Mag7 Meltdown To Kick Off 2025… And Mortgage Demand Drops 1/2/25

0:02Indeed, it does live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast Money, and here's what's on tap tonight. Holiday hangover. Stocks stumbling out of the gate to start the new year after limping to the finish line in 2024. Is this a bad setup for a bull run this year? We'll debate that. Plus, stuck in reverse, shares of Tesla taking it on the front bumper after reporting their first ever drop in annual deliveries. We will break down the stock's recent slide coming up. And later, the builders bruised and battered. Will the slide continue in 2025? Energy on the climb.

0:38Could this rebound be for real? And a call of the day on Uber. Why Goldman is so bullish? Welcome, everybody. I'm Tyler Matheson. In for Melissa Lee. Coming to you live from Studio B at the NASDAQ market site on the desk tonight. Vono and Eisen, Karen Feinerman, Courtney Garcia, and Guy Adami. Folks, welcome, everybody. Happy New Year. Tyler, great to have you. We start with a magnificent seven meltdown led by losses in Apple. The iPhone maker dropping more than 2.5 % today. Biggest loss, by the way, since October and shedding$100 billion in market value in the process. A cool 100 mil. Or 100 bill.

1:18100 billion. The stock has now dropped more than 6 % from the all-time high it hit just a week ago, back when we were counting the ticks to the$4 trillion market cap mark. It closed at less than$3.7 trillion. That's not so bad when you really think about it. Apple's weakness dragging down the broader market on this first trading day of 2025. Major indexes all down, though off their worst levels of the day. Fractional declines, really, in percentage terms for the big three. S &P touching its lowest level, by the way, since Election Day. So does this sort of choppy start to 2025 portend an end of a two-year mega rally?

1:57What do you say, Karen? I hope not. First of all, it's so nice to have you in your retirement. In my retirement, yes. That was such a beautiful send-off. They said, we need an old guy. We need an old guy. And Neil Cavuto just wasn't available. But, I mean, that send-off a week or two ago, whenever it was really not a dry eye and easy. Anyway, we're lucky to have you. Thank you. What were we talking about? Off the bench. We were talking about Apple and the Magnificent Seven. And what is this? I'm long the Magnificent Seven. What do we think about the market for this year? I don't think I don't want to extrapolate anything from what happened today.

2:32It would be a risky thing to do. Yes, it would. And make for not such a good show for the rest of the year, I think. But, you know, I like the ones that I own. Apple, I think on this desk, we haven't loved Apple, primarily because of price. The sort of, you know, the disappointment about AI and whether the, you know, I don't know when we're really going to see phone sales take off because people love the Apple AI experience. I don't know. Who wants to take a bite at Apple? Who wants to take a bite at Apple? I'll take a bite. All right, go. I might spit it out. All right. You might. You might choke on it.

3:04I'll see if I can chew this one down. So, listen, I think Courtney and I were on the show and, you know, the other two panelists. I know we hate that word, but we're a family here. But the other two members, I think collectively we've said, listen, there are times where Apple is a legitimate trading vehicle. You know, it oscillates. There's times to get in. And if you've been long, that same volatility makes it very tough for you to time when you're going to get in and out. So if you're a believer in the long-term sector of the story, it's one that you should own and hold on to. Now, for those of us that have sat on the sidelines, I'll be the first to raise my hand.

3:39I just don't understand what the real drivers of the super cycle are. And if AI is the catalyst behind it, I can understand that they don't have the same cash back spend as some of the other Mag-7s. So there's a floor there. But in terms of what's going to take what is already a fully valued company to the next level and lead to either, for me, PE expansion, I don't think AI is a story yet or I don't see it. For Apple, you're saying. For Apple specifically. And they're having competitive issues in China, right, where they've had to lower their prices to compete with Huawei and other. By the way, I was in Europe last summer and I saw some of those Huawei phones.

4:18They are cool looking. Did you grab one? I love them. I'm telling you, I like that phone. But at any rate, so they've got issues there, and there are questions about how well this latest phone is selling in the U.S. and whether it's going to like it. Yeah, I mean, headline risk, without question, it is great to have you, Tyler. And your legend will only grow in retirement. But I'll say this. You know, if you think about the things that I got wrong last year, and clearly there were many, but passive investing, you don't realize the magnitude, and so you start to see the numbers. And a trillion dollars made their way into ETFs and mutual funds last year, which was a record.

