Countdown To Tomorrow’s Jobs Report… And Auto Stocks On The Move 9/5/24

0:02Live from the Nasdaq market side in the heart of New York City's Times Square. This is Fast if its deal with Nippon Steel falls through? And could another suit or emerge? We mined for some answers. And on the sidelines, the Dallas Cowboys may top the debut ranking of CNBC's official NFL team valuation list, but what franchise is waiting in the wings with the potential to unlock the most value? We'll go inside the numbers to find out. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feiderman, Dan Nathan, and Guy Adami. We start off with what might be an ominous sign ahead of tomorrow's jobs report, Private payrolls rising by just 99 ,000 in August, according to ADP, well below expectations in the slowest pace since early 2021.

0:58Job creation now falling five months in a row. What will that mean for tomorrow's Labor Department number? Economists expecting a 161 ,000 gain in payrolls, with the unemployment rate ticking lower to 4.2 percent. Stocks largely struggling ahead of the data. The Dow dropping 219 points with the S &P 500 on a three-day losing streak. The Nasdaq eking out a quarter of a percent gain. So what should we expect from the markets and its reaction to the report, Guy? So Tim alluded to this last night, but let's drill down a little bit. I think for a long time we were in this environment where bad news was good news.

1:30But in an environment now where you have a 40 percent chance of a 50 basis point rate cut in September, that part of the equation is out. Like the Fed part is out, in my opinion. So bad news is going to start to be bad news. And I think you're going to see it tomorrow in the form of this number. I think the street's looking for 4.2 percent. So he ticked down in the unemployment rate. I'm not sure they're going to get it. And if this thing, again, starts to stair step in the way I think it will. And the way you hear from all these different sectors in terms of layoffs, you know, I think that's going to be a problem for the market.

2:01So we would rather the markets, that is, would rather have a 25 basis point cut than a 50 basis point cut right now. All right now. Right now. Yeah. All day long. It's negative because that's a big economy. Now, granted, on a day when John Paulson's out there saying he thinks the Fed's so far behind the curve and Guy talked about the 40 percent probability of 50. But I don't want to see 50. There are some ingredients going into tomorrow, including things like the U6, which is the underemployed rate, which last month hit three year highs. So, in other words, there are dynamics in the job market that we all know have started to give ground.

2:32I actually think so bad news is terrible news for the market. We saw that on the Friday. I guess that's August 2nd before that painful August 5th, Monday. But the dynamic here is I actually think that the market gets a bit of a reprieve tomorrow. This is just more of a kind of a trader's call on statistically what I think are some lumpy labor numbers and a dynamic that I actually think those numbers tomorrow, I think, are going to be OK. I think we had a seasonally weak number in for July printed in August. And so I think this is what the market wants to see. I think the labor market is going to be the dynamic that is going to probably give the market a lot of pain.

3:06But it's not going to be tomorrow, is my view. Yeah, it's interesting that, you know, things are playing out very similar to the start of August. When you think about some of the catalysts that caused that sell-off right into that August 5th crescendo to the lows. But, you know, when I think about what we might see tomorrow, I almost think that yields have kind of run ahead of that. Especially if that 40 percent chance of a 50 basis point cut, you know, I don't think that's going to happen. And then I think about, OK, we're talking about the market. Let's talk about S &P earnings. You know, all year long, we're like, oh, that 11 percent growth year over year.

3:34That seems like a really, you know, like stretch. Right. And then we have 14 percent expected growth next year. Well, think about some things that have happened. Yields have come in. Crude has come in. Wage growth has moderated. The dollar has gotten a lot weaker. So if you think of the forces that are driving the stock market and EPS growth for multinationals, there's some things that are lining up right now. And I don't mean that, you know, the economy is going to hang in there and they don't have to keep cutting jobs and they don't have to cap X. But, like, I don't think we're going to learn anything tomorrow from, you know, from that meeting.

4:04And then obviously we have the Fed in two weeks that might not change too many things that are going on right now. I've actually moved out of the 25 camp into the 50 camp. Really? Yeah. Based on your want or your expectation? What pushed you into that camp? My expectation. Okay. I think this, they are clearly more focused on employment now, right? And so if we take off the inflation part of the conversation, the employment data, I think, is a little quicker to weaken than I was expecting maybe a month ago. And so I think that the downside of going too far with that 25 to 50 is fine. It's not that much downside.

