JPMorgan Warning Sends Shares Sinking, and a Pairs Trade in the Retail Space 12/9/25

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. A big bank warning. A J.P. Morgan executive making some comments that sent the shares sinking midday. What they said and what it means for the consumer and the rest of the banking space. And a retail pairs trade. Walmart and Costco have had vastly different years so far. But how do you play the names in 2026? We dig into the charts to find out. Plus, we're counting down to the last Fed decision of the year. All the headlines from GE Vernova's latest investor day. And NVIDIA shares giving back all of yesterday's China We've got the latest reaction from VC on the company's AI ambitions.

0:37I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami, and Chris Marone, partner and chief market strategist at Strategas, a Baird company. We start off with today's big reversal, and J.P. Morgan shares plunging into the red midday after the company's consumer banking chief told investors that 2026 expenses will rise to$105 billion. It's more than 10 percent higher than this year, more than what analysts were forecasting. Those comments at the Goldman Sachs Financial Services Conference pulling down other bank names like Bank of America, Wells Fargo and Citi.

1:10Leslie Picker is here on set with more on this. It was a big decline for those comments. Yeah, it was pretty surprising. The way Lake described it is that the firm needs to spend more to grow more. And while the expenses are more than$4 billion higher than the street was expecting, She said that's largely due to higher activity levels, which drives more incentive compensation and marketing. The firm also plans to invest more in branches, bankers and advisors, in addition to, yes, of course, AI. As analyst Mike Mayo pointed out in a report, the firm increased expenses more than expected also in 2022, which ultimately paid off.

1:46Mayo did know that this is the, quote, most competitive environment we've seen since the financial crisis for the industry. He implied that if the biggest of the big banks is increasing its spend, then the rest of the industry, including the regionals, may need to follow suit. And so that's why you saw a reaction in the stocks of B of A, Wells Fargo and Citi in sympathy with the J.P. Morgan move today. Overall, though, the commentary across the industry was pretty positive. Wells Fargo CEO Charlie Scharf saying that consumer spending remains strong. Other executives saying consumers remain choiceful in what they spend on.

2:20But the cohort of people in distress is an elevated relative to normal times. And we'll hear more from several industry titans tomorrow, including ARI CEO Michael Arregetti, Blackstone President John Gray and B of A CEO Brian Moynihan from day two of that Goldman Sachs Financial Services Conference here in New York City. How should we think about that increase that is above what analysts had been expecting and higher than what it was this year? It sounded like a lot of the growth was going to be in compensation. Yes. And so how do we think about that as that sort of cost that will continue to rise versus actual strategic investments like investments in AI?

2:57Well, just to put that number into perspective here. So it's about a nine nine billion dollar increase from what's expected this year. Total among the other big six, excluding Wells Fargo, because Mike Mayo is the one who did this this work and he works at Wells Fargo. But let's just put Wells Fargo aside. Their expenses are about eight billion dollars expected increase. So this one big Goliath, as he calls it, is more than the entire increase of the rest of, you know, four of his big competitors. And so that's a pretty big number. Anything over$100 billion you look at for an expense figure, and that's pretty sizable.

3:33But to your point, the way that Lake described it is the biggest bucket is going to be kind of these drivers for growth, spending more on compensation to attract bankers, to attract advisors, basically leaning into this very conducive environment. The second bucket, which she described as being much smaller, is going to be kind of the investments that we think about, refurbishing the branches, investing in technology, investing in AI. And then that last bucket is going to be an increase due to inflation and real estate costs. So that's something I would say is kind of out of their control, perhaps.

4:06It's more of the macro environment that we're talking about. Everything else is a strategic investment as well as something that they're benefiting from the growth in their business. Yeah, Leslie, the AI spend is what caught me because you look at Citi. Citi actually recovered, closed, I think, around a 52-week high today. But the AI spend and the competition in AI is something that obviously caught my attention. I think for J.P. Morgan, people looked at valuation and said, this is a little problematic. Am I reading this right in terms of AI? Well, I think it was the overall headline number that I think people were concerned about.

