Market Momentum Still Alive… And Energy’s Next Move in Q4 10/2/25

0:01Live from the Nasdaq market side and the heart of New York City's Times Square, this is Fast Here's what's on tap tonight. Propped up by momentum, a relatively quiet day for stocks, but not for a handful of momentum sectors. How the jumps in semis, quantum stocks and crypto related names are helping stocks stick to record highs. And a potential crude comeback, WTI hitting four month lows as the energy sector lags the broader market. But could the oil trade pump higher in Q4? What one top energy analyst sees in store for the space heading into year's end. And later, Boba bull market run as shares of the China tech giant just keep climbing.

0:33FICO shaking things up in the credit score space and the next equity stake for the U.S. government, where President Trump may be looking to make a deal. I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami and Julie Beal. We start off with movement in the momentum trade. The major indices in and out of negative territory today and ultimately finishing in the green. All three notching fresh record closes, but it's the moves under the surface that's really catching our attention today. Semi-stocks ripping higher. The SMH ETF on pace for its fifth straight week of games with chip makers like NVIDIA, Micron, Lam Research, KLA all hitting fresh record highs.

1:10Quantum stocks surging as well. Roggetti Computing, D-Wave and others with big leaps in today's session, making their massive runs this year. And the poster child for the retail trading boom, Robinhood, hitting new highs. Coinbase seeing its best day in four months as the crypto space sees a bounce, Bitcoin crossing above$120 ,000 for the first time since mid-August. So even with a quiet day for the broader markets, is this momentum trade going to power the rally into year end? Guy. Well, I will tell you, Tim Seymour has been talking about the semis and the importance of it. I'll say this. You know, today was a day where the market reversed, I don't know, noon-ish or so.

1:45S &Ps were trading lower and made a new all-time high. You have this government shutdown. You have all these things in terms of valuations extended. Today was a day where the market could have really given it up. And it didn't. And it went back to exactly what you're talking about, momentum. Now, why is that? I wish I could answer. I think part of it is October, the chase is on, people behind the eight ball have to put money to work. And I think to a certain extent, you're seeing that and valuations be damned. You know, I'm surprised at how strong the market was in terms of those stocks, but nothing should surprise me at this point.

2:17Yeah, as far as the momentum, right? So we're seeing maybe some slight underperformance from that Mag7 and some of the groups that you guys are talking about are taken off and then a Robinhood is kind of interesting because that's where all this stuff is kind of traded on, right? I look at today and I said to myself, here's another situation where one of these neoclouds gets more detail about a contract from a major hyperscale. It's Microsoft and Nebius. Nebius rallies like crazy. We saw this with CoreWeave earlier in the week when they got this contract from Meta. So you're seeing this sort of performance, but Meta and Microsoft did not go up on the days that they are announcing those sorts of contracts.

2:50So to me, it feels like that sort of trade is getting a little bit long in the tooth as you see some of this money move towards these other groups. You saw crypto. Obviously, Bitcoin's about to make a new high. But what also stuck out to me was recent IPOs. If you look at bullish, you look at Circle. They're obviously crypto related. They had big days. So there's a lot of stuff going on. Everyone wants to keep making this comparison to the tech bubble that we saw in the Internet in late 90s. I think it feels a lot like 2020 and 2021. There's a lot of comparisons right now. Well, it feels like FOMO, and it feels like FOMO in anything digital, and it feels that this is a place where, you know, on a day or in the last 24 hours, we put a$500 billion market cap on OpenAI.

3:28It's the largest private company in the world. They raised$6.6 billion on an employee sale. You have a couple other stories both in that market. There's even, you know, there's a German AI play, Depot, which is talking about an IPO in the U.S., and it's just interesting that the rest of the world is bringing some of their stuff. You have Samsung and Hynix also on a very big deal, also in cooperation with the OpenAI. And it does, by the way, remind you that Samsung really is maybe in terms of memory chip in this space, the big player to watch. And I think a lot of U.S. investors, because that stock does not trade here, don't have a lot of exposure to Samsung, although you can get it.

4:00So that's what today feels like. And it's, of course, framed around this second day of a government shutdown that we spent a lot of time in the last week, but really in the last 48 hours, understanding what this means and what it doesn't mean. What it doesn't mean is that, you know, the conflation between this and a debt ceiling dynamic, in other words, not. You know, that was put aside in the big, beautiful bill. There is no debt ceiling issue. The Treasury is not going to have any issues continuing to issue. And it's really just a question of how much transparency or lack of transparency is going to hold the Fed back from doing what they want to do.

