Big Week Ahead For Stocks… And Emergent’s Mpox Approval 8/30/24

0:02From the Nasdaq market side in the heart of New York City's Times Square this is fast money Here's what's on tap tonight. Stocks rallying to close out trading for the month of August, but with fall just around the corner, sorry to say, what's going to drive the market into the fall? From the jobs report next week to a looming Fed decision, we get you the playbook for the next few months. And insuring gains. Shares of companies like Allstate and Progressive trading at all-time highs. But is there more juice left in their run? We break out the technicals to find out. Plus, Intel says it's looking at ways to revive its struggling business.

0:40Alibaba clears a three-year-long regulatory battle and why approval of Emergent Bio's Mpox vaccine wasn't enough to lift the stock. We have all those stories coming up this hour. I'm Contessa Brewer in for Melissa Lee. Coming to you live from Studio B at the NASDAQ, on the desk tonight we have Steve Grasso, Tim Seymour, Carter Wirth, and Mike Coe. And we start with an August to remember for stocks. After a stunning stumble to start the month, markets rebounded in a big way. The S &P rallying in today's close and now more than 10 percent higher than the lows hit on August 5th. And less than half a percent of its all-time highs hit six weeks ago.

1:23All three major indexes manage gains for the month, with the S &P and the Dow now up four months in a row. Now attention turns to September, traditionally one of the worst months for stocks and a slew of new potential catalysts for the market. From next week's jobs report to the next iPhone launch party to that closely watched Fed decision toward the end of the month. And which of these events will you watch most closely? I'll start with you, Steve. Yeah, I think it has to be the Fed, right? We got through NVIDIA. That was the biggest thing that we could all focus on was NVIDIA. But it's always NVIDIA or the Fed.

2:00And now Apple kind of sneaks in there. You guys have been doing a lot of coverage on that on the network. AI, I have an iPhone 13. This is going to be a powerful upgrade cycle. I'm going to upgrade. Not that I need all the new fancy stuff. I usually upgrade. What do most people upgrade for? Because they want the new gadgets that are on the phone. The camera, right? So this one's going to be AI. Yep. And AI and the camera. and who knows what else, a host of other things that are going to be available. I believe it's going to be the Fed. The Fed is the biggest thing that we have to focus on. Although, interestingly, we seem to all be on the same page with what the Fed is going to do to cut rates.

2:42You don't think that there's going to be any surprises from the Fed, that they're not going to overshoot it by half a basis point? Oh, I think that it's going to be 25 basis points. I don't think that there's a case to be made to make it a half a point. Unless, you know, it just will be very uncharacteristic of Jay Powell to just pull a half a point out of the hat right now. I think it'll be 25 basis points and then two more to follow that 75 basis points total. Tim, we have other data coming out next week. All attention paid on that big jobs report that we're expecting next Friday. Which of these do you think moves the needle?

3:16Will it be jobs? Will it be the Fed? Is it that Apple event? You're moving the needle with us today, Contessa. great to have you. And I think it's the payroll number. I really do. And it's not that a weak payroll number will signal that the labor market is caving and collapsing. I just think that the market reaction we got at the last payroll number and the close scrutiny, at least of really look, and the Fed has more or less said that now they are really pushing more towards at least evaluating the labor market and seeing where that side of their two pronged approach is something they may be spending more time on.

3:54So today's PCE number, to me, I think cements the fact that we're at 25 bips. I don't think there's a 50 coming. I don't think there should be a 50 coming. If you look at July consumer spending, it was up about 4.5 % so far, which is more or less kind of where things have been. We haven't seen the consumer fall out of bed. We're going to talk later on in the show about certain segments within retail that I think are under some pressure here. But it's been an extraordinary month. And if you think about some of the tensions we had earlier in the month. I still think the market will digest those.