4:38People want to see the banks investing in AI, something that Dennis Coleman, and the CFO of Goldman Sachs talked about was this GS, 1GS 3.0 initiative where they're really leaning in to see how AI can drive efficiencies across the franchise and make their touch points with clients even stronger. They want to see these banks invest in AI. They want to see that money spent that way, but they want to see ROI from it. They don't want to just see the money kind of, you know, be burnt, you know, within the towers. They want to make sure that they're getting the efficiencies from it, that they're getting the revenue growth from it, and they want to know what it means for headcount, what it means for their ability to drive revenue higher and be more efficient with the talent that they do still have.

5:22Leslie, great to see you. Thank you so much, Leslie Picker. So that's great in terms of ROI on that spend. Same thing that's going on in the MAG-7, but in terms of the 5 % decline practically in J.P. Morgan, I don't know if you thought that That was surprising at all. I'm surprised, but it's an opportunity. I mean, the question is really more the surprise as to why one bank responded differently than peers and less high quality peers. But to me, as an investor and someone who said, I'm sure yesterday on this show how excited I was about this environment for banks. Nothing changes here. Everything I heard is the reason why you want to own banks.

5:57Would you rather hear J.P. Morgan say we don't know what to do with our money. We're going to buy back shares. I don't think so. Would you rather hear JP Morgan say we actually want to invest in infrastructure and asset heavy stuff? They're investing in in revenue related to incentive comp. That's ultimately comp that's tied to a top line growth. There's nothing wrong with that. And all we would have wanted to hear banks do is say we're investing in a I like everybody else, because if you're investors now, you're already rolling out the curve of where investing around AI is not investing in semiconductors as much as is investing in companies that are going to benefit most on margin.

6:32So I like this number. I love the fact that Citi finished at a 52-week high. I'm buying weakness on J.P. Morgan. So is this just about the valuation, the spend plus the valuation? Yeah, I think Jamie Dimon looks at this, and here's a guy who said we're not buying back our stock at these levels, right? So to Guy's point, you know, he's trading near three times tangible book, which is a huge premium relative to obviously its peers but also its own history. And you think about a stock that, okay, fine, it's down 4.5%. it's actually tracking in line with the S &P 500. So if you think what Tim just said is a great environment for banks, for some reason, the best bank was trading basically on a performance level, worse than many of its peers.

7:11Now, the flip side of that is you see Goldman Sachs, Morgan Stanley, they've been just on a parabolic move. And I think a lot of that has to do with some of the recent data about deals in general. And so if you think about the outlook for 2026, it still looks pretty good. And those two banks are in the cap board seat. I think the mistake one could make here is reading the JPM comments of response as a message on the entire group. I mean, we are 24 hours removed from new highs in almost every single bank stock around the world. I thought it was notable today that this did not, in fact, Goldman Sachs' new high, Morgan Stanley' new high, Citigroup' new high.

7:44I mean, one of the key features of this bull market really for the last two-plus years has been the banks have been involved every single week, week after week after week. I still think that's largely intact here. I would also note some of the forgotten, neglected corners of the sector are also inflecting here. Look at the move Apollo had today or Blackstone or Owl. So as they rotate away from JPM, it seems, again, more rotational than it does outright distributive. Yeah. Marianne Lake also spoke about the consumer and what they are seeing. She noted that they skew higher income. But overall, what they are seeing is very positive.

8:18Resilient. Resilient. That's what we continue to hear. Yeah, she also made this interesting point about people, you know, people in the lower income who are really suffering, as you say, resilient five times, I don't know why, who have a credit card balance and an auto loan. You want to look at that because obviously they pay off the auto loan first and not the credit card, but they're seeing they don't see any weakness there. Yeah, but we also know and they probably won't. And I'm sure they're absolutely telling you people what they're seeing. The reality is, though, if you look at some of these consumer credit numbers, they're all continuing to go, in my opinion, in the wrong direction.

8:49And it comes at a time where I think the unemployment rate is going to continue to go in the wrong direction. I don't think that paints a great picture. And if you read some of these retailers, obviously there's been a huge trade down. So, yeah, I think J.P. Morgan is probably insulated from a lot of this stuff. And it makes sense. Brian Moynihan will tell a similar story. But I think on the margins, things are deteriorating more than they're getting better. All right. Well, we are less than 24 hours until the last Fed decision of the year, with traders pricing at a near 90 percent chance that the committee cuts interest rates by a quarter of a point tomorrow.

