Fast Money 5/16/25

0:02Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast money. Here's what's on tap tonight. Soft data signal a strong week for stocks after tariff cuts fueled a market resurgence, but are fears of inflation and a slowing consumer going to pull the rug out from under this rally? We'll debate that. Plus, Novo CEO Shakeup, the Wagovi maker, dropping its CEO after a rough run for the stock. Can changing the chief executive tip the scales in the right direction? And later, inside the latest opposition to President Trump's one big budget bill, how to trade Ralph Lauren with options ahead of results next week, and why one of our traders is scooping up Dick's sporting goods at a discount.

0:38I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinemann, Courtney Garcia, and Mike Ko. You start off at the market's big week. The S &P 500 climbing more than 5 % and up five days in a row. The index is now less than 3 % from its record high. Tech, a key driver, big move since Monday, and Nvidia, Tesla, Dell, and more. There were a number of bullish drivers for stocks this week. The U.S. and China, for one, agreeing to temporarily delay tariffs by 90 days. Inflation data coming in softer than anticipated and Goldman Sachs lowering its recession odds to 35 percent, while Barclays dismissed them altogether.

1:14But a downbeat consumer sentiment report out today could be a troubling warning sign. University of Michigan survey posting its second worst reading on record. Tariff and inflation fears weighing down the mood of respondents. So with the next batch of data expected to show prices rising and inflation, too, is this the best it's going to be for this market? Tim, what do you think? Well, I think the inflation data is going to be as murky as the now less than recessionary calls coming from Wall Street all over the place. We went from everyone starting to raise the ante on recession to now being, well, we're less clear on recession than we were.

1:50It's the same thing with inflation. And we've been talking, I think, rightly about hard data versus soft data. The soft data sentiment wise doesn't look so good. And if you look at the University of Michigan sentiment this morning, long term inflation expectations are at their highest since 1991. But there was a lot of other good news. I know Courtney's got a positive view on inflation, and we'll talk about that, too. I just think that this was the week where you just really have no idea. And that includes even listening to Walmart, who said, you know what, we're going to start passing this through.

2:17You know, we can wait a little bit, and we're going to control prices. But equities are responding to the worst of trade news behind us. And, in fact, it's so funny. Like if we'd never had Liberation Day and if we had never had all the trade anxiety and rancor, would we be lower than we are on some level by just removing it and dropping these? We talk about this all the time with companies. It's like, you know, getting beat up by the same news over and over again. We're rallying now on the fact is every trade deal going to be a rally point. So U.S. and EU with some pretty good news coming out of where we're going to be.

2:53I don't know, but I do think the White House is bringing good news, not bad right now. Well, I agree with that. Good news, not bad. And, you know, big, you know, high profile deals in Middle East and all of that. But I do think a market that's down 20 percent and up 25 percent is flat, but it is not the same as flat. Right. I think that there is some damage to not just consumer confidence, CEOs confidence. Right. How do you run a business? Great. You averted this first disaster. But it's hard to think, well, there's no chance of it coming back. There has to be some chance of it coming back or in some maybe lesser form, but still not a good form.

3:32So I think that the rhetoric with China, that was clearly a good thing. If one believes and it seems like most market participants believe even if we get to the 90 days with no deal, we're just going to roll it over and it'll still be fine. I think, though, I agree with Tim, the data, I don't know what to make of the data. It's really murky. It's hard to know. Now, have any of the significant tariffs gone through yet? No. No. Right. So, okay, so I don't— May, June, July. Those are going to be the tests of the hard data. July 17th or what is it? July—no, I guess it's July whatever. Next month we will start seeing more of the impact.

4:11But then you had all that front-running. Right. Yeah. And then—so I do think also we'll see no guidance still. Why would you? Right. Why do you even need to? Right. And also, by the way, 35 percent tariff is still very high. Yeah. It's still it still affects a higher. If we just started, this will still be higher. Yeah. No liberation day. 35 percent. There we are. That's the deal. Oh, wow. That's a lot. That's a lot. Exactly. That is a lot. Yeah. And that's clearly what's weighing on all the soft data right now. When you're looking at consumer sentiment data, the amount of times that people mention tariffs have significantly increased because everybody's saying, OK, maybe inflation is coming down.

