Checking In On The Housing Market… And The Future of Pharma & Health Care 2/18/25

0:01Live from the NASDAQ market site in the heart of New York City's Times Square. This is Fast Money. And here's what's on tap for tonight. Housing headaches, shares of Toll Brothers sinking, as you can see, after the company's latest earnings report. That after a dismal day overall for the builders. We're going to dig in on the numbers and bring you the trade on the housing space. And back at records, the S &P setting its first intraday and closing record high since late January. What's driving the move? And is there more gas left in the tank for stocks? We're going to debate it. Plus, a baba bounce takes the stock to three-year highs.

0:36Investors bet on a win-for-win resorts. And Meta breaks a historic winning streak. What's next for the social giant? I'm Dominic Chewin from Melissa Lee this afternoon, coming to you live from Studio B at the NASDAQ market site. On the desk tonight, Dan Nathan, Guy Adami, Carter Worth, and Julie Beal. Let's get right to the markets. The S &P is staging a late-day rally to set new record intraday and closing highs, As you can see there, it's the first time since late January. The Dow and the Nasdaq, by the way, also inching back towards records of their own. We're going to get to all of that in just a few minutes time.

1:09But we start with an earnings alert on Toll Brothers. The homebuilder sharply lower after missing Wall Street's earnings and delivery expectations estimates. Our Diana Olek joins us with all the relevant numbers. Diana. Well, Dom, it was kind of an ugly first quarter for the luxury homebuilder. Missing on the top and bottom lines. Toll also came in short on deliveries. Revenue down 5 % year over year. CEO Doug Yearly said in the release that the miss was mostly due to some impairments and a delay in the sale of an apartment property in a joint venture. He said home building operations met expectations.

1:39He did, however, add that although demand has remained healthy in many of our markets and particularly at the higher end, affordability constraints and growing inventories in certain markets are pressuring sales, especially at the lower end. The average sale price in Q1 for toll was$925 ,000. He also said that based on first quarter results, the gross margin embedded in their backlog and the trends they're seeing early in the spring selling season, they are reaffirming all key homebuilding guidance for the full year, including deliveries, average price and adjusted gross margin. There was nothing in the release about the potential impact of tariffs.

2:15We'll look to hear more on that on the analyst call tomorrow morning. But, Dom, as you know, homebuilder sentiment this morning tanked because of tariffs. And that was down to a five months low from the National Association of Homebuilders. It's all going to be part of that contextual picture. Diana, thank you very much for all of that. Let's turn now to what's going to happen with the trade here on the home builders. And maybe, Guy, I'll start with you on this. If you take a look at the way things have moved, the sentiment numbers, as Diana alluded to, had tariffs front and center. Do we think that there is a plateau building for home builders?

2:48Before we even get into it, welcome. We're a welcoming show. It's good to be back with you guys. So welcome, Dom. Am I right, Dan? 100 percent, Guy. Appreciate that. I think it's a big deal. I think tariffs are the headline. Interest rates, though, are probably the real plot. And when you look at the Toll Brothers, average selling price is now down 8 % year over year. So in my opinion, higher rates are starting to have an impact. And you look at this stock, I mean, the move we've had since November has been significant. And to me, it's not about EPS. It's not about if these stocks are expensive.

3:18It's cheap. What do you think about the employment picture? And what do you think about the rate picture? I think the employment picture is going to deteriorate. I think rates are going to go up. So almost by definition, you can't own these. Now, if you put a chart up, you'll see 110 or so was the level that we bounced from in July of last year. That should be support. That's probably where we're headed. Yeah, it's worth noting, though, it's not just obviously home builders. It's also the autos, right? And so they're facing this headwind of potential tariffs here. And if you go back and you're just calling up charts here today, aren't we?

