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Fast Money Podcast Summary - September 28, 2023
Podcast Overview Title: Fast Money 9/28/23 Description: Hosted by Melissa Lee along with a panel of top traders, this episode discusses market volatility, stock movements, and actionable investment strategies relevant for investors.
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Episode Highlights
Current Market Trends
- Mortgage Rates:
- Average rate for a 30-year fixed mortgage reached 7.65%, the highest in over 20 years.
- Monthly payments on a $400,000 home have increased by $920 compared to two years ago, drastically affecting affordability.
- Pending home sales down 7% from July, and 19% from the previous year.
- Higher rates are discouraging potential sellers who currently enjoy lower mortgage rates.
Homebuilders and Market Dynamics
- Despite rising rates, home prices remain steady due to a lack of inventory.
- Builders are adjusting by buying down interest rates for new buyers.
- A supply-demand imbalance persists; existing homeowners are reluctant to sell, maintaining market competition for available homes.
Consumer Spending Concerns
- With rising mortgage rates and other costs (energy, maintenance), consumer spending is likely to decline.
- There is skepticism about the consumer's ability to maintain spending levels under these conditions.
Stock Market Observations
- Workday (WDAY): Experienced its worst day since 2020 after a disappointing earnings guide, forecasting 17-19% sales growth, down from over 20%.
Discussions on Major Stocks
- Nike: Positive earnings report with expectations for slight revenue growth and improved gross margins.
- GameStop: New CEO Ryan Cohen emphasized the company's survival strategy, urging financial austerity.
UAW Negotiations
- Updates from the ongoing UAW negotiations with major automakers (GM, Ford, Stellantis), highlighting significant wage increase demands.
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Key Discussions
Mortgage Rates and Housing Market
- Economic impact of rising mortgage rates:
- Discussion on how the increased cost of borrowing will impact both buyers and sellers in the housing market.
- The importance of inventory levels in maintaining home prices despite rising rates.
Workday's Earnings Forecast
- Market reaction to Workday's guidance:
- Concerns from investors over slower growth in the software sector as it faces economic uncertainties.
Consumer Sector Insights
- Analysts express doubts about the consumer's ability to sustain spending amidst rising costs across various sectors.
Stock Performance Insights
- Nike's Earnings Performance:
- Positive market response due to better-than-expected earnings and guidance, focusing on inventory management and direct-to-consumer sales growth.
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Key Takeaways
- Housing Market Trends: Rising mortgage rates are creating affordability issues, but supply-demand dynamics may keep home prices stable.
- Consumer Spending: There are growing concerns about the consumer's capacity to spend in a high-cost environment, which could have broader economic implications.
- Market Volatility: The stock market is responding to both earnings reports and broader economic indicators, with particular attention to tech and consumer goods.
Closing Segments
- A mind-reading segment featuring Wall Street Mentalist Ose Perlman, adding entertainment to the financial discussions.
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Conclusion The episode vividly illustrates the current volatility in the markets driven by rising mortgage rates and consumer spending concerns. With insights from various traders, it provides a strategic lens for investors navigating these economic shifts.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:01Live from the Nasdaq MarketSight in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Mortgage rates at 20-plus year highs, and home prices keep climbing. Beyond that, insurance, maintenance, landscaping, all getting more expensive. The ripple effect on the consumer straight ahead. Plus, Workday Blue, shares of the HR software provider seeing their worst day since 2020. The warning that hit this stock could impact the broader market as well. And later, the Wall Street mentalist is here, fresh off his locker room mind games across the NFL. He will join us here on the desk to try and bend the brains of our traders.
0:35Does he have a few stock picks up his sleeve? Stick around to find out. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. And we start off with a stat we haven't seen since the turn of the century. The average rate on a 30-year fixed mortgage climbing to its highest level in 23 years. And monthly payments are rising at a staggering rate. CNBC's Diana Olick has the details. Diana. Well, Melissa, mortgage rates have been on a tear. and there appears to be no relief in sight. The average rate on the 30-year fixed at 7.65 % today, according to Mortgage News Daily, up from 7.08 % just a month ago and up from 2.8 % two years ago, which was the record low.
1:20To give you an idea of what that means to a home buyer today, well, if you were going to buy a$400 ,000 home with 20 % down on your mortgage payment is now$920 per month more than it would have been just two years ago. Add to that higher home prices, and you can see how affordability has just been crushed. Now, we saw it in the pending home sales numbers out this morning, down over 7 % from July and down nearly 19 % from a year ago. Higher mortgage rates are not only hurting home buyers, they are keeping potential sellers in place because the vast majority of current borrowers have rates well below 4%.
1:59So why would they want to trade up to nearly twice that? The home builders are buying down interest rates for new buyers. The builders up today, though, likely because of that disappointing pending home sales report, builders, of course, are benefiting from the lack of existing homes for sale. Melissa? Diana, Karen's got a question for you. Yeah, so we know that some structural issues, people have to move at some point, regardless of how good their mortgage is. But do you think we're going to see a pretty significant decrease in home prices because of the lack of affordability? No, actually, we're not.
2:33And that's what's so strange, because generally, historically, when mortgage rates go up and the cost of buying goes up, the prices go down because people can't afford it. But we have this terrible supply-demand imbalance. We have nothing for sale, at least on the existing side. And that's why whoever is out there buying is finding competition for that two or three houses that are out there on the market. That competition leads to bidding wars, leads to higher prices. So it's more about getting more inventory onto the market. And you say people are going to have to sell at some point, but a lot of those baby boomers that we expected to get out on the market, they are just aging in place.
3:07Diana, thank you. Diana, I'll look for us. $920 more a month versus two years ago. What else is higher versus two years ago? Energy, everything. So how's the consumer going to fare? I don't think that's the question. How are they going to fare? How they can continue to spend? I don't think they can. And we've been concerned and we say all the time, never underestimate their want. But should they be spending in this environment? So where does it come back? The good news for today in terms of broader market quickly, the reversal and bond yields were interesting. And we talked about it last night with Andy Constant.
