As Nasdaq Sets First Record Close in Two-Plus Years, a Look at the Stocks Leaping Past the Competition 2/29/24

0:01On a night where the Nasdaq set its first record close in more than two years. We're coming to you live 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. Leaping higher, the S &P joining the Nasdaq in record-closed territory this extra day of February. All major markets all closing out with its fourth straight month of gains. And some stocks and sectors have really jumped past the competition. Can they keep their lead, or are they about to come back down to earth? Plus, the next big thing for GLP-1 already being used to fight diabetes and weight loss, are there even more applications for these in-demand drugs, and how big can the market for them get?

0:36We've got some answers. And later, China's auto boom, why cars made by the country's manufacturers are in such high demand around the world and what that could mean for American companies trying to compete. I'm Melissa Lee coming to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan and Guy Adami. And we start off with the last of the three major averages to set a record close this year. The Nasdaq making the most of this extra day in February and leaping nearly a percent. It was the first time the index closed at a record since way back in November of 2021.

1:07The S &P and Dow also ending the day higher with all three indices notching a fourth straight month of gains. But a couple of stocks in particular really caught our eyes. Sure, so much attention has been on NVIDIA this year. But take a look at AMD up 9 percent today, nearly 15 percent in February. Retail also seeing strength with Ralph Lauren seeing its best month since 1999. The single best performing stock in the S &P this month, Constellation Energy, up nearly 40 percent for its best month on record. So as you head into March, do you stick with the stocks that have left ahead? Or do you look for the names that have been left behind, Guy?

1:42I see what you did there. Remember the end of the Grinch? The Grinch was trying to figure out, like Christmas, it came without packages, boxes and bags. Remember that whole thing? And he was trying to figure out why Christmas still came. And Nasdaq's doing it without Apple, we'll talk about. And I know Google, we're all right today, and without Google as well. So it's really impressive, the performance over the last few months without question. Today, AMD, though, you know, you mentioned it, so I'll talk about it. You know, up$15 after the move that it's had, after the earnings release that we talked about when we were down in Florida.

2:09It doesn't make a whole hell of a lot of sense to me. But here we are. You trade the market you have, not the one you're wishing for. So, yes, I guess you stay with the winners in this environment because, quite frankly, they've given you no reason to get out. Do you stick with the winners? I feel like you're going to say no. Listen, it's a tough – I mean, it's just a tough call here. Listen, as an investor, I'm stuck. As a pundit, I'm a little stuck here. Are you just, like, torn because fundamentally you believe the market doesn't deserve this multiple? Fundamentally you believe the market shouldn't go higher, and yet it still does?

2:38You guys are going to be scared about this. Fundamentally, I feel like things feel okay right now, like in general. You know what I mean? And I think about this. We're coming on the one-year anniversary of SVB, and I know we're going to talk about another regional bank. I think the thing that got everybody off sides last year, We're so convinced that we're going to have a recession in 2023 from the best economists to the best Fed watchers, the best investors to everybody. Right. Well, and then they injected all this liquidity. Right. And that March sort of period away. So here we are now. And they kind of do the term values as they alchemy out that sort of business cycle, that economic cycle.

3:09And so here we are. Things kind of feel OK. But to me, I think Guy just made a really good point. The NDX had already made a new all time high. OK. So right now it's up 7.5 % from its previous all-time high. And you're doing it this year without Apple. You're doing it without Tesla. Okay, if you're looking at these Mag 7s. You're doing it without Google, too, right? So I think it's getting more selective. I know Tim's going to talk about the broadening out here. But I don't think, and this is where I got myself in a little trouble there. I think that the quality of the names that are rallying right now.

3:41That's what my mom texted me, by the way. It's getting worse. You know what I'm saying? Good for Mrs. Nathan for calling you out. I don't know. Yeah. You know, sometimes we talk about things going down on the same news over and over again. And I think we're in the opposite phase right now. I'm just looking at AMD after Dell, which was up, you know, in that whole frenzy of just AI and anything related to AI. And they certainly are in that sort of peripheral circle. So now we're seeing things up again on the same news over and over. I don't know how long that lasts. To me, whether it happens in March or Leap Day, whatever, doesn't really seem to matter.