3:48Yes, we do. Let's look at the GM chart for a second. It doesn't look too different than where Toll Brothers topped out, too. It was late November. So lots of sectors rally over the enthusiasm about a pro-growth sort of agenda by the new administration. But I think, you know, first and foremost, I think tariffs have basically taken over, like, the story here as it relates to our economy. And that's the sort of thing where you talk about the S &P, you talk about the Dow making new highs. At some point, these sectors that face these headwinds are going to weigh on S &P 500 earnings, even if it's just indecision, right, whether it be from consumers or it might be indecision from companies and CEOs and how they choose to spend their money on R &D and CapEx.

4:29Julie, if we talk about the fundamentals of the housing market, this is a key point in the overall scheme of the year and maybe even this market right now. It's the spring selling season. We're almost into it. How worrying is Toll Brothers and how worrying is the homebuilders trade if you look at it from that standpoint? Well, I think for sure it's pretty critical that right now they get out there and be able to make up for the mistakes that they had. They reaffirmed their guidance. And so I think they have a certain amount of confidence. They have a certain amount of their inventory that's already bought and paid for and sold.

5:00So I think that their visibility is probably better than the average home builder. And also demographically speaking, they're better positioned because they're a higher end builder. I'm much more worried about the lower end entry level building companies because I think they're even more economically sensitive. Exactly to Guy's point, the employment picture is what's really going to drive them longer term. That's what we really need to see. I think tariffs are something that can be an intermediate or short term headwind for them, but they've all been able to be pretty resilient in the face of that.

5:33Hey, Carter, are any of these charts set up better than others, either one way or the other, if you could find some momentum or some carry through to the upside or down? It's a very homogeneous group, of course. And what we know is that they are all under pressure and they all peaked as four, five, six months ago. In fact, the S &P 500 home building sub-industry group right now is down 30 percent from its peak in September. And you have a sort of a one-two setup that's not good. The one is that this group has doubled the performance of the S &P over the past decade, the past 15, 20 years, and now is underperforming.

6:12So when you have something that's been a massive outperformer that then starts to stall and roll over, all of these stocks qualify as bullish to bearish reversal sells. And the news out with toll bothers doesn't help the situation. You know, Julie, I want to go back to something you said with regard to some of these, the spectrum across there. One thing that we do know is that many of the housing related stocks outside of the pure builders, I'm thinking names like Home Depot or Lowe's or maybe names like Masco on the building supply side of things, have been trading alongside, maybe not exactly lockstep, but they're not exactly momentum upside winners at this point either.

6:49How big of a deal is it for some of those other plays like a Home Depot or Lowe's, given the fact that the housing market right now seems to be losing at least a little bit of steam for the time being? Yeah, I mean, I think it's absolutely critical, right? All of those businesses, everyone has been holding their breath. If you read any analyst note covering any of these companies for all of 2024, we're just waiting for interest rates to decline. And we're all just waiting and waiting and holding our breath. Eventually, we're not going to be feeling so great. I think the biggest concern for everyone is that affordability remains a very large problem in the home sector.

7:24And we just don't have a lot of visibility in terms of when interest rates are really going to soften. There's just more factors pushing them up than down. About a week and a half or so ago, I thought that Home Depot could break out through those December, I think, 2021 highs. And it looked like it was poised to do it. It has not traded well ever since, should come as no surprise to Fast Money fans. I put the maloic on it. But with that That said, this report on the 25th becomes extraordinarily important in terms of where the stock is technically and maybe where it is on a valuation level as well.

7:58So, you know, these downstream plays, which have seemingly been Teflon, potentially could be under a lot of pressure as well. All right. So with that in mind, let's turn back to the broader markets overall, because the major indices are closing near their highs of the day right now. The S &P setting, by the way, new intraday and closing records. The Nasdaq is less than a percent off its high, while the Dow eked out a gain of 10 points. So for more on what's been driving and what's next for the markets, let's bring in Katerina Simonetti of Morgan Stanley Private Wealth Management. Katerina, what does it say to you that we're having this generally negative conversation right now about a key part of the market and the economy, yet the Nasdaq is a percent away from record highs, the Dow is a little over a percent from record highs, and the S &P is at record highs right now?