4:23But as it relates to the Fed, hey, look, that two year to start of June was at five percent. It's now in the three 90s. This is a case where the market has done a lot of the Fed's work for him. I don't think there are surprises here. Mike Coe, twice in one week. It's a lot for me. Nice to see you. Which of these pushes forward for you? Yeah, I mean, look, the payroll number is basically how you're going to judge basically the magnitude and pace of Fed action. So I think both Tim and Steve are right on that. I mean, you don't fight the Fed. We know that rule. But what guides the Fed is going to be things like inflation and payrolls.

4:58And next week, it's payroll. So I think we can't ignore it for that reason. And look, Apple is certainly going to be meaningful as well. It's 7 % of the S &P. And that's sort of the benchmark that we look at when we're trying to gauge the market's health and performance. But the thing that concerns me here a little bit, I have to say, just looking a little bit further on is that as we see the front end of the curve come down, you know, we often talk about issues related to recession and things like that. But as the yield curve goes from an inverted state, you know, out of that, that's oftentimes when the first sort of cracks that we see in the recession actually come to light.

5:32So, you know, I think we could have some of that coming up as well. And Carter? Of all those choices? Thank you. Or more if you want Or other choices. There's always. Right. Speaking to Apple, look, we know that its relative performance peaked two years ago in September of 2022 to its brethren, if you will, its sector, the S &P 500 technology sector. I don't suspect it is all that important, despite its heavy weighting in the market. What we know is that the market has returned to the scene of the crime. The S &P dropped 9.71 percent and has recovered exactly back to that high of July 16th, basically almost two months ago.

6:14So do we break out or don't we? And is it some piece of news, some of the items that you suggested that would cause it? Or do we continue to coil here? My hunch is that we back and fill a bit more and we don't have a big week next week. Well, except for the jobs report. And given what we saw happen in August with the jobs report, there does seem to be a lot of attention paid to that. And because jobs and immigration are taking such a lot of the talking points from the candidates at this stage in the campaign cycle, even more pressure outside of the financial world on jobs and who's doing well and who's not.

6:53I want to ask about CPI here for a minute, because what we got from PCE today, Steve, was kind of a meh. It was expected. It seems to show that we were even, Stephen, CPI next month is we're going to be looking back at August. And again, the consumer having such a big impact on these the stocks that we're seeing, but also giving us a picture of the economy in general. Yeah. And CPI and just expenses. You have to you have to look at where the rates component rate to live in a home or an apartment. What that's considered of a third of it, basically. So we've seen inflation go from nine all the way down to sub three or around three.

7:35And the Fed has indicated that they're going to be on a loosening Fed policy right now. So it would have to be a blowout number to the upside, which no one expects it to be, to really have them change their stance. They've indicated they're ready to cut. They're going to cut. I don't think we're going to have any surprises on the inflation front. And if we do have a one-off here, a one-off there, rates are going – inflation is going down. Rates are going down. The markets have already spoken. They've done a lot of the heavy lifting around the Fed. The Fed just needs to pull the trigger. We had such a wild ride in August in the markets and now heading into September.

8:14And I feel like on CNBC, there should be like a little asterisk that says, you know, past performance, future results and all of that. But Carter, how do you look at seasonality when we are trying to brace for what's to come? Sure. I mean, that's an important factor. And there are all sorts of it's called data mining. Right. Once it is in an election year or how do you do if the first six months are very, very good? What does that imply for the backup? You can get any data series to sort of make one's case. bear or bull. But we do know that seasonality, August is particularly poor, as is September and into October.

8:48Okay, so even though the Dow closed at another record high, our next guest is warning that he's seeing some recession indicators flashing red. David Rosenberg runs Rosenberg Research. I want you to really dive deep into the specifics here, David, because as we said, PCE came in where it's expected. You've got unemployment holding steady at 4.3 percent. You have some earnings reports that have surprised at the upside, even if stock performance has failed to follow suit. So where are you seeing warnings? Well, for one thing, you're talking about earnings for the last quarter, which is in the rearview mirror.