9:19For more on the market impact, let's bring in Fast Money Friend and Richard Bernstein Advisors Deputy CIO Michael Cantopoulos. Michael, great to see you. Nice to see you, too. Let's assume that there is a cut. What is the commentary going to be like coming out of that cut? I think it's going to be hawkish. You know, when you look at the data, I'm not entirely certain there's a real compelling reason to cut interest rates tomorrow. I think they're going to do it because the market is telling them to do it, and they very rarely disappoint the market. But there's enough dissent amongst FOMC committee members where I think Chair Powell is going to have to come out with his cut, but then kind of talk the market a little bit hawkish and say, listen, January is certainly not a sure thing.

9:59In fact, it likely won't happen. And, you know, the balance of risks right now are pretty much tilting towards tighter versus market expectations rather than easier. Yeah, so let's extrapolate a little into 2026 then, Michael. We've been talking about this for a while, but the assumption that the Fed will in fact be dovish and will deliver cuts next year because there will be a dovish person put at the helm. But the fact of the matter is it's a very divided Federal Reserve right now, and we don't actually know what will happen. We don't know what will happen at the longer end. I'm just wondering how you think about that and the possibility that the market could actually be disappointed because they might not get what they're pricing in right now at these valuations.

10:43Yeah, I think much of the rally we've seen over the last six months or so, Melissa, has really been driven by liquidity and the expectation for the Federal Reserve to cut interest rates next year. And to your point, you know, I don't think that's really sustainable. There's not a good reason to do so. If the next chairperson were to come in and cut interest rates and inflation remain around 3 % or even go higher, if economic growth continues at sort of the level it is now, you're going to see meaningfully higher interest rates. And that's actually going to put a dent on some of these high valuation speculative excesses within the market.

11:21And that's not just sort of AI. I'm talking about cryptocurrencies, credit spreads, meme stocks, SPACs. I mean, they're all liquidity-driven investments off of expectations for an easier Fed. So from my perspective, this is one of the biggest risks to the broad markets at the moment, but also creates a lot of opportunity as well. Michael, so let's drill a little bit into the excess of AI spend. And I think your notes are fascinating when you talk about the AI spend on the credit side. It reminds you a little bit of fiber, shell build outs. And you point out that the end of those stories wasn't great.

11:58Are you concerned? You know, we've got Oracle's earnings that are, you know, clearly a major focus for not only the not so much Oracle's balance sheet as much as is for the tenor of a lot of these plays and other call them cash generative companies that suddenly people might be looking at differently. So just spell that out a little bit more. Yeah. So, Tim, you know, what's interesting is if you are truly a technology bull, if you're an AI bull, then why are you going to fund investments in these massive data centers for 40 years, which is some of this debt that's being issued? It's like saying you don't believe in technological innovation and obsolescence.

12:36You're saying we're at the peak of technology innovation at the moment. Chips aren't going to get more efficient, that you're not going to be able to do the massive amount of computing power that it takes to run AI within a much smaller framework. So I actually think if you're a bullish AI, very bullish technology, you almost can't fund this investment in data centers that the hyperscalers are doing using debt, right? Because you're going to be obsolete. There's a good chance you're obsolete well within the timeframe of the debt issuance. It's not a coincidence that much of this debt issuance is happening off balance sheet.

13:14I mean, one of the key reasons why, you know, mega cap growth was such a darling for so long was because they were asset like companies with pristine balance sheets. And it's not that they're going to go bankrupt. That's not what we're saying at all. But you can destroy a lot of value and eat into equity multiples if many of these projects don't end up having the return on investment that that these companies and credit investors think they will. Michael, it's great to speak with you as always. Thank you. Thanks. Michael Cantopoulos, Richard Bernstein, advisors. Yeah, on the debt side, I mean, you could broaden this out a little bit.

13:48I mean, there's some that are going to be in much worse situations than others. You know, Meta putting this into an SPV and getting, you know, equity and credit being put into this vehicle. I mean, you know, Meta is a great credit, right? But if you think about Oracle, we've seen what's happened to their CDS over the last few months. And this is really since those obligations, or at least those contracts that they were given from OpenAI. I mean, the narrative around OpenAI over the last few weeks has just changed so dramatically. It was like Sam Altman and this company could do no wrong. And this has gone on for three years and they've been given the benefit of doubt.