4:47But once these tariffs kick in, that could affect inflation later. So people's expectations of inflation are continuing to rise right now. What's interesting is this was the second lowest reading on consumer sentiment. The worst of it, you would think it was a really bad time, like a 2008, a 2001. It wasn't. It was actually 2022. It was actually the lowest reading on consumer sentiment. And that did not turn into that self-fulfilling prophecy where everybody stopped spending and it didn't cause a recession. So it's not to say that this can't always happen. And I just haven't seen it translate into the hard data.

5:16You are seeing inflation coming down. You're seeing GDP numbers are strong. Earnings are strong. So until that actually translates, I don't actually think that that will necessarily become the self-fulfilling prophecy everybody's so worried about. Isn't it just a matter of time before it translates? I'm not trying to really rain on your parade because I'm glad you're bringing this more positive spin to this whole thing. You're sitting in a silver lining chair. Exactly. But it is just a matter of time before that pulled forward inventory runs out, which a lot of people said may already. and tariff inventory gets on the shelves and Walmart is going to start passing on the cost to consumers.

5:48I mean, it's just a matter of time before inflation goes higher. It can be. That's the concern, right? So that's what people are trying to weigh out. Is there a higher risk of a recession if these tariffs go through and that does cause more inflation? Yes. But also, if it isn't as bad as people expect or if some of these businesses are able to absorb some of it, which we talked about yesterday is Walmart may be able to absorb more of this than they are saying. So I think that's the question is what actually goes through. I think people are pricing in a worst case scenario than may actually come to fruition.

6:18That's the real question. Mike, where do you stand? Are you Mr. Silver Linings tonight? Well, look, I mean, we've made it through some pretty key technical levels, I think, where I actually expected the market could have bumped its head. So the fact that we're, you know, approaching basically those all time highs, I have a feeling we're probably going to test those, as a matter of fact. So I think we probably could go a little bit further. As for Walmart, I mean, obviously they are going to have some sensitivity if we don't really get big movement on some of the products that they're going to be affected by on the tariff front.

6:48But they are principally a grocer, right? So we're looking at, what, 59 percent of their revenues are on the grocery side. So I'm not really that concerned about Walmart on that front. The valuation is a little bit troubling as far as Walmart's concerned at 33 plus times forward. But, you know, the tariffs, I think they're sort of trying to talk to us about what that impact is going to be. And I don't know that they're trying to blow it up too much, but I think that it's one of those things that the C-suite can do to try to talk to the administration from the side and say, hey, this is really going to affect us.

7:18And, you know, maybe they'll get to see some additional movement. We've seen that there's some flexibility there, and I think that's what a lot of CEOs are hoping for. I think that's a great point on the levels, but we've also made the point in the past where the market swings to extreme. So maybe that low that we saw was an extreme low. And maybe here we do have some upside from here. But how much more? Yeah. And I guess getting back to our inflation conversation, remember, COVID was an excuse for a lot of companies to raise prices, too. I mean, there was there was real strain within supply chain.

7:47But but I think you kind of have an excuse if you're a company and raising prices here, too. And I think companies are going to probably have to fight that urge to raise prices if they all can do it. All right. We've got a news alert here on the FAA and some proposed flight schedule changes for Newark Airport. Phil Abbeau's got the details. Phil. Melissa, slowly but surely, the FAA and the airlines that serve the Newark Liberty International Airport are going to reach an agreement when it comes to flight schedules. The FAA coming out after three days of meetings today and saying that it is proposing, similar to what they did before the meeting, 28 arrivals per hour at Newark Liberty.

8:25And then once a runway that's under construction, once that construction finishes on June 15th, it would go up to 34 per hour. For a point of reference, Melissa, before a lot of these issues really started popping up about three or four weeks ago, the regular arrival rate was at about 34 or 35 flights per hour. So this is not finalized, may not be finalized until the end of the month, but the FAA is saying that it is continuing the conversations with the airlines. And at this point, they're proposing 28 per hour, which is roughly where they're supposed to be right now. But remember, they're short on flight controllers.