4:14I'm not going to materially change what I do. But this does feel a little bit frothy. You did buy Dell. I did buy Dell today. And you know you have the wrong size position when you feel bad if it goes up or it goes down. You feel like, oh, I should have owned more. But anyway, it just seemed to me like, you know, it used to be that hardware traded at a much different multiple. And Dell's multiple at 14 was seen almost, to me, it's almost old school multiple, especially if you think about Apple, where I don't even know what the hardware software multiple is there. And then I think this is an under-promised, over-delivered company by their own description.

4:50So semis are up, we've talked about this, are up 10 percent and they're up 18 percent per year. That's not the story of the month. The story of the month is the XRT up 8 percent, is transports making, not, you know, cycle high, all-time highs. All-time highs, industrials, that chart is ripping. So, yes, the market is broadening. Everybody wants to look at the equal weighted S &P and say, no, underperforming the S &P. I don't see it. Small caps been lazy, slowly catching up to the party. But the broader market, and I'm talking about real sectors, gig sectors that have been underperforming are actually taking the lead.

5:19So, yeah, we talk, we spend a lot of time. Biotech is certainly XBI up 14 percent this month. But to me, it really is the real economy. It's that banks, after a 30 percent run, have managed to make another 15 percent run. It's that GM is now up 56 percent from October 26th. And there's a lot of other industrials. How many times have we talked about Caterpillar and said, oh, well, this is probably it. And they had a difficult earnings period. And yet the stock shoots higher. So to me, February was the month that actually the market decided to be not just seven stocks. It's amazing how we get this all time high in the Nasdaq on a day when the PCE or the core inflation gauge that the Fed is looking at hit the lowest level since March of 21.

5:58So last time the Nasdaq was at these highs was right at the end of 21 before the Fed embarked upon an aggressive strategy. So a lot of this has to do with benign inflation, less Fed and an economy, frankly, that's not given way. That's why the real economy is outperforming. Sounds like Goldilocks, Guy. You didn't just say that. I mean, I was just such a good leap year, right? I mean, happy birthday to all you cats out there with the February 20th. When do you celebrate? March 1st. Every four years. Or you don't. You choose. Can't you choose? No, you don't choose. It's got to be the first of March.

6:32I mean, think about how opportunistic you could be with your age. That's an excellent point. You could play for the Mets because they have trouble. I don't know why that came up. It's not even relevant. This is an energy. You mentioned Constellation Energy. This is not me pulling things out of the hat. You mentioned at the top of the show, we said, look at the move. This is an energy stock. They reported, I think, on the 22 days or so ago, right? Look at the move that this stock has had. And what was a good earnings release, but not ridiculously good? I mean, this stock went very parabolic, like a lot of these tech names.

7:02It doesn't make a lot of sense to me. And this is somebody, by the way, that's bullish in the space. So when you see other sectors acting like this, at least you got to say yourself, whoa, something is a bit askew here. One thing I want to take some issue. So it's one thing to talk about the stock market broadening out in the participation of retail and industrials and transports. It's another thing to talk about where S &P 500 earnings are going to come from or where they're expected to come from. And a lot of the gains in this double digit expected S &P earnings in 2024 are expected to come from the largest market weighted companies that have driven a lot of that performance.

7:35OK, so the point is, is the economy does start to slip. OK, maybe those large cap tech stocks are going to be insulated for a period. There's a lot of recurring revenue in the like. But at some point, we will see the job cuts move to CapEx cuts and the like here. and you will see a normal business cycle come back. We've already seen it in like digital ads. You know what I mean? Like, you know, that was one of the canaries in the coal mine, at least from some of the earnings that we heard back in that Q4 earnings period. So I guess my point is you also have to focus on where the expected earnings growth is going to come from.