4:47Right. So I either think he could do 25 with a very dovish outlook. Right. Or I think he can do 50 and be a little bit more measured. And to me, that's sort of threading the needle. And I don't think it would be that big of a mistake. Right. I feel like the risk of not doing it is a little bit larger. I don't think 25 or 50 honestly makes that much difference, except for the message that it sends. I think the message is already here. We are seeing weaker. I think they had to address the message. But how is it? Is it weaker in the context of a Goldilocks scenario, soft landing scenario? I love Goldilocks.

5:25I know that's why I gave him the side eye or weaker in the context of a larger slowdown. Weaker. I think there's something else at play, which is a little bit of. All right. We've been a little late before a couple of times. Maybe we don't want to be late this time, particularly when what is the risk, really? How badly could we screw up if we went 50? So you think inflation is gone then? Because, I mean, the risk was three months ago that the risk was too early. Why would the Fed need to get too far ahead of the rate cutting cycle? We've seen a lot of good inflation data since, right? So you think inflation is gone?

6:00I think this weighs much more heavily. And so I think that if that is the case, which seems to me it is, then err on the side of 50, not 20, not 25. And think about really what we're talking about. How much did they raise? This is up from zero. Right. The way Karen explains it doesn't sound too negative for the markets. But how will the markets actually react? That's it. I mean, a lot of times things in a textbook where things are explained sound one way, and then in real life things happen a much different way. And I totally understand what she's saying, but let's play it out a little bit more.

6:33There's obviously a presidential election coming up. If they go 50, that will be politicized without question. You're going to hear it loud and clear how this Federal Reserve is trying to help the current administration and their candidate. That will be coming to a theater in the U. I don't think they want that, number one. Number two, you know, I don't necessarily know what, at this point, Fed rate cuts are going to do. Once the job market starts to move, it gets to this sort of, you know, it gets to this speed that you really can't control. The fact that they may think they can control the unemployment rate is the same way they can control the inflation rate, which means they can't control either one.

7:09But let me ask you, though, if that is the case and the employment data seems to continue to deteriorate, then they should have done 50. The flip side of that coin is what Tim was just talking about. The inflation gene is not. But we're talking about oil down, right? Right. And we're talking about wage growth down. The Fed does not like to surprise the market, right? And if you look at the S &P 500, it's a few percent at best off of those all-time highs made, what, a month ago or something like that. So at the end of the day, you know, I was just looking at Fed funds, the way they started to raise rates back in 2022.

7:41If they start going 50, then the expectation is going to be that they continue to go 50. I don't think so. I don't think. Well, I mean, but you're saying that 50 kind of gets things reset and it gets the ball rolling and stuff like that. And they don't need and he can do a more measured, more measured. Twenty five. Yes. After that. We're ganging up on Karen. It's kind of fun. You're not alone now. Well, but I if the Fed goes 50, you know, just to kind of define this, the era of Fed gradualism is over. And this Fed has been all that gradual. I don't agree with that either. 50. I'm looking at where we are.

8:14In the context of how much of how much we've already hiked. Well, I but again, this is a Fed that's saying we now feel some urgency to do something that we don't think so. I know they paved the way in Jackson Hole to basically say we are now focused on the labor market. And that's why that was wildly bullish for equities, because it was certainly a constructive and a dovish tilt on what had been a hawkish stance. But why go 50 when you've been a gradualist? Let me just add one more thing. What if we start to see various Fed governors and ex-governors in the next two weeks talking about 50? To me, that will come from somewhere.

8:51Right. You're talking about messaging. Dan, that's what I'm referring to. Yeah, you'd have to float a little bit of a trial balloon. You don't want it to come out. How is 40 percent expectation the markets of a 50 basis point cut? How is that surprising the market? Because it's higher than it was. I mean, it's a new idea. Well, and I would make an argument that bonds have priced in a whole lot of Fed. And that's really where equities need to get word. Yeah, no. And, you know, we should bring a guy like Ben Emmons will be perfect. It'd be great to get him if he comes in. But, you know, again, and I asked Steve Leisman this question.