4:50Apple wins to this. They're in 487 ETFs, 410 of which Apple's one of the top 15 1-5 holdings. So as long as money flows in, Apple will almost by definition go higher. But that doesn't mean valuation makes any sense. And, you know, Bono just spoke to that. I mean, you talk about a company that was a growth company 9, 10 years ago. It was trading at a ridiculously cheap valuation. It was trading in the low teens. Now that it's become sort of a value stock, it's trading north of 30 times next year's numbers. with EPS growth maybe at 12%, 8 % revenue growth, doesn't make a lot of sense. So they win in this environment, but be careful if it flips, and that's one of my biggest concerns of 25.

5:31Let's broaden out here, Courtney, a little bit and pick up on one of the things Bonoan said there about AI. Last year, I think it would be hard to argue that one of the main drivers of the market was the AI lift that was in there. Are you expecting that kind of lift to reoccur this year? And if it doesn't, what kinds of stocks are going to move ahead? What will the drivers be? And I think there's a lot of structural changes with artificial intelligence that are going to continue. So I think some of your easy money in AI has probably been made. I don't know if you're going to see something like an NVIDIA outperformed to the same magnitude that it has been.

6:09And a lot of that magnitude has already been priced in. But then look at energy, for example. Like there is not enough energy to go around for these AI data centers, for electric vehicles. So I think there's a lot of these stories that are surrounding AI that aren't going away anytime here in the near future. So, yeah, like with Apple, is like an AI emoji going to make me get the new iPhone? Probably not. But do we need that energy to create all the new AI stories? Absolutely. So is that kind of a two cheers for energy here? Is that what I'm hearing you say? Anybody else want to pick up on energy?

6:37Well, it makes sense. I mean, we didn't talk about this stock for the first 16, 17 years of the show, and it's VST, Viscera Energy. And quite frankly, there's no reason to talk about it if you look at a long-term chart because it didn't do anything. Look at the performance it had last year on the back of exactly what Courtney is just talking about. I mean, this is a stock that's been reinvigorated by this whole AI phenomenon. And, yeah, it's probably extended on valuation, but those are the names that are going to win in 2025. And I'll say this quickly. Semi's topped out in July. You say what you want, but look at an SMH chart.

7:07That's when it all topped out and they've been sideways to lower ever since outside of maybe Broadcom and maybe of Marvell. AMD has been awful. You throw a Micron in the mix. Qualcomm, even NVIDIA, since the earnings release has not traded well, that's something to watch earlier this year as well. Thoughts here, Karen? So for AI, I mean, to me, when you look at Mag7 and how much is driven by AI, Meta has been the most compelling story because they've been the most able to translate that spend, which is enormous, into actually giving advertisers what they want. Right. They're able to target ads.

7:40The ads are more effective. The advertisers will pay more for them. And so to me, Zuckerberg deserves the benefit of the doubt here on this gigantic spend. We've seen his spend before, and it didn't work out with the metaverse. But I think it had a great year, had a great two years, but it's still pretty compelling at a mid-20-ish multiple, not excluding the cash. So it's a little more than a market multiple for, I think, a stock that is way better than an average market stock. As you look at the landscape of 2025, is this a year where the market goes back sort of to what Guy was saying, semiconductors sort of topped out there in the middle of last year, including NVIDIA.

8:23Is this a year where the market broadens away from the MAG-7 and some sectors like energy, like financials and so forth move ahead? I think there will be a significant pickup in volatility in 2025. And, you know, I believe that most investors, particularly our audience, should have some passives. But I think 2025 will give you an opportunity to be a much more agile and an active trader. So I think for now, you see you see an energy or pockets of it. You know, some of Vistra, Constellation Energy, some of those were leaders today for solar. I think you'll get opportunities where there will be ebbs and flows of money flows in and out of those subsectors.

