Dow Inches Toward Record High Ahead of Fed Decision 12/12/23

27:30Right now, we have to make sure they win the war. And we launched a joint declaration of support alongside President Zelensky and the G7 leaders in Vilnius, outlining a long-term commitment to supporting Ukraine's defense needs. We also hosted a defense industry conference last week here in D.C. to get that critical work done. So it's a step at a time. Thank you all very, very much. This concludes the — thank you, everybody. Thank you, everyone. This concludes the press conference. Thanks, everybody. Thanks, everybody. We have been listening to President Joe Biden, Ukrainian President Volodymyr Zelensky just wrapping up their joint news conference at the White House.

28:14This is an important tour for President Zelensky. He needs aid very badly in the fight to maintain his country and the boundaries of his country. Let's go to Eamon Javers for the very latest. President Biden, Eamon, mentioned a small group of Republicans opposing funding. Of course, the context to all of this is we just came off of a bruising battle over the budget, fiscal responsibility concerns. And here we are with President Zelensky asking for some more aid. Yeah, two small olive branches from the president to the Republican Party in that set of remarks, Melissa. The first one was when the president talked about security at the border.

28:53That's the demand in the negotiations from the Republican side. They want to see border funding, more border security measures before they'll pass Ukrainian military aid. The president here is saying, yes, we're going to look into that. Yes, we want to compromise with you on that. But no, let's detach that from this debate. So going a step or two toward the Republican position, but not all the way there. And then one of the questioners there set up an opportunity for the president to tee off on former President Donald Trump, which, you know, in a political context, President Biden would normally love to do here.

29:26He restrains himself because he knows that Volodymyr Zelensky is courting Republican support, including from a number of prominent Trump supporters for that funding. So Biden doesn't want to get in the way of that. So fascinating to see Biden inching toward those Republicans a little bit rhetorically here. And then from Zelensky's perspective, I thought how fascinating to see him speaking in English to the American people. That's not something he was comfortable doing early in his tenure, early in the course of this war. Now he is because he knows how important it is for him to make the case directly to the American people to encourage them to tell their representatives in Washington to support this country and to support this war funding.

30:10Is it a foregone conclusion that this ask will happen in terms of aid this time around, Eamon? Or is that still completely up in the air? It is up in the air. And there's there's some a couple of days now where they could get this done before the end of the year break. But it's looking increasingly like this is going to have to slip into January. And of course, the Ukrainian side wants the money approved and on the way as quick as possible. You you saw some of the mentions of the defense industry here, Melissa. And I thought that was also strategic by both sides. You saw Zelensky mentioned the fact that he had met with American defense CEOs on a number of occasions, including yesterday in Washington, D.C., to ask their advice on how to improve the Ukrainian military industrial complex.

30:53That's been a point that the Biden administration has been trying to make to those recalcitrant Republicans saying, look, yes, we're spending a lot of money on Ukraine, but a lot of it's going right to the U.S. defense sector. The money is staying in the United States. The weapons are going to Ukraine. Therefore, this is not really a drain on the U.S. economy in the sense that you might think of pallets of cash being shipped to Ukraine might normally be. In this case, the U.S. defense industry benefits. And you saw Zelensky very keen to make that point and talk about his meeting with those CEOs just yesterday here in Washington.

31:27All right. Eamon, thank you. We'll see you soon. Eamon Javers in Washington for us. We were just having the short conversation prior to President Biden speaking. If we knew that the war was going to end tomorrow for whatever reason, hopefully peace, then what would happen? What would be the knee-jerk reaction? What are some of the things that you would look to in the markets that would happen, Karen? And we were mentioning picks and shovels. Right. Well, I was saying the knee-jerk reaction when it did happen was oil went up and then turned around. So I think the knee-jerk reaction would be down.

31:55But also shipping routes were just sent into a, you know, I guess it was just a full-on panic because they had to try all different routes. And that meant more days in the water. That was more expensive. The reverse. Right. It's fascinating. I don't know the answer to that question. I mean, And historically, you'd say crude is going to collapse. Maybe that flight to quality in the form of the dollar, maybe that somehow reverses itself. Maybe see the dollar continues. I don't know the answer. I'll say this. I don't think it's going to happen. I mean, we all want it to happen. There seems no indication.

32:27I mean, in some ways, it seems like they're digging the heels in a bit more. I'll say this. Defense stocks, which have sold off, I think on valuation alone continue to be interesting. Yeah. And we'll turn to our in-house Russia expert, Tim Seymour, for some insight here in terms. I mean, it did sound like President Biden, at least, was pledging U.S. support till the very end, until Ukraine could be sure that its borders were secure. He's going very far out here. So we'll see if that actually happens. But what are the implications here? What would you have to assume Putin would be willing to do if that happened?