9:01So that's part of the issue here as well. How does the FAA decide who has to pull back, Phil? How does that get allocated in terms of cancellations or whatnot? It's not a slot-controlled airport, so the FAA can't just come in like the schoolteacher in charge and say, you get this, you get this, you get this. They've got to work everything with the airlines that are there. And for United, there's a lot at stake here. 71 % of the flights out of Newark are United flights. So it's already cut back 35 flights a day. Now the question becomes, does it have to further cut back? And, of course, the other airlines, Delta, American Spirit, those are the other biggest of the operators there with each about 5 percent of the flights.

9:40They would likely have to take some cuts as well. Just thank you, Phil. Quickly, good for airlines, bad for airlines at this point, when it gets to this point. I think at this point, we're starting to think about where there may be capacity issues in other places. You rightly brought up a couple of days ago that reduced capacity forced upon airlines sometimes could be a positive in terms of what we concern. and they always seem to get a little fat when they have the opportunity. I think net-net airlines are trading on economic sentiment and that risk momentum, and I think, honestly, they've come a long way.

10:12I'd be a little wary here. All right. For more on market risks tied to the disappointing consumer sentiment data, let's bring in CNBC contributor Peter Bookbar, Chief Investment Officer at Bleakley Financial Group. Peter, great to have you with us. Hi, Melissa. Before we get to all that, I want to talk to you about a headline that crossed in just the past half hour or so. So we learned that the U.S.'s last AAA rating is gone. Moody's has downgraded the U.S. to a AA1 from a AAA. The outlook is stable. What does that mean, if anything, to you, Peter? So Moody's is following S &P 14 years later. Obviously, Fitch did it as well.

10:48I don't necessarily think that there's much of it. Treasuries are still dealing, though, with the fundamental factor of less foreign demand for them and the growing size of the pile of debt that needs to be constantly refinanced is not going to change. But it is symbolic in the sense of here's a major rating agency that's calling out the U.S.'s strained debts and deficits. And I don't know if that's enough to sort of change the negotiations currently right now in Washington. I think more impactful would be if the 10-year yield really started to spike sort of like what we saw in the U.K. a couple of years ago.

11:27But I don't think we should ignore it. But on the other hand, I don't know how much of an impact it's going to have on the actual levels right now in the 10-year, for example, with that being the benchmark. All right. Let's get to the consumer and to markets, Peter. You missed survey. It's soft data. The Fed has sort of discounted soft data, relies on hard data. But how important do you think this is, this unexpectedly weak reading? You say that it's a bipartisan issue. How does that then factor into how we handle tariff negotiations? Well, it's clear and loud and clear from that survey that consumers are really worried about the inflationary impact from tariffs.

12:06Whether it's a one-time thing or not, I think a lot of consumers, particularly lower-to-middle-income ones, still have PTSD from 2022 and 2023. And the last thing they want to see is another rise in their cost of living. and that Walmart, when Walmart gets to dictate what they want to pay a vendor for a particular product that's sold in their store. And if one vendor is selling something too much or too high, then Walmart's going to go somewhere else. That Walmart is acknowledging that they have to absorb the price increases coming from their vendors, I think is pretty notable. Now, to what extent prices are going to go up, so there'll be some products and not others, But I think that they can't fully absorb these tariffs is a pretty telling thing.

12:52And over the next couple of months, you're going to see a lot more of that. And I'm really interested in next week to hear from the slew of retailers that are reporting to see what extent they're going to pass it through. But regardless of whether a retailer is going to pass it on to us or not, it's going to be eaten somewhere along the supply chain. So somebody is going to get hurt by this. Hey, Peter, it's Courtney here. I found it really interesting looking at those consumer sentiment numbers. The consumers are clearly very concerned about tariffs. But what happens when we get past this? And are we at some point going to focus on things like tax cuts, things like deregulation, things that may be positive for the economy?