8:06And those groups will not save you. Retail will not save you. Energy will not save you. Some of the other ones. You know what I mean? So to me, like there's a big difference there. I'm with you. I'll push back on that and say we all know that in 23 when the S &P was up 26 percent, 17 points of that were all about multiple expansion. And this year, 65 % or 70 % of the 6 % increase or 4.5 % is all multiple expansion. So we know that the earnings have to keep score, but when do they need to come in and play their cards? Or when does that hand need to actually work? Because it hasn't needed to work.

8:42It hasn't needed to work for the last couple of years. I don't think that the market can go unabated up higher. But the market is certainly telling you that there was a bear market for a lot of stocks in the first half of 23, if not three quarters of 23, that are only just catching up now. And I think there's a lot of allocators out there that have recognized that. Again, look at health care. It's not just biotech. Look at health care. Look at all these big sectors, utilities. And I think utilities haven't really rallied. I think people are going to be looking at that. So I just I hear the fundamental argument, but the market to me tells me it doesn't necessarily need to respond to earnings in the short to medium term and sometimes even in the long term, because I feel like we've been doing this for a couple of years when we haven't had real earnings growth.

9:22Are we waiting for a shoe to drop with the consumer? I mean, we've been waiting for that shoe to drop for a while. Right. It has a really long time. It has not happened, including like today. So I think, though, that retail was so oversold because it seemed like everybody was including me down on the consumer that they weren't going to be spending. And yet here they are still spending. So that's been a really nice rally. But it's not like those stocks are in crazy land. Right. Right. I mean, you look at something like Macy's, which has a takeover issue now. But, you know, what's the trading at?

9:53Eight times earnings. And that's off a big rally. Right. So, I mean, that never should have been where it was. Nine dollars. Yeah, I think I think we have a case where the consumer, we do have jobless claims today. We got continuing claims. There's nothing in this data that tells us that the Fed has killed the equity market. But it gets back to if you think about how people were investing a year ago when we really thought the Fed was going to bite. They were going after after giving them a great rally because they knew the Fed was there like the dollar stores and even to some extent target. And I think that's where you have some more opportunities here.

10:28And there's there's the big box stores and the places that we know have been have had their different secular challenges. But I still think that there's a lot of stuff that has not rallied and a lot of stuff that really is if the consumer has a job and they're not falling apart credit wise and the banks are telling us that not so bad. All right. We've got some breaking news here on New York community bank shares dropping after hours as the bank discloses internal controls issues. Leslie Pickers got all the details. Leslie joins us on the fast line. What do you have, Leslie? Hey, Melissa. Yeah, the plot really thickening here.

10:59Those shares down more than 15 % in after hours. There was an 8K that came out after the market closed detailing material weakness in internal controls pertaining to loan review. The company says management identified the issue, which resulted from ineffective oversight, risk assessment, and monitoring activities. And NYCB says that the assessment of internal controls is not yet complete, but a remediation plan will be disclosed in its 2023 10K. The company completed its Goodwill assessment last week. It decided it needed to take an additional$2.4 billion charge to its fourth quarter earnings as well.

11:38Now, the company also announcing Alessandro Danello, known as Sandro, would be stepping into the role of CEO after having taken that executive chairman role shortly after the company's fourth quarter earnings. One director, Hanif Daya, resigned in opposition of Danello as CEO. So remember, it was those fourth quarter numbers showing several troubled commercial real estate properties that initially spooked the market, began kind of a spiral that we've seen in shares. Those declines ultimately cut its share price in half and obviously continuing the descent today in aftermarket trading, Melissa.

12:16All right, Leslie, thanks for the update there. Leslie Picker, again, shares are down 15 percent. Karen has been digging in the timing of these resignations. very interesting because they didn't happen just today or yesterday or even the day before. Right. It happened more than a week ago. Not more than a week ago. The 25th. They happened on the 25th on Sunday. And I don't know if they're sort of hiding behind it. Those changes don't take effect until today. To me, that's a little, what would you call it, Guy? Fugazi? Fugazi. Yeah. It's a little bit fugazi. Forget about it. So, I mean, this is, for any company, this is bad.