9:08But I have a hard time thinking that we will get multiple expansion without that MAG-7 lift. Especially with rates going higher. And, you know, I'm probably one of the few people that think I still think 10-year yields are going to 5%. Throw up a TLT chart, and I think it's going to trade down to the levels that we saw in October of last year. It was about 82.5 or so, which sort of equates to about 4.9 or so in the 10-year yield. I don't think the market's prepared for that at all. And valuations certainly don't support that. So higher interest rates, to me, is one other thing you've got to focus on, especially with all the issuances coming out over the first couple months of this year.

9:43I think that's a really good point. I think there are two things that make this year different, this year that we're looking ahead towards. Number one is what happens with the Magnificent Seven and the AI lift that may not be there to the same degree. And the other thing is that rising interest rates this year and how the market and how you're going to have to discount against that. Let's move on. Our next guest expects stocks to rebound this year to new all time highs. Chris Harvey is the head of equity strategy at Wells Fargo Securities. Chris, welcome. Good to have you here. You say this is going to be a good year, but a bad vintage.

10:13What do you mean by that? So I think equities are going to go up this year, but people are going to put on too much risk. Right. So for the last couple of years, people have been playing momentum. I buy strength, I sell weakness. That's comparable to I keep pushing my bets. I keep pushing my bets into the table. That's fine, but it builds up risk over time. The other thing is people are going to start to go out on the risk, too far out on the risk curve and too far down the capital structure because the person to the right, the person to the left is going to make more money, and there's going to be a bit of FOMO.

10:40So this is a year that I think equities do go higher, whether it's related to a good economy, the Fed's still cutting rates, M &A activity, IPOs. But when we look back from the perch of 27, we're going to say, 25 was a year where people put on too much portfolio. Are you with Bono win that this is going to be a year of heightened volatility or more volatility than we've had? I think that's an easy. Yes, we didn't have much volatility last year. We had a spike in the beginning of what was it? August. And that just disappeared. Disappeared after that credit spreads are still incredibly tight. We should see some spikes in volatility or a lot more spikes in volatility.

11:14But I don't play. What do I do? What do you do? What we do is we've been barbelling some of the things that we really like. We like the communication space. We like banks. But we want to barbell that versus staples, right? Staples, unloved, underappreciated. And that's going to give your portfolio some balance. And in times when the market really trades off, that's going to help out the portfolio. So you really want to barbell something defensive with something you like, garby, something a little bit more cyclical. Karen? So when you're talking about investors being more levered, Are you saying they themselves are more levered or they're looking at things that are more levered, which the MAG7 is not?

11:52So what I think is they're going to put on more portfolio leverage. The other thing that we're going to see is more M &A activity, which will bring leverage into the system. Furthermore, when you look at credit spreads being this tight, you and I could go out and issue 200 million. I'm exaggerating, but you could issue a lot of paper. And so more leverage is going to come into the marketplace that way as well. So you're seeing on a portfolio level, you're seeing on a corporate level, and I think you're going to see a lot more risk-seeking as the year goes on. What do you say, to Guy's point a moment ago, interest rates moving up.

12:25He thinks they're going to go up. What did you say? Toward at least 5%. Toward 5%. And what does that do to the overall? And your price target is one of the highest on the street. 7 ,007? It's 7-007? 7-007. Big James Bond fan. Yeah, dry, straight up. So what that does is that that's not positive. But we do think that rates do peak in the first quarter. Bonds are actually a pretty good risk reward at this point in time. The compensation you're getting on bonds above inflation expectations is about two and a quarter percent. You haven't seen that for a sustained period of time since 06, excuse me, 06, right, when the Fed was still raising rates, not easing rates.

13:08So, yes, we can get rates to go higher. I don't think you can sustain 5 % for a long period of time. And I do think that rates will come down because the economy, I think, will slow down in the second half of the year. Communication services is one of the elements of your barbell approach here. What are those companies? Which ones? That's your Metas, your Googles, your Netflix, some of your AT &T, Verizon, and some of the cable companies. Yeah. And so you think those are well-positioned. And financials. Big bank of financials is a big, big space. What are you emphasizing? I think Karen hit it on the head before.

13:44With communication, it's that quintessential Garpe space. Yes, the stocks have done really well for the last two years, but valuation is still attractive. They're still able to commercialize and they're one of the first ones to really be able to commercialize AI. And so the underlying fundamentals are still really strong. Technicals, momentum look really good. With regard to banks, I just think you're going to have upward EPS revisions for banks. and you're still going to have relative multiple expansion for the banking space because of the regulatory environment. If the year ends where you think it is, 7 ,000, 7 ,007, is the first half going to be where the fund is or the second half?