9:25I don't know the answer to it, and so I'm not a good attorney, but I'm not convinced, by the way, that, as I said earlier, once the rate cut cycle starts, that's not going to magically stop an unemployment rate that's going to continue to move higher for the foreseeable future, get this escape velocity, and historically it just continues to move regardless. All right. Well, for more on what we can expect from tomorrow's jobs report and how markets will react, we are joined by FedWatch Advisors founder Ben Emmons. Come on. You ask and you shall receive. Ben, welcome. Thank you. What do you think?

9:55What are you expecting? How do you think the markets will react? So it will be a soft print, I think, because, you know, the ADP number, I think, as much as people talk about that, that is not a good number to estimate. Within that number, leisure, construction, that all has slowed down a lot. And I looked at the ISM data today, too, and it's like, you know, there's data in there from high unemployment versus low unemployment. That percentage is really contracting, which is kind of like a differential, like the conference board is a labor differential. So that indicates deflating momentum in the labor market.

10:24So it doesn't look to me like a strong number that could come out of this, despite all the statistical issues that we deal with these payroll numbers these days, because, you know, who knows where vision will be. But to the discussion, you know, a soft print, not necessarily good news for the market in that way, because it does set in motion again. We're slowing down. We're seeing more and more evidence coming through the labor market that we are really slowing down, deflating labor momentum ultimately leads to more contraction. And I think this is where we're sort of at the edge here, where markets are kind of trepidating.

10:57You know, if we're getting a negative print, which I don't think will be the case, then it would be really risk off. So the only way that we could get a positive upside surprise because of statistics. So it looks to me like a soft print, not a good market reaction. So will the number tomorrow, in your view, given your scenario, let's say that that is actually what happens. Does it change the Fed in what it does? It probably keeps them at 25 basis points. But to that to what you were discussing, you know, like Goolsby and Waller have been about once the unemployment rate starts rising, it doesn't stop.

11:29And so to to Guy's point, like you do are getting behind the curve. You got to do something. You got to do faster. That is a 22 scenario of like we got to suddenly do 50 or 75. I wouldn't be surprised that it actually happened if you get this big uptick in unemployment rate that they react to that quicker. On the other hand, if you have a labor market that's just sort of where it is and claims are, I think, a reasonable indicator, right, then I guess you could do the staircase 25 starting and then see what happens. You know, ultimately, this economy is still in a soft landing. So if you ease too fast too quickly, the inflation problem comes back.

12:03So it's a bit of a asymmetry here. I think this Fed is very sensitive, though, to the unemployment data. So I think what Bostic said the other day and Daily, too, They're kind of worried about if we're too behind the curve on this picture on the unemployment rate going up too quickly, I do expect the federal rate react more aggressively. 25 or 50 probably doesn't matter, as we've all said. And if you look at the jobless claims, I think we're at the four-week average is at six-month lows. So there's nothing in the jobless claims number that are concurrent, at least, in terms of reading the labor picture.

12:34Does this change any view? And what is your view on the second half of 25? Where is the economy? Because we all know this could happen pretty quickly. I mean, a slowdown. No doubt. And I think that 2025 are really about what they're ultimately going to do with fiscal policy. Because you see the speech from Trump today where he makes a big case about, I'm going to put, you know, Elon Musk in there to start looking at spending, right, and start evaluating that. Now, say he's, right, then we're getting a big picture, right, a big, big change in the fiscal spending picture. So I think that's what the drive is for next year.

13:06This sort of phase we're in right now where the Fed is really in control of the economy, lowering rates if it has to because of to control the unemployment rate. I think that really matters currently. We will see what happens after the election. But I do think the Fed will react, though, to this negative data that comes out. So next year is the fiscal picture. I think that's totally a different scenario. You know, Ben, we went a month ago for, you know, a lot of folks are like, oh, maybe it's not going to be a soft landing. We have a hard landing, which takes me back to kind of 2022. Right. And we think about, you know, a lot of folks were kind of positioning for a recession that was supposed to happen in 2023.