9:27It's interesting to me that you're seeing the stock market go up. and yet earnings estimates for the rest of the year have actually started to come down over the course of the past couple of months and there's been no change from the analysts for 2025 so this has been purely multiple expansion related and you mentioned the consumer and yeah the consumer is really exceeding expectations there's no doubt about it but we have this wide divide right now that's really incredible because real personal disposable income after tax income in real terms is growing 1 % over the past year, and you have real consumer spending running almost 3 % over the past year.

10:08So the follow-up from that is we're seeing this relentless decline in the personal savings rate. I mean, this time last year, the savings rate was already pretty low at 4.5%. Today, it's 2.9%. It's only been this low in the past 5 % of the time. It's a 1 in 20 event. So I look at the consumer, I know what you're saying, but it's really the consumer spending report I would say is a low quality report because it's not being generated by real income growth. It's been generated by a continued drawdown on the savings rate to historically low levels and when we talk about the recession we've seen recession in real capital spending.

10:45The industrial sector is in recession and the housing market is rolled back in a recession. These aren't the biggest components of GDP of course that's the consumer but there are segments of the economy that are operating below the zero line. Admittedly not the consumer dot dot dot not yet. As for your comment on the unemployment rate you know it's not stable at all. It's gone up 80 basis points in the past year and that's what's caught the eye of Jay Powell. That's the only reason why they're cutting interest rates is they're concerned now that there's too much slack being built up in the jobs market.

11:20So that's the story is that you're You're not seeing job loss, but the unemployment rate is going up. And Powell's already told us that is the most important statistic for him right now. So, David, do you think that the Fed is behind the curve on this? Or do you think that this was unavoidable? Just a two-pronged answer. And do you think that the recession, whether we're in one now or there's one that's coming, do you think that it's a first quarter next year issue or a fourth quarter this year? Well, it's a no-brainer that the Fed's behind the curve and the yield curve, speaking of curves, have been telling you that for quite a while.

12:00But Jay Powell told us that both at the last press conference after the July meeting and then last week at Jackson Hole, when he's talking about how the economy is normalized, inflation is normalized to a very large extent, And the labor market is not just normalized, but there's more slack in the labor market now than it was before COVID. So is he behind the curve? Well, you know, everything is normal except the Fed funds rate. And the Fed's own admission in terms of where its guesstimate of where neutral is, is 2.75%. That is the normal interest rate for normalized economy. And the normalized economy is what the Fed's talking about.

12:43And they've got the funds rate of 5.38%. percent. So recession or not, of course, they're behind the curve. Hey, David, it's Tim. Thanks for joining us. Yeah, I guess I shared that view and I share your view, at least that recession proof your term sectors or places at least to be thinking about. It's fascinating that it's a year where you've had a bit of a barbell already. I mean, there certainly has been a very defensive play to the market. If you look at what's been going on with gold, what's been going on with with health care, certainly what's going on with utilities. How do you characterize what you do from here on out?

13:18Because based upon the moves we've had in some of those defensive spaces, that's telling you, it certainly is a read on some of the things you're thinking. Have we missed the move in some of these sectors that are not terribly cheap at this point? Well, of course, what happens in those defensive sectors is that they get re-rated when investors start to see the economy cooling off. And the economy is cooling off. It's not in recession right now. And I think the consensus is that it's not going to go under recession. But, you know, we have the supply side of the economy expanding over 4 percent and GDP, which is what we all focus on, let's assume it's running at two and a half to three.

13:55That's what I'm talking about is we're building up disinflationary slack in the economy. So I think what's happening here is that interest rates have been coming down. The Fed hasn't cut yet, but market rate and they will continue to come down. So I would say that certainly the rate sensitive sectors in this environment get re-rated with a higher multiple and I expect that that's going to continue. What I call the bonds and drag, you mentioned utilities, which of course has defensive growth characteristics too. Bonds and drag in the stock market, so whether you're talking REITs or telecom services, utilities, yes, I think that they're very appropriate right now and being re-rated appropriately because of the industry outlook.