14:20I think it's the first half, right? I'm worried if we do get close to that number by September or something, we really want to start de-risking the portfolio at that point in time. I do think we're going to start to see a lot more merger Mondays. I think you're going to see a lot more IPOs once you see that. People will have more money to play with. Their risk appetite will go stronger. And again, we're looking at a period where the economy is still strong. Credit spreads are tight. The Fed is still easing, maybe not as much as we thought they would. And momentum is still very much in play. That's a pretty good recipe for upward stocks.

14:54Chris, did you know that it's in my contract that if I host, you have to be here? It's like every time I'm here something, you are here. And we're glad you are. Thank you so much. Happy New Year, my friend. Happy New Year. All right. This is the portion of the show where we get to agree with Chris or trash him. who would like to start. Courtney? No, and I am also very optimistic on where the markets are going next year. I think a lot of those animal spirits that we saw coming out post-election have been dampened when we saw this come back in December. The animals have been soggy lately. Correct.

15:19In the last month. Correct, which I think actually probably puts you in a little bit of a better position in 2025 when some of that has been let out of the sails. And I think there's still a lot of that opportunity to come because we are still going into a new administration. There is likely going to be less regulation. There's also talks of tax cuts, which we really haven't talked about yet. And I think a lot of those things are going to position the economy to continue to do well next year. So economy may do well, but that will maybe. Let's assume it does. What does that do to the Fed? That takes a little of the interest rate lowering pressure away, doesn't it?

15:51I think they've made their path pretty clear. You know, I think the market wants something the Fed's not going to give them. And I think the bond market is pretty much telling you that. But I'll say this as well. I think today was a glimpse of what you could see for the next few months without question. I mean, the VIX at one point today was above 19 and a half. I mean, it closed lower than that, but you saw glimpses of volatility in what was, yeah, a bit of a volatile today, but not that volatile. So buckle up. And again, bonds will matter. The semi-trade will matter. And I think Chris would be the first one to say it's not a straight line to 7 ,000, and it might get there by year end, but it's going to be interesting to see where it heads first.

16:24And let's talk about deal. Actually, that's one of his hypotheses is that more deals this year. Agree? I do, and I like the call on banks there, particularly the large integrated that also have an investment banking arm, because the volatility that I'm reporting will see will likely lead to increase in trading revenues as well, bolstering bottom line. Karen, wrap it up for us. What do you think? Agree. I mean, I like that deal. And also, when you see that's great for the banks, and I have banks, but also other players in the sector where one got acquired, it's good for the rest of them. It sort of breeds excitement, and I think it's going to happen.

16:56All right, let's move on to where a lot of the action is going to be over the next couple of days, certainly, and weeks to Washington. Republicans less than 24 hours from taking control of both the House and the Senate, but still a lot of uncertainty over who will be the House Speaker. Our Emily Wilkins has the very latest as the deadline approaches. Emily. Hey, Tyler. Well, yeah, Mike Johnson could face a battle for his speakership tomorrow. If all lawmakers are present and they all vote for someone, it would only take two lawmakers to deny Johnson the gavel, two Republicans voting against him.

17:28And we know at least one Republican, Congressman Thomas Massey, says he's not going to vote for Johnson. He criticized him in a lengthy ex-post for the way that Johnson handled the government shutdown battle last month, saying that Johnson, quote, already demonstrated that he won't tell the president what is achievable and what is not achievable in the House. and he lacks the situational awareness himself to know what can pass and what cannot. Now, about half a dozen other members are also undecided. Several of them actually met with Johnson this afternoon and leaving that meeting, Johnson struck an optimistic tone.

18:03People are talking through process changes they want and those kinds of things and I'm open to that and I think tomorrow is going to go well. So one big difference, of course, between the last Congress and now is that any Republican who wants to block the Speaker, they're just delaying progress on their own GOP agenda. That includes, of course, dealing with the debt limit, which, as of yesterday, is no longer suspended, giving lawmakers now a few months to figure out a solution. Tyler? Emily, let me ask you a sort of technical question about the vote for the Speakership. When someone like that representative says, I'm not going to vote for Speaker Johnson, does that necessarily mean that he's going to vote against him?