3:39He thought maybe another 10 or 15 handles up. You got eight handles up in a 10 year reverse closed lower on a day. Good sign. I think that's why the market reversed. We'll see how long that lasts. But in terms of the consumer, I don't think it augurs particularly well. The XRT, which is not a great ETF in the way it's structured some of the stocks, but that's the one everybody watches. I got to tell you something. Closed around 60. 57 or so is your line in the sand. We get through that, and you're going to have the world of hurt, I think. So just something back on this home thing. If you are a Blackstone and you own hundreds of thousands of homes.
4:11Right. Wouldn't this be an interesting time to start selling and put that money elsewhere? It looked not so great for them not that long ago. Right. I'm surprised that we haven't seen more supply come on the market. Well, the last time we had this type of a noticeable bond yield spike is when we were having the conversation about all some of the biggest REITs that have been family office, consumer advisory, you know, wealth managers. It's been a haven for collecting yield and it's been a great place to be. And and for Blackstone, who I continue to think are at least some of the smartest guys in the room.
4:46I mean, it's been a huge, huge product. But I get back to the market that we have. We've had such a big move in rates. I still actually think equities have behaved OK, given that. And I think if you look at where sentiment has gotten over the last couple of weeks, whether you're measuring, you know, feeding Greer, whether you're measuring A.I.I., whether you're measuring the name index, which is active money managers, people are bared up and they're bared up going into the fourth quarter, which kind of makes me feel decent about things. I don't think we're going to go a lot higher. I do think that the government shutdown has something to do with what the bond market is doing here, because people are then doing the math on all the fiscal dynamics that aren't really going to get better.
5:22But, you know, Moody's and some of the ratings agencies have made it pretty clear that they're actually following some of these shenanigans. It's interesting when you think about just the price action, you know, this reversal that we had over the last couple of days or so. And, you know, how much we are off of the lows. And you look at just the structure of the chart of the S &P 500, it really does feel like a rip into month end, quarter end. It's been a really crappy month. You just look at the numbers here. I think the S &P at its lows was down maybe 6 percent or so. The Nasdaq down 7 percent.
5:49When you look at a lot of the sectors, though, you know, we were talking about homebuilders. XHB was down about 10 percent. The staples were down about 10 percent. The industrials were down about 10 percent. So there was like a correction in the market. You know what I mean? And the broad market felt kind of orderly. And then you want to bring it back to, let's say, homebuilders, because this is the one that we think is so rate sensitive. You know, we were talking about Williams-Sonoma the other day breaking out to new 52 Akai. And on the flip side of that, you have the restoration hardware that looks like it's going to die.
6:16I mean, there's a lot of cross currents here. And then the Home Depot, which, you know, below its 200-day moving average, has really been range bound this whole year, given all these dynamics. So I think it's not such an easy trade. To your point about Blackstone, I mean, I think if they put a lot of inventory on the market, I think it does what you asked Diana. I think it puts a lot of pressure on prices because I just don't think there's a lot of folks who can – I do, too. I mean, first of all, Diana Olick's great at what she does, and she's been doing it forever, so I don't want to argue – I wouldn't argue with her.
6:43I would say theoretically, if affordability really is what, you know, housing prices. In other words, you could buy two times as much house if rates were one half of where they are today. And that's, to me, just the math around what's going to happen with housing prices. I realize that supply demand dynamics are a very macro important determinant of pricing. But I also think that there are places where we've had a major run up in prices and the people that were buying those. Those are second homes. Those are places that were regional. I think there is going to be pain in some of those markets.
7:13And then we still have this exodus out of urban centers. People say this about COVID all the time. It only accelerated trends that were in the works before COVID. I think you're seeing this in urban centers, too. Prices have to come down at some point. You would think. No, listen, I get that it's structurally rigged right now. Things happen in life. Well, I think in order for that to happen, the unemployment rate has to go from the current levels now to probably closer to 5%. I think if unemployment starts to trend higher. Can that happen with corporate profits where they are now? I don't know the answer to that.
7:44There's a discrepancy here. But let me say this. I think the feds, they would never say this. I think what they want to happen behind closed doors, they're like, we need the unemployment rate somewhere between 4.5%, 5%. And we're going to do whatever is in our power to get it there. I know that sounds completely counterintuitive. People at home are like, why would they want it to go higher? They want it to go higher. And that could potentially break the housing market. I also think there's been so much dialogue about the U.S. deficit and spending, and then it comes back to a government shutdown and whatnot.
8:12I get back to the U.S. debt market is the most liquid, but it's the highest quality in the world. And whose debt you want to buy? I mean, seriously, you're going to go buy bonds? I mean, Germany is the most conservative economy in Europe, and this is an economy that's weakening fast enough. Why do you think the dollar is rising? Central bank differentials are what they are, because I just think you look around the world. So at some point, I realized that there have been politics around central bank buying of treasuries over the years. And you look at what happened to Russia's reserves and a lot of central banks are saying, even if I'm not going to be Russia, that can't happen to me.
8:45We have to do something else. But the U.S. treasury market is is by far the standard in the world. And it's just not going that fast. And I think people are overreacting here. Right. Although we have that huge amount of issuance still to come on the market with. So does everybody of buyers. But you think Europe doesn't have to do better. And think about all of those, that$17 trillion in negative yield and government bond debt that was around a year and a half ago. I mean, there's a lot of people that are underwater. There are a lot of pension funds. There's a lot of market markets that are going to be painful.
9:16All right. For more on surging mortgage rates and the housing market, let's bring in Skylar Olson, chief economist at Zillow. Skylar, great to have you with us. Yeah, thanks for having me. What finally gives here? I mean, supply-demand dynamics keep housing prices high. People can't afford to buy. I mean, at some point, something breaks, right? What is that? Yeah, I mean, I think as mortgage rates have continued to go up, you know, as opposed to trending down as maybe six months ago we were talking about, we were at least hoping for, we've continued to see new listings pull back. So you're looking at around, you know, a quarter percent down from what was normal in terms of the homes that are dropping into the market.