8:44Well, Dom, the market has been extremely positive over the last couple of weeks, which is unusual, especially for the month of February that has been historically volatile. And when we're thinking about the backdrop of the tariff fears and executive orders and higher bond yields, it is almost interesting to see this development. And perhaps it is the possibility of the war ending. Perhaps there is a general sense that countries will have to step up, or maybe it's just the healthy economic dread drop that we have been experiencing over the last couple of years. But markets seems to be quite opportunistic.

9:29It's not just that, Katerina. If you take a look at yields, we talk about interest rates so often as a driving force behind these markets. We are still markedly lower than we were just a few weeks ago in terms of the 10-year Treasury yield. It's a benchmark for mortgage lending and elsewhere as well. What exactly is the rate importance for the overall market? Do we need to see continued rate gradual declines on the long end of things in order for this market to keep going higher? Well, we definitely have an extremely data driven Fed. And as we are kind of deciphering the news and are trying to see if tariff conversation, is this a policy or is it a negotiating tactic?

10:10Once we see the actual effect that higher for longer narrative has in the economy, Federal Reserve is going to figure out the way to proceed. We're expecting two rate cuts this year, perhaps one in May and one in September. But in our view, there are so many factors that are going to go into it. And perhaps we're just seeing the broadening of the market. Last couple of years, the leadership of the market has been in technology and seeing other sectors like health care, like energy, manufacturing, software, you know, on the tech side, you know, coming in and leading the way, you know, is something that could be affecting this market as well as high yields.

10:51Do you think that broadening out trade plays out markedly so in 2025, Katarina? Do we see names like financials continue to outperform? Energy was an outperformer today, albeit on higher oil prices. Does that rotation trade still happen? Dom, it was a surprise to so many investors that technology was not the leading sector in 2024. It was, in fact, financials. Financials ended up being up 32 percent in 12 months. And we are going to see more of this as quality stocks are going to be leading the way. There's a lot of fear. There's a lot of uncertainty. But there's also a lot of opportunity in quality names, both here in the U.S.

11:31and also in Europe. Katarina, at 4%, nobody seems to be concerned about the labor market, the unemployment rate. Are there any cracks in the armor that you see? Or is this basically, you know, we're in this great environment for the labor market and therefore theoretically a great environment for the market? We have not seen full employment at this level for quite some time. Is it playing a role in overall data, you know, as we're located? Of course. And it also is giving investors that sense of comfort with the market. But we can't forget about the fact that we're coming off of the two extremely positive years, unusually positive.

12:09So there has to be realistic expectations of what this year is going to bring. Even with the healthiest economic backdrop, we're probably looking at the low single digit returns for the end of the year. How fearful, Katerina, do your clients, investors in general, have to be about a renewed inflationary threat this year? You laid out the case for maybe two rate cuts this year, but it sure seems like the near-term data suggests inflation is certainly not gone. Of course, inflation has been a major concern for us throughout the 24, and we know without shadow of a doubt that tariffs are inflationary.

12:44Now, we have to wait and see what this tariff policy is actually going to end up being. But inflation was a concern, will be a concern and absolutely is going to have the negative effect on the market. And this is where investors absolutely are concerned. So when we're looking at the sectors, we will need to be significantly more selective about our stock picking this year versus just investing in the broad market index and just seeing how things play out. All right. Katerina Simonetti, Morgan Stanley, Private Wealth. Thank you very much. We'll see you soon. Thank you for having me. All right, Dan, given what she just said, are there favorite sectors that you should be in, given the backdrop that we've seen develop?

13:28We're seeing rotations within tech. And again, you know, out of semis, semis have really been flat over the last six months or so. Obviously, NVIDIA and Taiwan Semi have been big outperformers, but it can't get the SOX, the SOXX going at all. Next week is going to be obviously important when we get NVIDIA's earnings. And obviously, I think the whole sector should likely trade with it. On a day like today, though, I look at the fateful eight, right? I don't see many of them up. You know, NVIDIA was up three and a half percent at one point today. I think it closed up 40 basis points. Microsoft closed up a little bit.