18:41In other words, if he voted or others who do not support Johnson vote present, does that create more wiggle room for Speaker Johnson to continue in the seat? I love this wonky question, Tyler. And the short answer is yes. The short answer is that I think you can have up to four members come in, vote present, and Johnson will be just fine. Where it gets tricky is that if members actually start voting for someone else, be it Elon Musk, be it Donald Trump, be it you could do Mickey Mouse, I think. And that's where you're going to see the kind of breakdown in the votes. Because remember, McCarthy won with four members not voting for him, but voting for no one else and voting president.

19:19Yeah, I don't think it has ever happened. But you do not have to be a member of the House to be the Speaker of the House, right, Emily? You don't. But I will bet anyone a beer that we are probably going to be seeing Mike Johnson as Speaker. I think the question is, how many times does it take him to get there? And what sort of the things does he wind up promising or giving away or negotiating in that process? Because you have a lot of these members who are undecided. Their main concern is spending, and they want to make sure that Johnson is going to be addressing it. All right, Emily, thank you very much.

19:51Emily Wilkins in Washington for us. Let's take a quick break. Coming up, a rough start to the new year for a few high-profile names like Tesla, Boeing, Nike, all in the red today. The reasons behind those moves are next. Plus, home builder stocks getting hit as new mortgage data filters in. But could there be an opportunity in this space? We're going to drill down on that trade when Fast Money returns. We're back in two. You're watching Fast Money here on CNBC. We'll be right back.

20:32Welcome back to Fast Money, everybody. Got a news alert now on that U.S. Treasury hack from earlier this week. Megan Casella has the details. Hi, Megan. Tyler, we're learning just a little bit more about what exactly was accessed in that hack. Bloomberg News is now reporting that Chinese hackers were able to hack into the computers of senior U.S. Treasury Department leaders. They say roughly 100 government computers were compromised, that they were accessing unclassified material. That's what the Treasury Department had already said, that this was all unclassified material, but that it was specifically some senior leaders' computers.

21:04They're not saying who exactly, but they're saying that hackers were able to access drafts and notes for policy decisions, itineraries and travel planning documents, as well as some internal communications that they're still trying to decide, trying to figure out exactly what was taken. But that, once again, it was all unclassified information. So this does go a little bit further than what we already knew about this hack. It follows The Washington Post reporting that it was the sanctions office specifically, as well as the secretary's office, that had been targeted and breached in this hack. So more still to come out on this.

21:36Just today, congressional Republicans have been asking for a briefing, and the Treasury Department says that they will be briefing Hill Republicans or Hill leaders on this, I should say. So that's something to watch next week. More details will be coming out then, Tyler. All right, Megan, thank you very much. Megan Casella in Washington. Meanwhile, Tesla shares plunging 6 % to kick off 2025 after the EV maker reported its first ever drop in annual deliveries. Year over year, worst performing stock in the S &P 500 today. Deliveries last year coming in about 1 % below 2023 levels at 1.79 million versus 1.81.

22:13Our Phil Lebeau has the details. Was this expected, Phil? Wasn't a surprise, Tyler. If they were going to hit the consensus, they were still going to see a year-over-year decline in deliveries. Here's the numbers for the fourth quarter. I mentioned that they did not hit the consensus. The consensus was for 504 ,000 and 7 ,700 vehicles to be delivered. They delivered just over 495 ,000, as is usually the case, 95 % of them Model 3 and Model Y. So as you take a look at annual deliveries, as you guys pointed out, 1.81 million was what they delivered in 2023. They fall about 20 ,000 vehicles shy of that for 2024.

22:55So really close, almost flat, but it's still a decline. The first one, really, since Tesla, you'd have to go back to their days of making the Roadster when they were only delivering a few thousand vehicles. And even then, it's hard to determine exactly whether or not they ever had a decline in vehicle deliveries. So this is the first one as they've ramped up production and really hit the commercial markets around the world. If there is a silver lining in the report today, it's with energy storage deployments. They report that every quarter along with their annual deliveries. And it was a nice number that they reported in terms of the fourth quarter deployment.