33:03Look, I don't think Putin is backing down in any capacity. And it's also been shocking to me, both in the last two years and even in the last five, where there's been some kind of misguided support for Putin in this country. And so, look, I think the follow through here, unfortunately, on some level, today's political theater, it is about funding. It is about budget. It is about the dynamics of a fiscal process in the U.S. that really is as contentious as it's ever been at a time when when obviously we focus every single day on the fiscal dynamics as much as we ever have been. I'd get back to just the energy security issue.

33:46I think what you've seen in the last 12 to 18 months is, first of all, OPEC plus non-OPEC supply coming into the market and the oil and the energy space has never been stronger. U.S. production is as high as it's ever been. There's some real positives from this. Karen talked a little bit about just the dynamics around both energy prices. But the inflationary elements of this, if there was some type of a settlement, I think, are also, you know, this could provide additional relief. think of what this meant for Europe. Think of what this meant for Germany. But again, I would express my skepticism, too.

34:22And I don't think Putin is backing down. All right. We're going to take a break here. Coming up, we'll take a look ahead to tomorrow's Fed decision and the markets on the doorsteps of new highs. Fast Money's back in two.

34:39Welcome back to Fast Money Stocks. Rising today after the latest CPI data showed inflation cooling in November from the previous month, the Dow closing less than 1 percent from an all-time high. This ahead of tomorrow's big Fed decision. Wells Fargo Securities expects a knee-jerk bullish reaction to that news. Mike Schumacher is the firm's head of macro strategy. Knee-jerk bullish, but I guess that implies that you don't think that's the right reaction. Probably not. Really, it's based on the idea, Melissa, that almost everyone we talk to thinks Jay Powell is going to come out and try to talk down the idea the Fed is going to ease soon.

35:10So the bar is really high. How can he possibly top that? I doubt he can. And actually, if you want to look at a recent example, go back to December 1st. He had an appearance down at Spelman College and he didn't really sound dovish, but the market said, well, he wasn't super hawkish. So it was off to the races. Bond yields down, equities up. Maybe it's not as dramatic tomorrow, but something sort of like that, I think, is on tap. Do you think that he will try to be super hawkish and just the markets just will not believe him no matter what he says? The problem is he's not a super hawk. He'll try to be hawkish, but in his core, he's not really a hawkish guy, in my opinion.

35:45So it's difficult for him to try to make that point and drive it home. I think that's the issue. Sorry. Speaking of core, super core, which is one of the things they talk about watching very closely. There seems to be some sort of reacceleration going on there. So we can talk about this number being cool, but the one number they seemingly look at is going the wrong way for them. Yeah, super core is ugly. I mean, if you look at the annualized rate over the last three months, I know it's a mouthful. It's above 5 percent. Now, the Fed's target is 2. It's not 5. Even if you look at core inflation, same math, annualized three-month rate, it's right around 3 percent.

36:20And in fact, it's been around 3 percent for the last four to five months. It's done a lot, but that really occurred during April, May, June, that time frame. Not recently. So momentum, it's stalled. So one thing tomorrow that I would expect will see a change in the statement is around financial conditions. So last time they mentioned that financial conditions were tightening. Clearly since they've been easing. So I would expect a language change. It seems like they're making this a smaller issue. It's not front and center. But, you know, if we saw bond yields continue to come down, stocks continuing to rally, you said that might be the knee jerk tomorrow.

36:54When does it become a front and center issue to them? Or do you think it does? It's becoming a bigger concern. And when you think about bond yields coming down a lot, real yields in particular, That's the basic barometer of how tight policy is. So just to frame that a bit, when you look at the 10-year Treasury, it really yields about 2%, and it's down from 250-plus, not that long ago. That's a big move. It's still tight, but not nearly as tight. So the market's doing a lot of lifting for the Fed. But does the Fed want that lifting done right now, or would it rather wait three months? That's the big question.

37:24So what's going to be the most important data for you? What do you think is the most telling? It's the press conference tomorrow, no question about it. So statement, fine, a couple words change, what have you. The dots are sort of interesting, but it's going to be what Jay Powell says and how the market really takes that. That's where the action is for us, Karen. But it really sounds like no matter what Jay Powell does, he's going to be interpreted as dovish. And with seasonality working in the bull's favor at this point, it seems like we're just going to be off to the right, which is back to the knee-jerk hire.