9:54So Diana is totally right there in terms of its supply and demand imbalance. So I agree as well when we're thinking like what has to give the owner has to have an incentive to sell. If I have that low rate, it's not a financial opportunity from the mortgage market that's going to incent me to move. Right. It's a life fundamental. So it's either the time happening of getting divorced and having kids or it's job loss. And I think that's one of the reasons why right now we're kind of it's kind of confusedly optimistic, you know, which makes mortgage rates go up because we don't need those safe assets, you know, and they're related, you know, the 10 year.
10:31But at that same token, that's going to keep the activity low in housing markets and the existing existing housing markets. Is there a magic number on mortgage rates where you see, you know, deals clearing, you know, an increase in listings, you know, an increase in deals in general? Yeah, this is the magic question. We're, you know, at Zillow, we're tackling this in a lot of different ways. So every quarter we're asking existing owners, you know, are you willing to sell in the next three years? Right now, that is highly sensitive to the rate the owner holds. So the higher the rate is, if they have a rate above 5%, for example, they are twice as likely to want to sell within the next three years.
11:13So not everyone is as deeply locked in. When we think about what is that magic rate, I also think about affordability. So what share would that typical mortgage payment take out of a typical income, nationally speaking? Now that we're up, you know, at 7.3, that share is close to 40 percent if you only have 10 percent down. And it's close to 37 percent if you have 20 percent down. That's close to not being able to qualify. Once you drip down to, say, 6 percent, it gets a lot more relief. Karen, thanks for being on. So we talk about the 30 year a lot, but what is the number that most mortgage holders or borrowers?
11:56What is the actual amount of how long of a seven year? What is it and what rate and when did they get that? And how quickly is that loan aging? Oh, yeah. I mean, so pre pandemic and leading up to this, a vast majority of people did get that 30 year fixed rate loan. We had a very small share of buyers during the pandemic, certainly because of low rates, but even pre-pandemic that were getting adjustable rate mortgages. So a vast majority of the folks that, you know, were hoping to lubricate and, you know, as their life progresses, they'll release it. They do have that 30 year fixed rate loan. The typical amount of time that someone tends to stay is actually much less than that.
12:40But it, of course, depends on your age and your time of life. But then you're just thinking about a bit more of a decade. So in the U.S., we do over-insure that housing payment with a 30-year fixed. But to that end, those that are, you can see why they did that, the benefit of someone that locked in a year ago. So you work at Zillow. You don't sound very optimistic, Skylar, I have to tell you. You actually sound pretty sober about this market. I'm very sensitive to inventory. Yeah, I'm very, very sensitive to inventory. I, you know, we're talking in generations when we talk about housing, we talk about fundamental housing demand and the strength of that.
13:17We're talking about the size of younger adult Americans, you know, the millennials that honestly have the similar aspirations to previous generations. They are facing very different realities, both in the number of homes that are out there to buy, but also in the dollar and cents of it all. So, yeah, I'm pretty sensitive to the lack of supply. Skylar, thank you. Thanks for joining us. Skylar Olson, Zillow. It's fast. Well, Zillow, the stock, if you want to go down that road, did around 30, 180, back to 30. It's bouncing here. So maybe the bounce suggests we're in for better times. But the housing market, again, we've talked about it seemed counterintuitive to be bullish in the home builders, Pulte Homes, DHI, Toll Brothers for the period of time that we were.
14:03but it was all about supply-demand imbalances, the same way we've talked about energy. We thought at a certain point in terms of yields it would break the back of those stocks. Seemingly happened when we got through this 4.5 % level in the 10-year. You know, it's interesting. She mentioned, you know, what would cause people to sell is a divorce or lose your job. And you think about we're going to get this September jobs report next week, and we know we're still, you know, soundly below 4%. You know, we've been talking about corporate profits. We've been talking about their ability to pass through like like like inflationary inputs.
14:33And what comes next is probably another rounds of layoffs. If the economic environment stays pretty dicey, the visibility is really poor. The geopolitical situation seems kind of dicey. And we could have that. And if we start seeing unemployment, you know, get towards four percent, then you're going to see you're going to see inventory. You're going to see things come on. You're going to see pressure on that. And I think that probably coincides when the stock market is also probably lower than where it is right now. And that negative wealth effect won't be particularly great. So, again, we look at the stock market.
15:00The S &P is up 11 percent. Equal weight is basically up a little bit or so. It just really feels like we're like in the hands of seven stocks. You know what they are. Meantime, UAW gearing up to announce more strike locations as negotiations with the big three automakers continue. Phil Lebeau's got the latest on this. Phil. Melissa, a couple of pieces of news today move the shares of Stellantis, Ford and GM higher in the middle of the day. Here's one of those pieces of news. Take a look at shares of Stellantis. Stellantis today, according to a source familiar with the UAW, the UAW submitted a counterproposal to Stellantis.
15:37This is one of those things people are saying, how often are they submitting proposals, counterproposals? There's always discussions, but this was a formal counterproposal from the UAW to Stellantis. There's no comment from Stellantis on what was in that proposal. And also take a look at shares of Ford and GM. And the reason we're putting this up is because in the middle of the day, there was a report from Bloomberg citing sources saying that the UAW was aiming for at least a 30 percent increase in wages and cost of living adjustments over the life of this contract. That's significant because initially the UAW said we want 40 percent.
16:14Now, there was no comment from the UAW about this report. We reached out to them repeatedly. The UAW said it declined to comment on this report. But those are two things that moved shares of GM, Ford, and Stellantis during the day today. In terms of what to expect tomorrow, it's once again Sean Fain on Facebook Live. That will happen at 10 a.m. He'll give an update on negotiations. If there's no serious progress, we've heard this line before, there could be more strikes. And if there are more strikes, then those walkouts would start at 12 p.m. Eastern tomorrow. And remember, it may be one automaker, maybe all three, maybe two, maybe none.