12:47But if you are a bank, and if you are a bank that recently had a terrible chapter that you were trying to get past, where you had, you know, you had completely mismarked or paid way too much for your assets or whatever it was, and then to come out with this. So it makes me, you know, they don't have their 10K out yet. They have to get an audit, right, to get the 10K out. So this can't be good for so many reasons. The infighting, what's going on? I've never seen a chair of the board. I believe he's the chair. Do you know him? No. He's the new CEO, the one who resigned. In his letter, it says, I did not agree with naming this guy the new CEO.

13:31But the CEO, the former CEO, resigned on the 23rd. Oh, that happened on the 23rd. I thought that happened. That happened on February 23rd. Mr. Kang Jemmy notified New York Community Bank Corp of his resignation on the 23rd of February. OK, so that is ridiculous that we don't know that on the 29th. So clearly there it's sort of, I don't know, best case they're being way overly conservative. That's the best case. I fear it's a different case. Well, it's also interesting because Danilo, Alessandro Danilo was seen as actually someone that the investor community is very, very comfortable with, given the role he's played in the past and other reorgs.

14:13He comes over from Flagstar Bank. Now, the potentially interesting part about this is NYCB acquired Flagstar back in the end of 22. If the person who's saying absolutely not this guy feels that there was some conflict there, I'm not suggesting that. I'm suggesting that there are a lot of complications here. And this was a guy who was seen as a consensus, you know, someone to come in and calm the waters and actually get in there and figure out what was going on. And, you know, he may, in fact, have uncovered a lot of good stuff at this point. Tim's a fan of Stevie Ray Vaughan. Although we go back and forth.

14:44Double trouble. It's a great album. I mean, SRV. I think he's a bit overrated. But anyway, your point was. One of his lyrics, and this is actually pertinent to this. Thank goodness. Money's tight, nothing's free. Won't somebody come and rescue me? That's what's happening here. They're not going to get rescued. The flip side of that coin is, and I've said this and I believe this, the unintended consequences of zero interest rates for a long period of time, it's made places like this extraordinarily lazy, and they don't need any internal controls because there's nothing to control. So this is a fallout, I think, of all this central bank sort of largesse.

15:18And I don't think this might be the first. It's not going to be the last. I take a little bit of issue with that. I think this is idiosyncratic to them, to their purchases of assets that they either didn't know how to value or paid too much for. I don't think that this will be a contagion. I think it will be contained. But, I mean, maybe that allowed that environment to build. They've had a lot of time to check it, right? I don't think they will be a contagion. I think it's, though, endemic of maybe a lot of these. Like, there are other banks right now scrambling, saying, what do we have? What should we be looking at?

15:51I just think that's inevitable. All right, so I'll take a little issue with your taking issue. Okay. Does that mean then he's agreeing with me? No, I don't know that he's right. No, he's agreeing with me. I don't know he's right. Okay, please. Well, you know, my view is that Near Community Bank is somewhat unique, yes, idiosyncratic, Because once they went over$100 billion, the bright light of regulation and different regulation and more regulation is on top of them. So when you see that, so that is idiosyncratic. And they were forced to come in and buy some banks. And people thought, hey, they were sweetheart assets, especially around signature.

16:20They weren't forced to. They chose to. But the point is that they are under a level of scrutiny that I think other regionals are not right now. And that's not good because that level of scrutiny, I think, gets back to guys' largesse. I'm not saying you have largesse. I'm saying that you refer to more just. So you're saying other problems at other regional banks that may be smaller, that don't meet that threshold, may be being tapered over at this point or not seen because it doesn't apply to them. Even though I think they've got very idiosyncratic issues going on here. But it gets back to haven't we thought that regional banks were in a lot of trouble based upon CRE and dynamics that I think we all know are coming.

16:59So I think this is fascinating. The stock is down 17-plus percent. We'll keep you posted as the developments come in. Coming up, Apple shares clinging on to a key level. But can the stock hold on? The chartmaster Carter Braxton Wirth will join us with the technical take on this tech titan. But first, China putting the pedal to the metal in the global auto space, where they are seeing booming sales south of the equator. Don't go anywhere. More Fast Money in two. This is Fast Money with Melissa Lee right here on CNBC.