37:53It's tough. It's tough for him. He's managed to out-hawk the market once or twice maybe in the last year, but it's a pretty, again, a pretty high bar to get over for him. So that, to me, is the big challenge. Yeah. Anything in PCE that will change – I mean, not PCE, sorry, PPI, which is the other part to the CPI, which will feed into, you know, the Fed's preferred gauge of inflation, PCE, to piece it together and get the PCE. Is there anything that we can learn from that? Not too much, frankly. No, CPI told a pretty good story today, I think, as far as the overall pictures improved, but it's not really getting better faster.

38:26So I think that's the big takeaway for the Fed on the inflation front. So where do you think rates are in two months or three months? Yeah, I'd say pushing out toward the end of the first quarter, somewhat lower, but not a ton. So you think about the move in November, that was the express elevator straight down. Now we're taking the escalator down kind of slowly. So 10-year Treasury yield, call it high threes, 390-ish, give or take. So 30 basis points lower than today. Not bad, but not a super aggressive move. And we think it's because people look at the comments, think about the comments from the central bankers.

39:01Even though they're not incredibly hawkish, they say, you know what, maybe they're not quite ready to ease. Maybe it's going to be a second half thing. And perhaps it's not April, May. Maybe it goes out to September or something like that. So that easing in the market gradually gets pushed out, and that slows down the descent in yields. So do you think that the descent in yields is positive for stocks at that point or no? Probably positive for risk in general. I mean, the recent reactions have been yields down, stocks up. I'll defer to Chris Harvey as far as the details, but that mechanism seems in place.

39:34Okay. Michael, great to have you. Thank you. Thank you for your patience today. Absolutely. Michael Schumacher, you think yields go down, and that's not necessarily a good thing for risk? No, but I understand the mechanism stays in place without question, especially in the middle of December when, you know, seemingly we're on autopilot here. So I get it. Michael's been spot on with this. But, you know, I will say if the Fed is true to their word, you know, some of the things that I saw today in terms of what they've been focused on, not me, should be concerning for them. So you said, you know, is he going to be hawkish?

40:03Will the market believe him? We're going to find out in the commentary in the Q &A tomorrow for sure. Yeah, I mean, housing, rent, used car prices, Tim, all higher. I mean, oil is working in our favor. Rates are working in our favor. But what's your take here? Yeah, I think this conversation we're having is is inflation. If inflation is falling and rates remain stable, this is the dilemma within the Fed. Are you becoming more restrictive with the market saying is that inflation is falling faster than the economy? And I think we're all saying the same thing. There are some elements here of inflation core, super core, whatever, aren't going anywhere.

40:41That's why the Fed really has to hold the line here. But we get back to the equity market where I think we can continue to trudge higher. And if you look at how that's manifesting in terms of risk, well, we're about to be sub 12. I think we are sub 12 on the VIX. So we're at a place where I think, again, if high rates were bad, low rates are supposed to be good. And I know we all know that to some point they become a problem, but they're not a problem. And I would just get back to the biggest stocks in the world that we know have been the big outperformers. But you are starting to see after, look, equal weight is underperformed by 14 % year to date.

41:23OK, so it really is really lagged. We are seeing broadening. Banks look pretty interesting. Look at look at biotech also and other parts of, I would say, slightly riskier dynamics now up over the 200 day. You're seeing breakouts in certain parts of the market that this is the ammunition you need with a seasonal. I don't I don't see what what stops us between now and mid to end January. Coming up, Boeing, Boeing gone. The aerospace giant trading at levels it hasn't seen in two and a half years will take you inside. The stocks climb to the stratosphere right after this. But first, super host heartache.

41:59Analysts checking out of Airbnb as next year's travel outlook turns gloomy. Where they see the stock going next. More Fast Money in two.

42:19Welcome back to Fast Money. Shares of Airbnb dropping after a bearish call from Barclays. Analysts downgrading in stock to underweight from equal weight, lowering the price target to$100 from$135, citing a cautious travel outlook for 2024. But nobody seemed to tell the other hospitality stocks. Hotels, cruise lines, airlines all continuing to rip higher and adding to big rallies over the last few months. Marriott and Hilton also hitting all-time highs. So where does the travel trade go? I think what was important in this note, Tim, was that the reasoning behind this was competition from hotels.

42:49So hotels may be winning at Airbnb's expense. They are. And look at look at Hilton Grand, but look at Marriott and pricing's been very resilient. Demands remain very strong. I think Airbnb, while their third quarter numbers were solid, there's there's there's a multiple here at some point. Look, the best name in the space is Bookings. Bookings trades around 18 times forward. They're actually they're all, you know, so rentals business. in addition to lodging is growing very fast and obviously higher margin for them. They are the largest player in the world in terms of bookings per room per night, I would say by a significant margin.