16:51We're waiting to find out tomorrow. Real quick, want to update you on the total strike. About 12 % of the UAW members are currently on strike. The majority of them are at the three final assembly plants where the UAW walked out two weeks ago. And then remember last Friday is when about 5 ,600 walked out from GM and Stellantis parts and distribution centers. Guys, back to you. Phil, when we think about that counterproposal being 30 percent plus cost of living adjustments, the original 40 percent target, was that also COLA on top of it or did that include? Because if it included, it seems like the numbers may not be as far apart as we think.
17:30Well, a couple of things. One, we do not know that this was a counterproposal. What the Bloomberg report said was that they aim for 30 percent of both wages and cost of living adjustments. But you are correct that if you were to factor that in, because originally what the UAW said was we want 40 percent. That's all they said. We believe we should get 40 percent over the next four and a half years. They didn't say we believe we should get 40 percent plus cost of living adjustments built in that bring us up to 40 percent. And you're right that if this is in fact true. And again, the UAW declined to comment on this report.
18:05That would suggest that potentially and I'm just throwing a hypothetical out here. You could get an automaker to say, OK, we're going to offer you 22 percent over four and a half years in terms of gross wages increasing. And then with cost of living adjustments totaling eight percent over the next four and a half years, that gets you up to 30 percent. That's just one possibility. And again, that's a hypothetical that would suggest they might be a little bit closer. Right. Phil, thanks. Phil LeBeau. You bet. Tim Seymour. Nice pick up in these stocks today. Nice. Oh, a little pun there. I didn't know it's happening.
18:40Nice pick up. I mean, that's why I was so surprised. I was pretty. No. Yeah. And to be clear, I think we priced in a lot of this dynamic. In fact, these stocks are probably net up small since the strike began. GM, on a trailing 12-month basis, is four and a half times earnings. And I choose a trailing multiple because I think this is really what's at question. GM's been such a well-run company relative to both their peers and also, I think, relative to themselves over the years. I believe they can do that again. I think the stock is very cheap. Solving this labor dispute, they will solve it. Stock's going to go higher.
19:14I was kind of more disturbed by CarMax, right? That was a big move. If used car prices are really getting hit, it's not great for new car prices. So that was a little bit of extra. It's kind of Carmack specific, only that the same store sales were much, the decline was much steeper than the industry overall. We'll see. You know, we'll see AutoNation. We'll see Carvana, which may be its own animal as well. But isn't that a little precursor to what could happen in the housing market? And when you think about it, because higher rates and we know that higher auto loans. It's like the sticker shock, right?
19:49People are interested. Then they get the monthly payment. They're like, forget it. All right. We've got a news alert here on GameStop. New CEO Ryan Cohen sending an email to employees. Melissa Repko's got the details here. Melissa. Hi, Melissa. So Ryan Cohen, who was newly named CEO this morning, did not mince words in a memo that was sent to corporate employees and store leaders, basically said the company is fighting for its survival. That was actually the word he used in the subject line itself, survival. And in the email, he noted that the company is going to have to have, quote, extreme frugality, unquote.
20:25And he said they're going to have to avoid a lot of common pitfalls of other retailers. So he spoke about how they have to avoid buying bad inventory, using leverage and running expenses too high, and really laying out the task at hand as he steps into this role. This seemed like really obvious. I mean, we're sort of chuckling here. it's like, don't use leverage, don't run up expenses, don't buy bad inventory. I assume that GameStop was already trying to do all these three things. So, I mean, I guess the implication here is that this period of austerity is going to be even more extreme than what had existed in the past?
21:02Yes. I mean, it's worth noting that when he was named CEO this morning, he is not going to be taking a salary. So he is kind of signaling from the top that they are going to be pinching pennies and he will not be part of that equation. But it's also worth noting that he's been involved for a while. He's been executive chairman of the board. So even though he's stepping into a leadership role, it's a different leadership role, but he's still been very involved. And so far, the company has not showed signs of a turnaround. It had earlier this month, a report at a slightly narrower loss, but it still faces kind of an existential question about whether it can persist at a time when video gamers are streaming online.
21:41And a lot of the things they used to turn to its stores for, they just don't need anymore. Yeah. And who knows if the retail investors there to back them at this point after the Bed Bath & Beyond fiasco, shall we say. Melissa, thank you. Melissa Repko. Coming up, Nike on the move after our shares swooshing higher after results cross the wires. The numbers from that quarter next. Plus, Workday worries. Shares sliding for the stock's worst day since 2020. The guidance update that had investors calling it quits. Don't go anywhere. Fast money's back in two.
22:19Welcome back to Fast Money. We have an earnings alert on Nike, the sportswear giant moving higher after hours following a strong earnings beat. Courtney Reagan's got the latest. Court. Yeah, hi, Melissa. Just jumping off the call, and here's what we know so far. Earnings did beat by a wide margin. Revenue's a tad light. Gross margins down slightly, but better than expected. You might remember last quarter Nike said that markdowns were elevated, but no mention of that this time. Just successful, quote, strategic pricing action. Nike's direct-to-consumer business was up 6%, digital up 2%. Its wholesale business was flat.
22:50Geographically, its largest region in the United States was the weakest. Sales down 2%. Sales in China grew 5%, but that was a little less than expected. Europe, a bright spot. Sales there up 8%. Footwear was weaker than apparel in both the U.S. and China, but much stronger than apparel in Europe. On the call, the company discussing feeling comfortable with inventory levels, including the inventory levels at Wholesale Partners. Also saying traffic at Nike stores grew double digits over last year, and executives were able to capture higher full-price sales as a result. We're still waiting for the guidance, as far as I can tell.