14:35David, thank you for joining us, sharing your thoughts and your perspective with us. Mike, jump in. Are you positioning for recession? Well, I mean, I think there's two questions here. One is, you know, whether or not we think that a recession could still be on the horizon, despite the fact that a lot of people think that, you know, are sort of articulating this soft or no landing thesis. You know, one of the things that David didn't mention this time, but he has certainly spoken about it in the past, is the concept of sort of a corporate debt maturity wall of, give or take,$7 trillion. And the fact that the refinancing rate on that was high was one of the things that was keeping CapEx down.

15:14And so that obviously is going to slow industrial growth, meaningful or real industrial growth. And that, of course, is one part of the problem. The second question, of course, I think for investors is really, what does that mean for the stock market, though? And for that, I'm actually looking less at whether or not I think the potential for recession is there but just what the market is doing day to day. And what it's doing day to day is moving more violently than it historically does. You know, we have a 30-day realized volatility around 19%. That's a lot higher than average. And that actually is a warning sign all its own.

15:47Meanwhile, we've been watching Al and Bobby's shares today jumping after China's market regulators said that the tech giant completed a three-year rectification process and is now compliant with antitrust policies. Baba had been fined the equivalent of$2.6 billion in 2021 as part of the investigation, which accused the company of forcing merchants to choose between two e-commerce platforms rather than work with both. Let's talk about Alibaba here, Steve. Yeah, whenever you're dealing with the Chinese government and stock performance, if you look at the long-term chart of Alibaba, it's horrendous.

16:24So if you go back and you look it through the last couple of months, it looks okay. We're up 7.5 % year to date in Alibaba. Maybe the Chinese government had given us the all clear, but they could renege on that all clear pretty quickly. So if you're going to be long it, you should probably keep it on a short leash. But I do think you're due for a bounce more than the 7.5 % that we've seen this year. And we've heard it from retail companies and their earnings reports even this week, Tim, that the concern over the Chinese consumer is real. How much does that play into even the decision by the Chinese government on Alibaba?

17:03Well, I've been most more concerned about the Chinese government as it relates to Alibaba. And you look at this announcement by Samer. This is the state market regulator. I mean, that to me is a reset. I think it's a new lease on life. I think if you look at the chart on this stock going back the three years that we got these rectifications that came out, You can see a stock that's down almost 65 percent. I mean, Alibaba has been destroyed. And I don't think it's really been about the Chinese consumer. I think it's all been about a discount rate that's had to be raised to the roof. The risk around the company.

17:34I mean, look, we had our weekend at Bernie's moment for Jack Ma. We really never knew what happened to him. We were concerned that there was a lot more going on here. I actually think this is great news. I'm long Alibaba. People who watch the show know I've been long Alibaba for a long time. I mean, I've traded around the stock, but for the most part, this is the kind of news you want to hear. Add into the fact that earlier, actually, it was probably a week ago, they also completed the dual registration in Hong Kong. So the dual listing now, I think, does provide more liquidity. I care about the Chinese consumer.

18:05I like the fact, though, that the valuation here doesn't really need to worry about the strength or lack thereof in the Chinese consumer. And if anything, it's in Alibaba's share price. Forty percent of the market cap is in cash. And I like that. And those shares up 2.8 % today. All right, coming up, another update for Intel, the chipmaker fielding strategic options from the big banks as it looks to address its recent woes. Is this the beginning of a real turnaround? Chapter two, we'll debate that next. And an ugly day for Ulta Beauty investors hammering this consumer favorite after an earnings report that was anything but glamorous.

18:43How badly does this stock need a makeover? Closer look right after this. You're watching Fast Money here on CNBC. We'll be right back.