13:27How quickly could you see some of those numbers turn theoretically? And what does that mean for the consumer sentiment numbers or the economy at large moving forward? Well, I hope so, Courtney. I hope that we can sort of change the conversation from tariffs. But let's just take what would be the best case scenario on tariffs and that all we have is 10 percent on top of what was the existing tariff rate coming into the year at about two and a half percent. So even at that best case rate, we're still going to have the highest tariff rate since the early 1940s. And just to put a dollar around that, a 10 percent tariff on three point three trillion dollars of U.S.

14:07goods imports, call it around three hundred thirty billion dollar tax on U.S. companies. Well, for perspective, U.S. corporate income tax receipts are about five hundred and twenty five billion. So if you add those two together, you divide by the pre-tax income that is implied by a 21 percent corporate tax rate and the 525, then you're essentially raising the effective corporate income tax rate to 34 percent. So that base case 10 percent tariff is essentially wiping out back of the envelope math the entire Trump corporate tax cut in 2017. That is a very interesting way of putting it. Peter, thank you.

14:47It's always great to get your analysis. Peter Bokvar of Bleakley. Mike Ko, that's a very interesting way of thinking about it in terms of what it means for corporate tax, what it would be in the form of corporate tax. Yeah, I mean, well, it's a consumption tax. I don't know that I would necessarily equivocate it. You may make the equivalence with the corporate income tax necessarily. I mean, look, one of the other impacts that's going to be taking place here is that in theory, this was intended to help resolve the imbalance of trade. And one of the things that affects consumer confidence, which is one of the things we've been focusing a lot of our time and attention on, is that, look, that's going to be impacted by the kinds of things that people like us are talking about.

15:28And if the trade deficit declines, then that is a net positive for GDP. So I think we had a bad GDP print the last time. The next one could be a little bit better because they front ran a lot of the purchases. So that might actually get, you know, get some confidence back. And the prices haven't translated to what consumers are seeing just yet. So maybe that confidence returns. All right. Meantime, the House Budget Committee failing to approve President Trump's big budget bill earlier today. Another vote scheduled for this weekend. Emily Wilkins joins us on the Fast Line with the very latest on this one.

15:59Emily. Hey, Melissa. Yeah, lawmakers, they did not succeed today, but they are down and not out. They are getting ready to try again on Sunday night. The key to advance at this point, there are four solid no's. All of them are fiscal hawks. All of them want bigger cuts. And all of them are looking at certain things beginning sooner, things like work requirements for Medicaid. And I think particularly interesting to the energy sector, a lot of these clean energy tax credits are going to be phased out in the bill. They want that to happen much sooner than what we have right now. Congressman Chip Roy is one of the four that voted no today.

16:38Listen to his argument and the case that he made in committee for why he did that. We are writing checks we cannot cash, and our children are going to pay the price. So I am a no on this bill unless serious reforms are made today, tomorrow, Sunday. We're having conversations as we speak, but something needs to change. House leadership is hopeful to strike a deal this weekend. Majority Leader Steve Scalise telling reporters that it's not really policy changes. It's more of when things start and stop. And just to note on these clean energy tax credits, they are set to really be a flashpoint, not just in the House, but in the Senate as well.

17:18I think folks think clean energy. They think of solar and wind. But this is more than that. This is nuclear. This is hydrogen. And there are a number of industries that are pushing for these as well. So we'll be keeping a close eye to see this vote next week, if they can get it to the floor and if they can get it passed. Melissa? Emily, thank you. Emily Wilkins. Well, I think it's fascinating. I think it's fascinating that at least folks that by definition and historically how they have voted have voted in line with something that would make sense. In other words, if you are fiscally by again, by definition, someone that's supposed to be looking for at least cutting spending, finding ways to raise revenue and finding the ways to raise revenue, it's really the opposite.

18:00I mean, what we're getting from a lot of the policy initiatives here are ways to generate tariff income. But the revenue side of the balance sheet is something I think or the income statement people should be very concerned about. So where this all goes to is I just think we're at a place where I'm worried about discretionary spending. I bring it back to the market and I bring it back to at least certain subsectors that have had a tremendous rally off of those lows. We're looking at, you know, some of the discretionary names, especially in athleisure and apparel, that have rallied almost 50 percent back to where they were and even north of where they were before all this happened.