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23:26In the last couple minutes, as I've been talking to you, we don't quite have it yet. Back over to you. All right, Court, thanks. Courtney Reagan. So that's a caveat. A lot of things can change. At this point, Tim, you're still short. You've been short from much higher from here. Yeah. And these were solid numbers. As Courtney pointed out, the gross margins holding up, it is down. It was 43.1 last year. It was better than expected. These earnings, look, the top line was weaker and they haven't done this in two years. So, I mean, this is, I think, telling you the story. China, I thought, was significantly weaker.
23:54And I still care most about North America. And I care more about the profile of their core DTC business. So if you listen to where the analysts, I believe, are and Jeffrey's downgraded from 140 to 100, I mean, the dynamic is what are you paying for this company when their pre-pandemic three year was a 27 times multiple? You know, if you want to get to that number today, at a 27 multiple going forward, it's probably one hundred and twenty five hundred thirty dollar stock. I don't think it's expensive here. Let's be really clear. I think at this point, by the way, I am more leaning to cover than I would be to press this short.
24:30The level on the stock, it's down 30 % from where it peaked earlier in the year. And the level on the stock where really if you want to be a hero, I think it's probably 83 bucks. Guidance should be really interesting because they have seen a couple weeks that we haven't heard about Encompass and other retailers' guidance. So you've got to wonder if things are changing in terms of sentiment and just in terms of just patterns that they're seeing to date. Yeah, so Courtney touched on the inventory. So the inventory dollars were down, but the days outstanding inventory was up. So are there costs coming down or do they have an inventory of lower priced goods in inventory?
25:07I don't really know. I do think the inventory numbers are good. That's helping. I don't know. It feels sort of bottomed, having bottomed. All right. There's a lot more Fast Money to come. Here's what's coming up next. Cloudy with a chance of losses. Shares of Workday punching out. logging their worst day since 2020. The bleak revenue forecast that had investors running for the exit. Plus, prepare to have your mind blown. The Wall Street Mentalist is here and ready to uncover the financial secrets from the Fast Money team. So don't take your eyes off the screen. The magic is ahead. You're watching Fast Money, live from the NASDAQ market site in Times Square.
25:51We're back right after this.
25:58Welcome back to Fast Money. Shares of Workday sinking almost 9 percent, its worst day since November 2020. After the company lowered its outlook for subscription revenue, the HR tech firm saying sales growth would be 17 to 19 percent over the next three years versus a previous estimate of more than 20 percent. Workday was the worst performer in the Nasdaq. Dan, you flagged this because the guidance is concerning. Well, listen, I think it was kind of under the radar. I think we're all focused on Q3 earnings. that are going to start in a couple weeks here. And so I think it's interesting on a night we're talking about Nike and a stock that sold off a lot over the last six months.
26:30And here's a stock that's performed very well. And that guidance is, you know, it doesn't sound like a lot, but it kind of is around the edges. And you think about enterprise spend and you think about all the things that a lot of their peers are trying to talk about. They're trying to get in on this AI game. And then you just think about it from a technical standpoint. We've highlighted a lot of mega cap tech stocks that have broken down. And I think that if this turns into a trend as we get into Q3 earnings where you get a bunch of these leaders in these sorts of spaces. I know, Karen, you've been short the IGV probably for some of these sorts of concerns.
26:59I just think that, you know, the pieces are kind of coming together for a sort of mosaic that 2024 is going to be a slower year than 2022 and 2023. Uncertain economic environment is specifically what they cited. It also has a new CEO and a new CFO, which leads me to believe that maybe, and other analysts believe, that they could just be kitchen sink. Exactly. Let's lower the bar here because we can. It's a great time to do that. Yeah, it makes sense. And the stock's had a huge run. I think it went from 130 to 250. Here we are now. Big volume day, which suggests, you know, maybe there's more room to the downside.
27:28Valuation is not all that compelling here. So I think Dan's right to point it out. But again, look, if you look at the chart over the last six months, this stock has been unstoppable. Coming up, billionaire investor Bill Ackman just off the stage at CNBC is delivering Alpha Summit. What he had to say about where stocks are heading next and get ready to have your mind blown. The Wall Street mentalist, Ose Perlman, is here and ready to read your thoughts. Can he unlock the financial secrets from our traders? Find out when Fast Money returns.
28:04Welcome back to Fast Money. Stocks gaining back some of their ground lost yesterday and the day before. As Treasury yields retreated from their highs. The Dow jumping 115 points. The S &P up more than half a percent. The Nasdaq climbing eight-tenths of a percent. All three indices still looking to close out September deep in the red. Shares of Chico's rocketing higher. The retailer announcing it is being taken private by Sycamore Partners for$1 billion. That's a 65 % premium to where shares closed yesterday. And we're watching shares of Apple. That stock managed to end the day higher, but not before dropping below 170, hitting its lowest level since May 4th.
28:39Meantime, last hour, noted investor Bill Ackman spoke with our own Scott Wapner from CNBC's Delivering Alpha Summit. It was a wide-ranging interview on the economy, rates, and much more. Alphabet and AI were front and center in their conversation. Take a listen. It had a lot to do with AI because AI was the reason why the stock was cheap, right? ChatGPT was launched, an incredible game-changing kind of product, and Google really fumbled their offering. And so people said, oh, my God, Google's way behind on AI, and the stock sold off to, you know, 15 times earnings for one of the greatest businesses in the world.
29:13We've bought more in the 120s. It's our second largest investment. Alphabet, yeah. Ackman also saying he sees a 10-year Treasury yield hitting 5 % in the short term. Karen, his second biggest position. Yes, I like that. I mean, I think we all sort of thought, okay, yeah, they fumbled it, but they have AI. It's not like they didn't. But it was thought to me that search just more broadly, which is their bread and butter, was under siege. It doesn't feel like being as overtaking. That was the thesis. And it was wrong. And and and also to think that Google hasn't been investing in AI and maybe arguably was front of the line on AI and to have the business that they have, I think, was pretty silly.