13:58The rest were down. And you look at software and it's doing pretty well. So you're seeing a bit of rotation within tech. But when you look at some of these other areas that we just talked about, some pockets in the industrial space, home building, obviously financials have trade pretty well. So that's on the flip side of what we've seen or what we've just been talking about, the ones that are kind of seeing rates as a headwind. And so 4.5 % up in the S &P 500 year to date. We had two consecutive years of 25 % returns. Something's got to happen if we're going to kind of get to double-digit returns.

14:27I think that Katerina just said they're expecting low single-digit gains this year. Well, you know what? We're up low single digits right now. So it'll be interesting to see how we get there. The last thing I'll just say is this. Both the Bank of America Global Fund Manager surveyed. 89 % or so of the respondents said they're like full up in cash. Like they don't have cash on the sidelines. That seems a little euphoric right here. All right, Julie, what does this setup say to you? Does it feel like there's no gas left? There's no fuel left in the tank at this point? I think there is fuel left in the tank.

15:00I think because we've seen enough weakness in earnings outside of the Magnificent Seven that there's still opportunity for growth. But it really is requiring everything to go right. And I think that's the kind of concern that we're all feeling is that there are enough difficulties in front of the markets. and in front of just companies writ large, that they have uncertainty, they have inflation, they have interest rates. And these are the types of things that can really trip up companies when we're trying to navigate this landscape. And so I think it's really natural to look at this market, at this pricing, at these levels and say, gosh, we really could use a nice pullback in terms of being able to level set and reflect where we are as far as the fundamentals.

15:42All right. Well, speaking of navigating, folks, President Trump is signing some executive orders just in the last hour. CNBC's own Megan Casella has all those details. And these EOs are becoming a fact of life in the first hundred days of the administration. What exactly do we need to know now and how do we have to navigate these new EOs? Almost every day there's some new ones down. So a couple of executive orders and a press conference down in Florida just in the last hour. The first order was a move directing Trump's Domestic Policy Council to look for ways to expand access to fertility treatments and to make IVF and other treatments more affordable.

16:20He also then signed a presidential memorandum, so one step down from an order, committing to what he called radical transparency. This one directs his agencies to release the complete details of every program and contract that they cancel as they work to streamline the government. So something to look for there as Doge begins to work its way through federal agencies. Trump then also spoke a bit about tariffs, saying that he will be announcing more specifics on his sectoral tariffs after April 2nd, but that tariffs on cars and pharmaceuticals are likely to start at 25 percent and could go higher from there.

16:55Then on the Doge front, Trump said that he has no concerns about the thousands of layoffs of probationary employees across federal agencies this weekend. And even he was specifically asked about the layoffs of people who focus on nuclear weapons security who were immediately then rehired. No concerns about how that was done. He was also asked about the potential for a conflict of interest as Doge works with the FAA and the Defense Department, given Elon Musk's and SpaceX contracts that are in place. Trump said that anything to do with space, he will not let Musk partake in that. And then finally, Dom, as Trump walked away from the cameras, he said that he would probably meet with Russian President Vladimir Putin before the end of the month.

17:35That came just a few minutes after Trump said that what he wants with Russia and Ukraine is peace and that he thinks he has the power to end this war. So much more to watch on that front as well. Dom. All right. Thank you very much, Megan Gisela, for a lot of detail and recapping of these new EOs and memorandum. So this is important, Guy. As we talk about the navigation aspect of it, we have to deal with this idea that there are uncertainties that need to be addressed by the markets vis-a-vis the administration. What exactly does that do to, say, investor sentiment, given what we've seen now so far?

18:09Well, apparently investor sentiment is not great. Apparently, the lowest I've seen in about a year and a half. And yet records are at record highs. My next point. So, I mean, clearly the market has figured out how to sort of deal with this and handicap it. So with the VIX below 16, the S &P had effectively at an all-time high. I mean, the market doesn't seem to care. We'll talk about it all the time, and rightly so, but the market has figured out how to handicap this. I will say this, though. It does come down to interest rates. And, you know, you look at the move in interest rates, and all the things that we continue to hear are not bullish for the bond market.