18:35I think the reality is, and it's also more than coincidence, I think we're getting this. this maybe it's a coincidence, but this kind of a reaction out of out of lawmakers on a day when we do get this downgrade there, there is there is reason for it. In other words, there is a reason why the ratings agencies are coming through, whether the market is listening or not. At some point, the rest of the world. And that gets back to the other debate we've had all week about Treasury yields, which are creeping higher. Coming up to cable giants set to join forces in a nearly thirty five billion dollar deal, an early test to see how the Trump administration deals with industry consolidation and big M &A.

19:10Plus, why one of our traders thinks the pullback in Dick's Sporting Goods is ripe for buying, what a new suitor would mean for Foot Locker. More Fast Money coming up.

19:24Welcome back to Fast Money. Cable companies, Charter, and Cox Communications announcing a deal today. They are two of the largest cable companies, and their tie-up is valued at$34.5 billion. The question now is, how will President Trump's antitrust teams view this deal? The CBC's Julie Borson has more on this story. Julia. Well, both the CEOs of the companies that are merging, as well as analysts, seem pretty bullish that this deal will get approved. And this deal could be a litmus test for the Trump administration's approach to deals in general and also the potential for M &A floodgates to open.

19:57Now, this deal combines Charter's 31 million customer relationships and Cox's roughly 6 million, giving it more scale to compete with Comcast's 51 million customers. as Comcast is CNBC's parent company. Now, Tartar Communications CEO Chris Winfrey and analysts are bullish the deal will be approved. The merger aims to help the cable industry, which has been struggling with cord cutting, as well as increasing broadband competition from the wireless carriers. New Scale will give the combined company more leverage when it comes to negotiation distribution deals with media companies, enabling it to create a more appealing bundle for customers, a bundle that also includes mobile service.

20:34So what's next now? Analysts project more deals, particularly with wireless carriers. KeyBank notes that Charter could be looking to strike another smaller deal, such as one with a small broadband provider like Cable One. And Comcast, after spitting off Versant, CNBC's parent company could look to buy the likes of Altice. Melissa? So it is in the hopes of having a more robust bundle when it comes to the services side of it, correct? I mean, that's really the driver. I mean, analysts were very bowled up on the Charter thesis prior to this deal even, because it was able to offer not only broadband, but also mobile.

21:16Broadband, mobile, and content. And what's so interesting is it's not about cable content necessarily, but subscription to a content bundle. You may remember that Charter has struck a number of deals with media companies such as Disney, negotiating to make sure that they're not just offering linear TV channels, but also access to an ad supported streaming tier. What that does is it locks consumers into a subscription. So it means if you're paying for everything, everything through Charter, you're less likely to turn out. And then for the media companies, it gives them more viewers to their ad supported tier.

21:51So maybe they're not making as much money from the subscriptions, but they are growing the number of eyeballs in order to grow that ad business there. So Charter is very much looking at this holistically. How can they make sure that now with Cox, they have all of the options necessary, including the content deals, to lock in consumers for as long as possible in a time when there's more competition than ever? All right. Julia, thank you. Julia Borsten. Versant is going to be CNBC's parent company, to be clear. This is a very interesting deal. A lot of the analysts raise their price target on Charter on the back of this.

22:25Yeah, I think it's interesting. I think that it's hard to say there's not competition, right, in terms of the ability to get this deal done. There's competition from everywhere. So I think that will help. And to the extent, you know, Julia talked about what the strategy is, lock them in, offer all kinds of things, and so they never leave you, which is sort of where they've been all along in what used to be the old model, right, have relationships with all the content. Right. Right. But so it's interesting. Also, though, I do love seeing a big deal. I mean, they feel good enough that how many deals have been on ice?

23:01So it's good to see a deal get announced. I think it's an interesting point you're raising. And one of the things I thought about is, again, what's what's competitive force in an industry? I mean, the reason this is happening is because of competition and the different formats from within in which you can get your content. So I also think it's interesting on a day when historically people would have looked at this a couple of years ago when it was the writing was on the wall as a negative day for the industry. And all these stocks would have been down. They were all up today. I think the clawing back of the bundle is great news for Disney.