19:03Welcome back to Fast Money. Intel shares topping the tape today, locking in their best day since October 2022 on news that the chipmaker is in talks with bankers, including Morgan Stanley, to address weakness in its core business. Earlier this month, Intel announced it would lay off 15 ,000 workers during a disastrous earnings report. That sent shares plunging. The stock is down more than five. Is that 50 percent? Yes. This year. Wow. Carter, what do you make of it? Right. So the key, the data point that you cited, of course, is that plunge on earnings, right? You traded 300 million shares that day.

19:43That was August 2nd, essentially dropping from 30 to 20. We spent the entire month of August going absolutely dead flat. So a massive re-rating and then a tight consolidation now on 177 million shares. You're talking about a stock that's average daily volume of 50. A big thrust higher with a gap. What I would do is sell puts, which is to say the news today confirms those lows as decent intermediate lows. I think you can collect premium here, and that's how I'd play it. Just getting long because they want to address their weakness in their core business. They've had a weakness in their core business for a long time, and talking to Goldman Sachs or any other banker is not going to change that.

20:22But it is a big day in the market, and I would become an insurance company and sell premium to someone else. Hmm. Yeah, this is a company that's really chased everyone in the space. They've they've underperformed everyone in the semiconductor space. NVIDIA. Forget about just NVIDIA. You name a semiconductor, they've underperformed it. Even AMD, which is flat, basically. Intel has been the IBM of the semiconductor space where it just seems that they can't move the ship around too much. They're not nimble. I mean, they said today, oh, we're doing this because it's really important that we're super nimble and flexible.

20:58and can adjust quickly. Yeah, too little, too late. And the market's not going to believe it until the market believes it. But to Carter's point, maybe you've got to play it that way instead of buying into the equity because the equity has disappointed you repeatedly. Tim. Well, it's interesting that these headlines, which are the kind of headlines that when I hear about restructuring, and we've put this in the context of a company that is cutting 15 ,000 jobs, et cetera. I mean, people, you know, it's not about solvency per se, but these aren't headlines that necessarily would be driving a stock up 9 percent.

21:33I mean, it almost feels like the activist investor day. It feels like a day where, you know, you get some sense that they're and they say this about markets, too, right? That, you know, markets don't rallying, don't start rallying in the middle of a big downturn until policymakers start panicking. And it does feel as if that there's a little bit of that going on at Intel. So the headlines are interesting. We have nothing concrete. How much do you think this is about Pat Gelsinger's leadership or lack thereof? Well, I think in terms of long and, you know, the lag effects that we talk about with regards to the Fed, I mean, the lack of innovation at Intel and the loss of market share is something that had been going on for years before he got there.

22:13I do think it's a dynamic that you can't just turn this around. But again, it's that innovation gap between Intel and its peers. That's part of where the stock is. seeing their market share even stabilized would be seen as a positive. And that's actually what got that stock rallying from the low 30s to the mid and the upper 30s going into that second quarter print that you got some sense that there was stabilization. So I think this is important news. I think Intel has a lot of access. There is M &A around there. There have been a couple private equity deals in terms of some of these foundry stations over in Ireland.

22:46They sold a big piece to Apollo. I think there's more they can do. But right now, yes, it's Gelsinger's let's just say that I think his reputation here and his credibility is certainly something that needs to be proven. We have a lot more to come on Fast. Here's what's coming up next.

23:21Live from the NASDAQ market site in Times Square. We're back right after this.

23:34Welcome back to Fast Money. Buzzkill on Ulta Beauty. The makeup chain store dropped 4 % after missing top and bottom line estimates after the bell yesterday. The stock is just one of many retailers out with earnings this week. Nordstrom, Abercrombie & Fitch, Gap beat estimates. where Lululemon, American Eagle, Dollar General missed the mark. The sector is having a very mixed earnings season. So is there anything that we can broadly read about consumer behavior right now from the reports of the retailers, Steve? Yeah, those retailers that have really been the wolf on top of the hill, those days are gone.