18:41In other words, they're not reason for rates to go lower, the reason for the rates to go higher. That, to me, is the real story of this market. All right. Thanks very much, guys. Coming up with the show, a potential breakup boost. Shares of Intel surging on reports competitors could be looking to split the company up. What a deal could look like coming up next. And don't look now, but Alibaba is up nearly 50 % in just 2025 alone. Founder Jack Ma resurfacing in a high-profile meeting with China's Xi Jinping. The latest on the Chinese tech trade. When Fast Money returns, we are back in two. You're watching Fast Money here on CNBC.

19:20We'll be right back.

19:31All right. Welcome back to Fast. Intel shares surging more than 16 % following a Wall Street Journal report that rivals Broadcom and Taiwan Semi are exploring independent deals to split up the chip maker. Broadcom is reportedly interested in acquiring Intel's chip design and marketing business, while Taiwan Semi wants either partial or complete control of its factories or foundry business. Intel is up more than 36 % this year after today's gains, but have been nearly cut in half since the start of 2024. Dan, this is one that is in your Gen AI acronym, as we are seeing up there right now. So take us through the Intel pieces.

20:10By the way, I played the game right, Guy. You see what I did there? Some of the folks on this desk don't do it. But what I was trying to do here is kind of go after some laggards. And this action is pretty interesting. Guy's been making the case, I think, for a couple years that Intel is too important of an American company just to continue to flounder like this. And so when you see what's going on, it's really a shame that the Biden administration didn't come around to this kind of quicker. I think they gave them maybe$8 or$9 billion as part of the Chips Act. That wasn't going to do anything.

20:36They don't have a CEO right now. That chip design business is probably more than three quarters of the value of this company. I think that's one of the main reasons why the stock has rallied the way it has from maybe$20 to where it's trading like 27 or something like that. There's a gap to be filled above of that. Any way you look at this thing, that some of the parts is probably a bit higher. I think it's gone too far, too fast. I'd be really surprised if we get any announcements in the near term. These sorts of things without a CEO in place are probably pretty hard to navigate. Carter, you've got to put these things in contest.

21:06We're flashing all kinds of timelines for charts here, massive moves that we're seeing very much in the green. But if you look longer term, it's a very different story. So what do the charts say to you about whether Intel has more room to run? Sure. I mean, that's just it. Timeframes. It's ever thus, and one has to know who one is in the market and what one's time frame is. We know that this stock still is way below its dot-com peak, up in the 70s. It's right now a$27 stock, still down some 60%. And yet what we also know is it's been basing and bottoming for the better part of 10 months. It keeps holding 18, 19, 18, 19.

21:41Now it's thrust aggressively on heavy volume from that 18, 19 level to where we are at 27. And we are into the gap that I guess Guy referred to. That was a drop in gap on earnings on the 1st of August. And so a natural sort of resting spot, if you will, for this current day-to-day thrust would be to fill that gap. That's not much higher. That's at 30, 31. At that point, you would be back to a level of overhead supply. And if I were in this stock and had caught this move, I would be cutting it back by half above 30. Guy, this is interesting. Speaking of volumes, I mean, this thing right now, it looks like as things are settling out, has traded about 260 million shares today.

22:25The 10-day average is roughly 116 million. There was a lot of activity today. Yeah, almost three times normal. We'll call it two and a half times normal volume. Absolutely. Dan was kind to say I've been pointing that out. He was also kind enough to point out I've been saying it since it was a$50 stock. So it's been wrong. But with that said, I mean, if you look technically, the latest low we made is a bit of a double bottom from the fall. Nothing's been fixed at Intel. I want to be crystal clear, but the stock can still go higher. And Carter and Dan are right to point out those levels. 31 gets us back to levels that we broke down from in July of last year.

23:00I think that's where it's headed. Then we'll have another conversation. All right. There's still a lot more to come here on Fast Money. So here's what's coming up on the show. Quite the bounce for Alibaba. the Chinese tech stock trading at three-year highs. Will support from Beijing help the rally keep running? Plus, the future of healthcare in America. What billionaire investor Mark Cuban has to say about the space. You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.