14:20And all of a sudden, code reds and this and that or whatever. I mean, if you're like Oracle, how can you be sure that you're going to get these contracts that are over, you know, the next five years or so? We've been talking about it since that that day in September when the stock gapped up 40 percent or so. It just seemed ludicrous that investors were willing to actually match the expected revenue over five years in market cap just like that. And look at how quickly it sold off and gave back all of those gains. And I think it has a lot to do with when you peel back the onion, people are like, how are they going to pay for this?

14:51And so to me, it's just kind of shocking that that is not spread to other parts of this trade. Dan, let's go back to the Fed for a moment. It's remarkable how many times I've heard the phrase hawkish cut over the last couple of weeks. It feels so overdone. And remember, we're just three weeks removed from everyone being worried that the Fed wouldn't cut in December when Fed fund odds got down to something like 25 or 30 percent. There is so much tape chasing and narrative chasing after the fact here. Here's, I think, the reality. Ten-year bond yields have been in the same range for the last three years.

15:21As long as they're between, call it, 390 and 450, I think the status quo likely reigns. Fed fund futures for June of 26 really haven't moved this entire time. They've been about 340, 350 the entire time. So let's assume they go tomorrow. Let's assume they go maybe one more time over the next three or four months. That's where the market is saying I think the neutral rate probably is. That's a pretty big band. It feels like 399 or 390 to 450. I feel like you crossed 425. Like, that's the logical man's band. But the reality of the market reaction will be 425. And there are cracks. Why couldn't that be the logical woman's band, by the way?

15:56I mean, like humankind. I know what you were saying. Melissa, I think what's interesting, this move the last couple of weeks that has brought 10-year yields from 399 back to 420, it's been accompanied with pretty pro-cyclical leadership. I get worried with rates moving higher and defensives really taking control of the market. That has not been the case here. So I think the market is saying, if anything, hey, the growth outlook's okay here. You know, regional banks, transports, retail, all pretty good. I think it's fair to say that that that band, whether it was 30 bips or 60 bips, is a proven three year range that has encountered a lot of different dynamics, which have included growth scares, deficit scares, foreign buyers, buyers of our of our bond market scares.

16:41And I still think you do in terms of equity fundamentals start to look at the change. As we always say, it'll be the velocity of the move and it will look as we get close to 450. That's all we'll talk about. But I think Chris is right. I think Carter's been on here talking about the 10 years have done nothing. I do think that there is some risk because I don't think we've really challenged a lot of the deficit concerns out there on top of the global debt markets, which at least in Japan don't look so great. But until they don't, that's not our issue for this equity market right now. What I've thought and I will continue to think the market's going to challenge whoever this new Fed chair is, he or she.

17:19And, you know, each passing day, we're getting closer to May. And I think the market is going to start to do it now. And I think that's where in the midst of. So throw that in the mix that a new Fed chair is always challenged on top of everything Tim's talking about. And more and more people are going to start to talk about the move in dollar yen, which is now through 157. And the fact that their bond market continues to deteriorate. I think that's coming to a theater near you here in the United States. Yeah. And if the scenario that you just mentioned, if growth is good, if labor market's good, if inflation is coming down, then why do they need to cut?

17:47and why is the market so dependent on that cut? And I'm going to take you back to that last meeting in 2024. It's December 18th. The stock market sold off 3 % like that when they actually did a hawkish cut. And there was still pricing for June of 2025. We didn't get there. And so, you know, the fact that the market trades as well as it does this year, you know, it's really kind of a hard case to make why they should be cutting so aggressively. Meantime, Walmart's transformation into true tech titan may officially be complete. the stock started trading here on the NASDAQ. Today, after five decades on the New York Stock Exchange, a company has embraced technology as a part of its business, helping it grow to a market cap of more than$900 billion.