13:39We had an earnings recession, right? But, you know, we didn't have that recession. So that's been pushed out. There's a whole host of reasons for that. When you think about next year, I mean, like, what are the probabilities in your mind? It sounds like you're prepared for softer data, specifically employment data. What is the chance in your mind that we actually do finally have that recession that a lot of folks were kind of planning on last year? Yeah, you know, Dan, if you think of the U-curve, right, the rates re-steepening to flat, and we have a flat curve, which means uncertainty. And I think that's what we're currently discussing.

14:08We don't know exactly the picture. That next year, a much more steeper curve does indicate that we're in a lot softer environment. Again, it does, I think, depend much on what happens in Washington with fiscal spending, how dramatic that will be cut, yes or no, against what else is being promised in terms of tax cuts as well. So that does matter, I think. But it does show that we are in a more and more decelerating phase of the economy. Hard to predict whenever a recession will hit, But it ultimately could happen if you particularly bring, you know, fiscal policy to a halt. Ben, thanks. Good to see you.

14:41Ben Emmons, FedWatch Advisors. What is the first thing that you will look at when that print hits, aside from obvious overall markets? Bond market trades, one, dollar trades, gold trades. Is there a move in the VIX? And is the knee-jerk reaction higher S &P or lower, the conversation we had initially, if bad news is, in fact, bad news for the market? Yeah. What's your take? Similar, right? And also, yeah, I think bad news is bad news. But then to follow that on, would that make a 50 more likely? Right. And is that bad news also? So it'll be interesting to see the odds and how they change, right, post 830.

15:19I just think it's fascinating what's going on with asset classes because commodities and bonds are telling you recession is coming. And it's coming a lot faster. Equities and credit are not. And I think, you know, so we all recognize how important it is. And, you know, back to August, as much as some of it was technical and some of it was carry trade, it was a growth scare. Let's be clear. A real growth scare is something that's going to scare the you-know-what out of these markets. And right now we're within a whisper of all-time highs. Yeah. And, I mean, a growth scare, you should probably take some, you know, chips off the table as it relates to equities.

15:51A lot of folks will make an argument about valuation and the like, especially if you're in the camp, that if it's a little less than a slow landing, then we're going to have an earnings recession. Right. If you think about, Guy uses this term all the time, some of these companies that have been driving the performance of the S &P, they've been out-earning. And at some point, they're going to pull back on that CapEx, which is going to have this kind of circular sort of experience, I think, for the economy that's really relied on this stuff right now. So to me, I think that makes sense. And I think under most scenarios, you probably have a retest below 5 ,400 in the S &P.

16:20All right. We've got an earnings alert on Broadcom. Shares are down despite the chipmaker beating on the top and the bottom lines. Revenue guidance for the next quarter in line with expectations. CNBC's SEMA Modi's got the latest. SEMA. Melissa, two things seem to be impacting the stock here. When you break out third quarter segment revenue for Broadcom, semiconductor sales came in a bit weaker than expected. Broadcom CEO Hawk Tan reiterating on the earnings call that he is seeing strength in artificial intelligence and says hyperscalers are scaling up. However, fourth quarter revenue guidance came in line with estimates at$14 billion, dollars, though still short of some of the loftier expectations out there on Wall Street.

16:58Broadcom does project artificial intelligence in 2024 to bring in 12 billion dollars in sales that's higher than last quarter, driven by Ethernet networking and custom accelerators. So that is a sign that demand is growing as it works with Meta and Google to build their in-house chips. Shares, though, down 7 percent in after hours, still up over the last three months. During the same time frame, I would point out shares of NVIDIA are down. Separately, you know, Melissa, we are watching shares of Intel here. There is a report from Bloomberg that the company, in an effort to restructure and shore up capital, is looking to sell down some of its stake in Mobileye.

17:32The company acquired and then took public in 2022. Not a big surprise here, but we are, of course, reaching out to Intel for comment. Back to you. Seema, thank you. Seema Modi. So Broadcom, not good enough, not quite good enough. So relying on the hyperscalers, that's great. You This has been a build that's been going on for more than a year right now. And I look at their customer concentration, you know, Alphabet and Matter are 15 percent. Apple is 17 percent. We know there's a ramp into this iPhone 16. So that's totally separate. But it's kind of related. If you think about AI being on the phone, that should be a big driver for it.