29:54I think I don't know if it feels like it may not necessarily be wrong, but the time frame over which that scenario would have to play out is much longer than what people were thinking in the stock in terms of the reaction. Microsoft, too. I mean, the boost from AI, right, it was immediate in terms of the stock reaction. But then we start getting guidance in the latest quarter that it's actually going to be like a back half 2024. It's going to be a much slower ramp in terms of how it adds to revenues. AI is a great story, but I feel like investors got the time frame wrong initially. I understand the excitement around it.
30:26I mean, it started obviously with NVIDIA, but it made its way to Microsoft. A number of different names mentioned AI stocks off to the races. Now you have that diminishing marginal returns in terms of when they say it, what does the stock do? So I'm with you 100 percent. Dan's been talking about this for a while. And very quietly, NVIDIA, which was 516 on its way to 1000, has come off some hundred dollars since their earnings release. And I probably think there's more to come. But kudos to Ackman, who early August, I think was the second or third of August, came out with his bet against the bond market.
30:53It looked like he rang the bell. Rates actually went lower from that day. But they've been off to the races ever since. And I think he's got a lot of runway left with this trade. Dan? Yeah, I just think we're all in agreement on the Google. And when you just think about looking out to the out year, expected to grow earnings 20 % next year, trades at 20%. I mean, trades at a P to growth of one, 20 times. It's just cheap. It's got a better gross margin than Microsoft. They've got a similar revenue base, and they're growing faster. And so the discount that Ackman's talking about that was placed in the market before we knew any commercialization of these sorts of products, any market share that they might gain in search versus Google, it just seemed a bit premature.
31:33So, again, I do think that if a lot of the froth is coming out a lot of these names, Google has the potential to go lower. It just has much better valuation support, and it's also discounting their capabilities within AI, is what Karen's saying. I mean, they declared themselves as an AI-first company seven years ago. They've been spending billions on R &D in the space. So I have a feeling that that's probably a better bet, you know, one versus the other. We're playing Would You Rather right here. Ooh, self-worth you rather. Can we just say that? Nobody asked. So we just put it together. Coming up, get ready to be wowed.
32:02The Wall Street Mentalist is joining us on set. What tricks does he have up his sleeves? Stick around to find out. Exciting. The SecureLeaf CEO telling us on Tuesday this was not the environment to be raising capital. So why did they do it anyway? We'll dig into the about face next. Fast Money is back in tune.
32:25Welcome back to Fast Money. Stocks gaining back some of their ground lost yesterday and the day before as Treasury yields retreated from their highs. The Dow jumping 115 points. The S &P up more than half a percent. The Nasdaq climbing eight-tenths of a percent. All three indices still looking to close out September deep in the red. Shares of Chico's rocketing higher. The retailer announcing it is being taken private by Sycamore Partners for$1 billion. That's a 65 percent premium to where shares closed yesterday. And we're watching shares of Apple. that stock managed to end the day higher, but not before dropping below 170, hitting its lowest level since May 4th.
33:00Me and time last hour noted investor Bill Ackman spoke with our own Scott Wapner from CNBC's Delivering Alpha Summit. It was a wide ranging interview on the economy rates and much more. Alphabet and AI were front and center in their conversation. Take a listen. It had a lot to do with AI because AI was the reason why the stock was cheap, Right. ChatGPT was launched, incredible game changing kind of product. And Google really fumbled their offering. And so people said, oh, my God, Google's way behind on AI. And the stock sold off to 15 times earnings for one of the greatest businesses in the world.
33:34We've bought more in the 120s. It's our second largest investment. Alphabet. Ackman also saying he sees a 10 year treasury yield hitting 5 percent in the short term. Karen, the second biggest position. Yes, I like that. I mean, I think we all sort of thought, okay, yeah, they fumbled it, but they have AI. It's not like they didn't. But it was thought to be that search just more broadly, which is their bread and butter, was under siege. It doesn't feel like being as overtaking. That was the thesis, and it was wrong. And also, to think that Google hasn't been investing in AI and maybe arguably was front of the line on AI, and to have the business that they have, I think, was pretty silly.
34:15I think, I don't know, it feels like it may not necessarily be wrong, but the time frame over which that scenario would have to play out is much longer than what people were thinking in the stock in terms of the reaction. Microsoft, too. I mean, the boost from AI, right, it was immediate in terms of the stock reaction. But then we start getting guidance in the latest quarter that it's actually going to be like a back half 2024. It's going to be a much slower ramp in terms of how it adds to revenues. AI is a great story, but I feel like investors got the time frame wrong initially. I understand the excitement around it.
34:47I mean, it started obviously with NVIDIA, but it made its way to Microsoft. A number of different names mentioned AI, stocks off to the races. Now you have that diminishing marginal returns in terms of when they say it, what does the stock do? So I'm with you 100 percent. Dan's been talking about this for a while. And very quietly, NVIDIA, which was 516 on its way to 1000, has come off some$100 since their earnings release. And I probably think there's more to come. But kudos to Ackman, who early August, I think was the second or third of August, came out with his bet against the bond market. It looked like he rang the bell.
35:16Rates actually went lower from that day, but they've been off to the races ever since. And I think he's got a lot of runway left with this trade. Dan? Yeah, I just think I think we're all in agreement on the Google. And when you just think about, you know, looking out to the out year, expected to grow earnings 20 percent next year, trades at 20 percent. I mean, trades, you know, a P to grow to one, you know, 20 times. It's just cheap. It's got a better gross margin than Microsoft. They got a similar revenue base and they're growing faster. And so the discount that Ackman's talking about that was placed in the market before we knew any commercialization of these sorts of products, any market share that they might gain in search versus Google, it just seemed a bit premature.
35:54So, again, I do think that if a lot of the froth is coming out, a lot of these names, Google has the potential to go lower. It just has much better valuation support. And it's also discounting their capabilities within AI is what Karen's saying. I mean, they declared themselves as an AI first company seven years ago. They've been spending billions on R &D in the space. So I have a feeling that that's probably a better bet, you know, one versus the other. We're playing Would You Rather right here. Ooh, self-worth you rather. Can we just play that? Nobody asked. Coming up, a get ready to be wowed.