18:28And with a forward P.E. that exceeds most of the MAG-7, we wondered, should Walmart be the next member of this group? Maybe it should replace, maybe it should bump somebody out of the 7 and be replaced with Walmart. It's got a premium valuation. It's lean to detect. They have over the course of years really been very steady and strong in terms of its CapEx, in terms of investments and technology. They've leaned in, leaving Target in the dust to the point where it's going to be a huge catch-up for Target to catch up to where Walmart is. Yeah, another 7%. It's a trillion-dollar company. I think it will be.

19:05I think we've been pretty consistent over the years that Walmart's world, and you should continue to own the stock regardless of valuation. They had a great interview this morning on Squawk Box talking about basically how they're integrating AI and how margins have been improving and how well they're dealing with their inventories. A lot of reasons to continue to be bullish. And congratulations to the Nasdaq for getting them forward looking. Yeah, and I think the stock goes higher from here. Yeah, I mean, I know that's a rhetorical question, right? Because if you think about what percent of their revenues are really being aided, I think you have to think about the business in general.

19:36And we just spent a few minutes talking about J.P. Morgan. Why did J.P. Morgan get hit? because their expenses are going higher. What percent of revenues are being aided by AI? Yeah. By technology? Well, I'm just saying. About automation, robotics. Sure. I mean, but that's their business. That's what they're there to do. And they're supposed to take advantage of it. Think about Amazon. We're not saying that as an AI company. Well, I'm not saying you made up the question either. Actually, I did make up the question. But anyway, go on. But my point is, I know it's an exercise, but my point is that should we put J.P.

20:02Morgan in there? They just said they're going to be investing. This is the next wave of this trade. How are companies getting, you know, some sort of productivity? How are they advancing their businesses? And so think about insurance. Think about in research as it relates to health care. Think about a whole host of other sectors. This is what this whole spend, this whole build out is for. Well, you know, the Mag 7s are, you know, effectively, if you look at Meta, if you look at Amazon, for sure, those are not really tech companies. Right. And I think if you look at what Walmart has done, obviously, this move to the Nasdaq is symbolic.

20:33It's intentional to be symbolic. and this is a company that you're paying a higher multiple for because they invested in technology. And so, yeah, I mean, I think you stay here. I don't think you want to get rid of it. I think you can probably find ranges in Walmart. I think it's got some room to run on this run. But we get any kind of a growth scare. I don't care about the upper echelon consumer spending. That valuation is going to be a problem. We're not there yet, but I think you can trade this one a little more actively. How does this chart look? The Walmart chart looks great. And remember, though, it's kind of gone nowhere for 10 months until the last two weeks.

21:04It was in this very, very tight range, broke out pretty decisively. I think any check back or pull back, you buy. All right. We'll have more on Walmart's big move and a pairs trade against one of its big box rivals later on in the show. At first, all the headlines from GE Vernova's Investor Day. What is next for this high-flying energy stock? Stay tuned.

21:29Welcome back to Fast Money. Shares of GE Vernova popping after hours. The company holding its investor meeting this afternoon, giving some positive long-term guidance. CBC's Seema Modi has been at the Investor Day, been monitoring it. She's got the details. Seema. Well, as the company did raise its financial targets, 2025 revenue is expected to trend higher. And even looking forward to 2028, margins of 20 percent, that's higher than the initial estimate it provided of 14 percent. What the street wasn't expecting was the buyback announcement, increasing buyback from six to ten billion dollars and doubling its dividend.

22:00How many companies in the AI ecosystem right now are not only focused on capital expenditures, but also allocating money back to shareholders? So I thought that was significant. What is fueling this growth story is gas power. A lot of interest in its gas power turbines, which continues to accelerate its order book, which is sold out for the coming for the foreseeable future, looking to two to four years out. The CEO, Scott Strezak, telling me that the company is entering 2026 with significant momentum. And that is unique or significant, I should say, Melissa, because there's been concerns over the last four weeks around OpenAI, Code Red, monetization.

22:37This is a company that works with every hyperscaler across the market to help them build the energy resources they need as they stand up data centers, as well as OpenAI, which Strezak did confirm with me about a month ago post earnings. Let's look at the stock of all the AI industrial names. GE Vinova now up over 90 percent. So it's the best performing stock amongst these specific players. And analysts have been talking about how that's raised some concerns around valuation when you look at where it's trading in comparison to its peers in the AI industrial space. But even NVIDIA, at 30 times, this is 56.