18:04I just think about, you know, the story in general. So the guidance wasn't enough. That's what we saw with NVIDIA. And then what we also saw from the hyperscale is when they reported the CapEx was fine. People were excited about it. They're doing what they needed to do, but wasn't as high as some people expected. And that's the knock on effect. If you are a Dell or a Micron or, you know, an Alago or Bronco, they call it, you know, these days. So that's what's going on over the last few weeks. It's you know, they're non semi they're non A.I. businesses to say they're kind of their brick and mortar is, as they say, is stabilized.

18:35That's not necessarily, you know, an exciting, glowing recommendation in terms of where the outlook is. And in fact, we're hearing that broadband is particularly weak. So there are headwinds more cyclically, I think, in the space. This is, again, as we were all pointing out, I mean, the relative performance of a AVGO to the S &P, it's underperformed by almost 20 percent from that June 17 high, which was also when NVIDIA kind of printed its high. All right. Coming up with the U.S. Steel-Nippon deal on the chopping block. Is there hope for any deal getting done in the space? We'll look at the state of play in the steel world and the other names feeling the impact.

19:10That's next, and some fast movers in today's session catching our attention. Why the moves in Dix, Berkshire, and JetBlue should be on your radar. Don't go anywhere. More Fast Money in two.

19:26He won't. Welcome back to Fast Money. U.S. Steel calling back some of yesterday's losses as new details emerge on the government's concerns over Nippon Steel's proposed acquisition of the company. Meanwhile, Cleveland Cliffs, whose unsolicited bid for U.S. steel was rebuffed last year, continues to drop, trading at more than three-year lows. For more on the state of play for a steel deal, let's bring in Pippa Stephens. Hey, Pippa. Hey, hello, Melissa. Well, national security concerns have been cited for why Nippon's$14.9 billion proposed takeover of U.S. steel could be blocked. But now Reuters is reporting it specifically around having enough supply for critical infrastructure, citing a letter from the Committee on Foreign Investment in the U.S.

20:06that was sent to both companies. Now, Nippon declined to comment on the reports, but said last night that it had not received any updated related to the CFIUS process and that the American steel industry will be on much stronger footing because of Nippon's investment. For its part, U.S. Steel has said thousands of jobs will be at risk if the deal falls through and would raise serious questions about the company remaining in Pittsburgh. Now, shares are now trading below where they were prior to December's takeover announcement, with Wolf Research saying the stock now looks oversold and that the standalone value is more like$35 to$45 per share.

20:43But bigger picture, we've seen protectionism on the rise, and blocking this deal has gained bipartisan support, with presidential hopefuls Trump and Harris also speaking out against it. Japan also, of course, a key U.S. ally and the largest foreign investor in the U.S. Now, in terms of another suitor potentially swooping in in the last hour, Cleveland Cliffs CEO, Lorenzo Gonsalves, whose bid for U.S. Steel was rejected last year, telling CNBC he is working with his banking group and that he's ready to go after they submitted a much lower offer last year. Melissa, this has been quite the saga. It really has.

21:19Pippa, thanks so much. Pippa Stevens. So interesting that the Cliffs CEO might actually get some of the assets that he wanted before at a lower price now. Right? Yes. Well, that could work out just super nicely for him. So I don't know. Obviously, this is very political. There's no question about that. I wonder, though, if there is some way to craft some solution here where and we were talking last night, Steve brought the idea, well, what if they help Cleveland Cliffs buy it? I don't know if that's the best use of our taxpayer money. The politics of it is sort of disturbing. I think the deal should go through, but it doesn't really matter.

22:08Politics is what sort of is the only thing that matters at this point. Remember we were talking the other day about Dubai World or Dubai Ports World or something like that. was looking to buy ports that included U.S. There were several U.S. Northeastern corridor ports, and the deal was definitely in great distress, and ultimately they crafted a solution. This won't be as easy, but I don't think the possibility of that is necessarily over. But I also do think if this were in a deep blue state or a deep red state... Any state other than a swing state, basically. Sort of, yeah. Exactly that. Well, to that point, I mean, the Clif CEO said that he would be willing to invest in any and all union representative assets owned by U.S.