36:23The Wall Street Mentalist is joining us on set. What tricks does he have up his sleeves? Hmm, stick around to find out. Exciting. That's SecureLeaf CEO telling us on Tuesday this was not the environment to be raising capital. So why did they do it anyway? We'll dig into the about face next. Fast Money is back in tune.
36:48Let's get another check on Nike. The stock taking a leg higher after the company just issued guidance on its call. Nike expecting Q2 revenue growth up slightly since it compares to some of the most challenging comps here. Up 6 % at this hour. You see that little bump up. Tim, what do you make of this guidance? Well, again, if you listen to management, also their fiscal 24 guide that they gave recently was up 5.4. They had downgraded, I say, to mid-single digits, and the street's been following through. You've had a lot of downgrades over the last couple of days. They haven't been massive, but this is good news.
37:16All right. Meantime, take a listen to Curaleaf Executive Chairman and Founder Boris Jordan on our show earlier this week. We're all reasonably well capitalized. We have strong cash flows, and I don't think we need to come at this level of valuation. I think people are going to wait to see a re-evaluation of the assets. These assets have corrected almost 90 percent from their highs. And I don't think at this point in time people are in the condition to have to raise capital. This morning, the cannabis company announced that it plans to issue new voting shares. In a statement to CNBC, Boris Jordan said Curaleaf is making the offering to satisfy a condition for a potential listing of the subordinate voting shares on the Toronto Stock Exchange.
37:55The company plans to use a portion of the proceeds to fund working capital requirements of its international business and for general corporate purposes. Tim, you asked a question to Boris the other day, and then I sort of followed up and said, so you're not raising capital. Did you walk away with the understanding that the company was not going to go to market? I walked away with the understanding of a chairman that said we're well capitalized, and on a relative basis, we're not out there. We don't need to go raise equity. And that's not what this is. I mean, I think it's worth noting that Terrasend, who is the one of, I think, the first cannabis company that listed on the Toronto exchange, also was required by the TSX to do a raise.
38:34And again, do a raise in Canadian dollars, again, for a Canadian exchange. So I think this is, first of all, I spoke to Curleaf. I spoke to Terrasend. They verified that this is, in fact, what is required. And I will say, I think Boris Jordan didn't say we would never be raising equity. I think what he said is we are a well-capitalized company in this environment and that valuations don't really make sense. But when the Toronto Stock Exchange says you need to as a function of your listing, that's what you do. By the way, it's really good news that they listed in Toronto. And I, you know, I'm involved in the cannabis sector.
39:09I own I own Curleaf. It's the second largest position in my in my ETF. So it's not that I want to sound like a homer here. I want to say that listing on the Toronto Stock Exchange means that big institutional investors can actually own this thing. that, in fact, I don't need to own it on swap as a U.S. ETF, that actually I can buy it outright. So that's the good news here. Yeah. Pro tip. Just just go on TV the day after you do it. Well, I mean, I'm just I mean, I'm just I mean, because he not know that that company. That's my corporate communications. Different idea. You know, I'll leave that one alone.
39:38I'll let them figure that out. All right. Coming up, the Wall Street mentalist, O's Perlman is here. He's got some thoughts about what is going on in Guy Adami's mind. Oh, I don't want to be there. Get me out of there. Yeah. Scary thoughts and his mind-blowing tricks right after this commercial break.
39:59Greg, you thought of anybody in the world you would love to have dinner with. Is that right? Open your eyes, Cade. Look at him. Look into his eyes. Look into his soul. Who's he having dinner with? Jennifer Lopez.
40:19that was oz perlman the wall street mentalist taking his mind reading skills to the nfl working his magic so far with the cowboys ravens bucks jets and as you saw there with the seattle seahawks as well he also uses his mind bending skills on himself as an ultra marathoner last year he ran from the tip of long island to right here in times square that by the way over 127 miles. And he did it in less than 24 hours. Oz joins us now to take us inside his mind, maybe blow our minds as well. Thank you. Thanks for having me. Good to see you again. Listen, that LA traffic, easier to run than it is to, you know, that's in your car.
40:57Why did you tie up with the NFL? Thank you for having me. You know what? Good friend Adam Schefter, ESPN, has been good to me. And I think people like watching their favorite athletes, especially football stars, where you don't really see them. You see them on the gridiron, but you don't get to see them acting like kids again, being silly, blown away. And so it kind of humanizes them. They are a boisterous crowd. At the Baltimore Ravens, literally, I think I was handed around like a baton at the end. Like 320-pound men picked me up, 140 pounds dripping wet, and I was reading minds, and I was like, please stay away.
41:28Well, we act like children and have mind wounds every night. So what have you brought for us tonight? Let's do it. You know what? I love the name of this show, Fast Money. Yeah. You know what? Because people say this, and I get this often, not your viewers who are informed, but people will say to me, you're investing in the stock market. That's all chance. It's a roll of the dice. Proverbial. Right? I don't think it is. I think if you know what you're, watch, 34. Roll the dice. What is this? This is luck. Every time this lands, 56. Guy, this is luck. I don't believe in this. I believe that your viewers make their own luck.
41:59Grab those dice for me, Tim. I got you. Tim, instead of rolling them, which you don't control. No, no, no. I'm going to turn my back. You set it. You set it to your number. Two digits, set it, and I want you to put your hands on top when you're done. Cover them up. I'm good. I'm ready to roll here. Now watch. Watch. 10, 20, 30, 40, 50, 60. Don't say anything. 1, 2, 3, 4, 5, 6. See, you look for the reaction when the tension dips. Look how he's holding that. Hold on a second. I'm a better poker player than that. Look at those baby blues. I didn't give away anything. Look at those baby blues. You know what?