43:26So airlines, I think, are getting a tailwind here. Sorry for what's going on in energy because they didn't get credit on the reopening side. And when their pricing was holding up, prices are starting to come under some pressure. But again, I continue to like airlines here. Expedia, by the way, also got a downgrade from the same analyst. And he says, If you believe a recession is around the corner or coming, then you should be out of Expedia or you should be careful with Expedia and booking because they both lost 60 percent in the last recession. Makes a lot. It makes a lot of sense. You know, it's funny that Tim mentioned Delta because it's rallying now 30 percent from that recent low.

44:01But he's right in indicating that these are great trading stocks. And all those things you said are probably true. But it doesn't mean that Delta can't rally another 15 percent from here, which would probably make sense given the context of this range we've been in for quite some time. Yeah, Rebecca, what do you think about the consumer? Pent-up travel spending is almost over. Well, it's interesting. Bank of America had an analyst on your air this morning who was talking about what they're seeing from all their consumer data. And basically, consumers moderating, but at the margin. And where they are spending, it is increasingly experiences.

44:31So the hotels, the flights. And it doesn't mean the stock is going to move exactly with that. But from a macro perspective, moderation in spending, but still pretty resilient. And until that changes, I think, and they're focused on services, this holds up. Coming up, Boeing flying higher on a big delivery win. Is it clear skies ahead for the manufacturer? We'll debate that when Fast Money returns.

44:56Welcome back to Fast Money. Shares of Boeing hitting their highest levels since June of 2021. Today, the stock eking out a gain after reporting November deliveries have put the company closer to meeting its 2023 targets. Phil LeBeau has the details. Hey, Phil. Hey, you can really see the momentum, Melissa, that Boeing has enjoyed over the last several weeks. They've notched a number of significant orders. Those are reflected in what we see for November. The company logging 104 airplane orders for the month of November. Their net orders year to date, 945. They're easily going to top 1 ,000. That is the expectation at this point.

45:33Deliveries, 56 airplanes. Most importantly, the bulk of those being 737 MAXs. By the way, the company is on track essentially to hit the guidance. It's lowered guidance of delivering the number of MAXs that it said it would deliver this year, as well as for the number of Dreamliners. The total number of aircraft and backlog now at 5 ,324. And Melissa, the momentum that you're seeing with Boeing right now, a lot of people are saying, yeah, it's not only because of the orders that they've logged. It's the potential for China, perhaps within the next couple of weeks, to say, you know what? We're ready to accept deliveries once again.

46:11There's no indication of when China will do this. But the pressure is building, Melissa, because there's so much demand and traffic has grown so much in China. They need the airplanes. And that's why many on Wall Street are saying at some point here, China will say we're ready to take deliveries again. Phil, thank you. Phil LeBeau. Tim, you think that happens? given the relationship between the U.S. and China these days? I'm not sure. And there's plenty to talk about how that relationship is getting worse. And, you know, we've had a lot of conversations in the semiconductor space, even in the last 24 hours.

46:47I think the recovery of the max in the order book, and again, 45 delivered in November versus 32 a year ago, is the story. But max certification plus just reopening dynamics, get this company to 15 bucks of free cash flow a share, probably by next year, which is the story for moving the share price higher. So I've been long, I've been patient. It's been frustrating. But this company, it's an oligopoly, right? It's a duopoly, I should say, excuse me. There's not a lot of places to go, whether the Chinese come back or not. There's plenty of other folks in the order book. And the max is really the key, even though it's not the most profitable of the airlines they produce, of the bodies.

47:26But I think ultimately, this is part of the story. I agree with Tim that, you know, China's going to have to buy them from somewhere. They're going to need a lot of planes. And Boeing said for the next 20 years, Chinese demand is 20 percent of all the plane demand, all the plane purchases. They're a big player here. But we know that there is bipartisan support in Congress. There's new stuff coming out right now as we speak to try to tighten the screws between the U.S. and China. And so I think there is a risk that China might retaliate and say, no, Boeing. Thank you. Up next, Final Trades.

48:08Final trade time. Rebecca Patterson. I want to short the euro. The ECB is going to cut faster than the Fed. Growth is going to disappoint next year. You're just not going to see a lot of capital going to Europe, especially, unfortunately, if the war continues. Tim Seymour. I like bookings multiple. Also, their ad spend is their ad costs is coming down. Their margins are going higher. Bookings. Karen. Yes, first I gotta say happy birthday to my brother Mark before I forget. Heart of gold. And IBV, Tim mentioned it earlier that is my final trade. Happy birthday Mark. Guy. Happy birthday another Fenneman birthday after.

48:43He's a big fan of the show as you know. IBM, Mel. Alright, thanks for watching Fast Mad Money with Jim Kramer starts right now.

48:54All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

49:28To view the full Fast Money Disclaimer, please visit CNBC.com forward slash Fast Money Disclaimer.