17:35Welcome back to Fast Money. China's revving up its auto exports with Chinese companies gaining popularity around the globe. Sales are up in Europe, Mexico, and South America. But what is making companies like BYD and GWM so appealing overseas? Our Phil LeBeau joins us now from Santiago, Chile, to take a look under the hood. Hi, Phil. Hey, Melissa. I'm going to show you a couple of charts here, which speaks to what's happened in China and what we're seeing around the world when it comes to Chinese automakers. First of all, exports, auto exports from China have exploded over the last couple of years.

18:08Up 62 % last year, topping 5 million vehicles. Number one in the world moving past Japan. And by the way, 71 % of the vehicles exported are internal combustion engine vehicles. 29 % electric vehicles. Why the change by China? A pivot due to the slowing market in that country. What's changed is that Chinese cars up until now have been happy to stay at home and make growth and profits in their own market. But Chinese domestic economy has slowed. There's overcapacity at home, price wars. So all Chinese makers are gearing up at the same time, saying in search of we need to find new markets globally.

18:49And they're going everywhere. one of those markets is chile in fact if you drive around chile you'll see a lot of chinese autos we went to an auto mall actually a mall with all these different brands not just chinese but you saw the american brands there gm and chevy you saw toyota hyundai kia there the price difference is the big difference here they're about 20 percent lower than comparable models What does that mean? Here's a good example. Great Walls Haval Jolian, which is a crossover utility vehicle. Look at the price, just over$18 ,000. A comparable vehicle, a base model Toyota Corolla Cross,$6 ,000 more.

19:29And when we talked with customers, almost all of them said the same thing. I like the fit and finish, I like the quality, and I like the price.

19:39Because of the performance, and it's very cheap in comparison to other brands, so that's why I prefer this Chinese brand. So you would buy Chinese again? Yes, yes, I definitely prefer a Chinese car. I've traveled 500 kilometers, a lot of traveling, and it's very safe. I have had a very good experience with Chinese cars. In fact, spare parts you can find anywhere.

20:05Take a look at BYD versus General Motors versus Toyota over the last couple of years. And what you notice here is Toyota, obviously, because of what's happened with hybrid sales, not only in the U.S., but around the world, has moved ahead substantially. The interesting thing when you look at South America is that it's not just here. It's happening in Israel. It's happening in Australia. Happening in a lot of different markets around the world. individually. Chile is not a big market, but you add all of these smaller markets together, Melissa, and what you have are growing sales for Chinese vehicles because of the price advantage and because they need to export them.

20:42They need to keep those assembly lines running in China. And as a result, they are finding markets like Chile where buyers are willing to say, yeah, I'll buy a Chinese made vehicle. Is a terror situation much more favorable ex-United States for these vehicles, Phil? Yes, absolutely. There's no manufacturer here, so there's no tariff. Everybody, you know, to a certain extent, anybody can ship in here. It's just a matter of what price can you sell at. And as we showed you, China has a definite cost advantage. And then is there a differentiation here between strict EVs and hybrid EVs in terms of popularity as we're seeing play out in the United States in terms of growth?

21:19It's a very small market when it comes to pure electric vehicles here in Chile. It's just beginning. We went and talked with the folks who run BYD. They just came in here last year. Tesla has just opened up its first South American store here in Santiago. So it's just beginning. Most of the vehicles that are sold here are internal combustion engine vehicles. Got it. Phil, thank you. Phil LeBeau joining us from Santiago. All right. So not good news for GM or Ford here. Not good news. I think worst news for Tesla, because if you think about where BYD is going after him, they're going after him, I think, certainly in the hybrids and some EV.

21:56Obviously, the growth in BYD is so extraordinary. It's across internal combustion, hybrid and EV. But as we get into the trade barriers that Elon Musk is asking that we impose upon China, those that actually keep BYD out of the U.S. leftover from the Trump era, I think BYD at this point only sells buses in the U.S. Maybe that will soon be outlawed, too. But yeah, let's make it's not just Elon Musk asking for the trade barriers. And the Biden administration is now saying we got to look at this because it could be a national security threat. There's no question. And China has built twice as much capacity as the market needs in terms of demand.