42:31I think this is not your lucky number, is it? No, it is. I like it. I like this number. My favorite running back of all time. Ooh. Speaking of NFL. You pick this at random, but it has a meaning. Yeah, of course it does. It has to, right? Same two digits. All the directions. Same two digits. Yep. Yes. 44, isn't it? Lift it up. Getting tight on there. Getting tight on there. Look at that. Those are my dice. Those are my dice. With your own eyes. Okay, now hear me out. Hear me out. Maybe I got lucky. People always say this to me. Is this luck? Those are my dice. You're going to roll the dice. You know what, guy?
43:01Screw dice. Screw the dice. I'm watching at home. I'm a skeptic. I go, something's wrong with those dice. Get rid of them. Imagine, and dice is only one to six. The world is your oyster. Of course it is. Right? I want you to picture in front of you your number three digits. Yeah. Okay? And I want you to see each digit right there in front of you as if it's in bold, like a neon sign. Watch him now. One, two, three, four, five, six, seven, eight, nine. Look at that. See how he did that? He gave it away. I saw it, too. Totally. I saw it, too. Open book. If it gets bigger, smaller, the second digit, the third digit.
43:31People ask me, Dan, all the time, the same question is, do you always get it right? And here's the thing. This wouldn't be a fun act if I got it right every time. I swear to God, I don't get it right every time. I feel like you might not be getting it right now. Any number. You can put your phone down. Put your phone down. He's getting ready to get a video of this. He's like, I need to see it. Tell us, bright lights, what was your number? What are you seeing? Say it. I see a three. Yeah. I see a nine. and I see a nine. If I get it wrong, some days, but today is not that day, folks. Today is not that day.
44:08Today is not that day. And wait, wait, let's get back to stocks because I've obviously got your numbers dialed in. Mel, picture this. I'm going to give you a visual, okay? You're throwing darts at a dartboard. Karen, same thing. Each of you take, and I want you to grab your hand, show me some acting, and I want you to imagine this scenario is that on all of these places, It's 20 double, 12, nine. Every single one of these has a different stock all over the place on this periphery. Make them up right now. Impulsive, random, in the moment. And, Mel, you throw it. And let's say you hit a 10 right there, a single 10.
44:43Karen, throw it. And imagine you hit, I don't know, let's make one up, 16 triple. Well done. And when I, after I say, I'm going to say one, two, three. And when I say that, these are just random stocks you're going to make up in this moment. I want people to know there is no rhyme or reason to this. When I say one, two, three, and I point at you, name whatever random stock you just hit on there that you just made up right now. One, two, three, random. AT &T. What was yours? AT &T. AT &T. Okay. And so we had different ones there. And I want you to imagine that this time you don't hit a random one.
45:13Throw again. Throw again. Ready? Get ready. Get ready. This time you laser focus because the way to control markets and influence them is when everyone is aligned. And both of you, focus, throw it. And this time you hit the bullseye. Bam, bam. You hit the bullseye. and if you can get people aligned when they're buying, what does the stock do? It goes up in price. You each hit the bullseye. Tell us on three, when I say one, two, and when I say it, say the stock you just saw right there. Look at me. You're lined up. You're synced up. One, two, three, go. MasterCard. Get out of here. And, folks, I told you it's all about influencing the markets because MasterCard is what I wanted you to think about.
45:53How is that possible? But how do we take it to the next level? You could have said any stock. Be honest. You could have said any stock. You didn't know it was going to be on here. But how do you control the markets? You know what? Pull up. I want to know what MasterCard was trading at the moment you thought of it. Pull it up. Pull it up. I want you to pull that up. You can do it, Mel. I got it. Yeah. Because can you control everybody at once? Tell us all. What was the price? What was the price? Say it. $3.99. How many cents? $3.99.44.
46:22$399.44. Oh, my God. And that changes every second. After hours trading, right now it's different. Right now it's different. Right now it's different. Wow. That's all she wrote, gang. Fast money. We're going to need to do another cannabis segment now. That was crazy. Stick around for the final trade. Oh, great. He already knows what it is. So stay tuned. Has to. He already knows what it is.
46:49One more check on Nike here. More from the conference called The Company Sees Gross Margin in Q2 Expanding by 100 basis points. thanks to strategic pricing, improved markdowns, and lower ocean freight rates. Wow, the stock is up almost 9 % here. By the way, we wanted to give a special shout-out to our friends at Haribo. Loyal viewers know we are big fans, big fans of the Gummi. Huge. And after one of our recent raves, take a look at what they sent us. It's unbelievable. Who gets the socks? I want the socks. They sent us 20 pounds of candy, a handwritten note, and a lunchbox. I get the lunchbox.
47:22Yeah. So I can crack people over the bus. No, but thank you to Haribo. I mean, that's amazing. That's fantastic. Bravo. Nice Haribo. Oh, it's gone through seven bags of Haribo. Easy. A week. Twin snakes. A week. Twin snakes, number one. Everybody loves them. All right. Time for the final trade. Let's go around the horn. O's stuck around to give us his final trade. I'm bullish NVIDIA. I did the select stock draft one year, and I lost because I didn't pick NVIDIA. So I'm back with it. There's a lot more upside there. Tim? Well, O's knows that Google is best risk-reward in that market. Peg of one, Dan talked about Google.
47:55Google. Karen. Yes, I bought some IWM, which has had a horrific run. I don't have a ton of small cap exposure, but it seems overdone to me. Dan. Yeah, guy, read my mind. TLT, that reversal today, it looks like it wants to party. Yeah. See, I'm just going to party. That's unbelievable. I mean, unbelievable. That's amazing. Unbelievable. MasterCard, you know how I got to it? I did a pad like this, landed on MasterCard, and that's how we picked it. That's how, I mean, it's unbelievable. O's is the bleep. Fisty on BC. Thank you for watching Fast Money. Thank you, O's Perlman. Thank you. He's retired, by the way.
48:28That money starts right now. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, NBC Universal, 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.
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