4:34We're not going to have a payroll number tomorrow. We're going by second derivative type gauges on a labor market that doesn't look so strong. So right now, that's probably, I know it's crazy, but it's probably good for equities. Yeah, so we're only talking about public equities right now. You just mentioned OpenAI, half a trillion dollar valuation. Here's one thing I think is really important here. So in the past cycles, if you worked at a private company, a startup, you really didn't have the opportunity to sell secondary, right? So think about there are hundreds, if not thousands, of these tech employees are able to sell when these evaluations are getting so big.

5:11And so OpenAI, why did it trade at a half a trillion dollars? Because insiders and employees and founders, they're all being able to sell$6.6 billion. Just think of that as being extracted from a company that is going to lose maybe$13 billion this year. They're going to make maybe four and a half, five. I don't know what the number of revenues. It's like between five and ten or something like that. And these folks are just taking money out of the, you know what I mean? Where does that money come from? B.C. funds that raised it from pension funds, that raised it from sovereign wealth funds, that raised it from wealthy individuals.

5:43And you see this money that's being circulated around. And it's kind of an interesting thing to think about here because in past cycles, we really haven't had that. There's been these lockups. You've got to wait until the IPO. And who knows what the heck's going to happen after that. Yeah. Julie Beal, what do you make of the markets movement today? And do you think that it's a statement on where valuations are in some of the most favored sectors out there like big cap tech? Yeah, I think that people are continuing to try to find opportunities to make money. And if I think about most of the managers, the professional money managers that are out there, most of them are lagging their benchmarks.

6:16If they're in small cap, they're lagging them by a lot. And I think that what they've decided to do is capitulate to where towards the momentum, towards the high beta, towards the non earners. And I think that that really introduces a little bit of risk into the whole system because people are really chasing after a lot of companies that don't have the same quality as the Magnificent Seven. You can ignore everything in AI in the Magnificent Seven, and Facebook is still an excellent business, a very high-quality business. That's a little bit my concern is that people are just assuming if it has the AI, it's going to be quality, and I'm not sure that's going to be the case.

6:51In the meantime, we are just ahead of earnings season, which will start soon. And banks will kick it off. And banks have been notable laggards for the week. And you're pointing this out on the call today. Yeah, it's just it's interesting because we had this barbell kind of place where, I mean, if banks were value and they're not relative to themselves, but there's certainly a place where you put your growth on and you put your other kind of more value play companies that were getting tailwinds from both policy, getting tailwinds from their div plays. We've talked about banks quite a bit. So that story is interesting to follow.

7:23Are banks sniffing out some sense that the economy is weakening a little bit and that the payroll numbers are starting to weak? Possibly. The other just thing I think is critical about markets, not only the seasonal factor of where we are going to be in this quarter. Unless something happens, this is when you not only catch up, but you try to throw a lot of extra chips on the table. There's$3.9 trillion of money market chips that I think are going to get maybe not all put on the table. But as rates have come down, equities are going to continue to be a more attractive allocation for people that, frankly, don't feel the same way about being so defensive as they did when they put a lot of that money in money markets.

8:00So I think a lot of that money will find its way into the equity market. And I think it's sooner than later. Here's an interesting would you rather. I love this game. Markets at record closes, record highs, basically, or a CD that yields 4 percent here for the next six months. I don't know. You're patiently waiting to play. That is the question a lot of people are trying to figure out at this moment in time. So the equity market from now to the end of the year or lock in at 4 percent. Or behind what's door number three where there could be Monty. It could be tuna fish. It could be like a mule or something.

8:33I'll take the 4 percent, Melissa, and run like a thief because I do think sometime in October you're going to see something interesting happen in the equity market. You tell me why the Fed's going to lower interest rates going forward. Is it because the labor market's weakening or is it because inflation is coming down and maybe the economy is doing just fine? If that's the case and yields are coming down, this trade that we're talking about, the Gen I trade, is going to continue to broaden out and it's going to go higher. So I think 4 percent seems like a sucker's trade. I think I'm checking the equity market and feeling good that you guys are thieves and suckers.

9:05I mean, I just feel as if weaker dollar, lower oil, lower inflation, money on the sidelines, a Fed that's accommodating, policy that's accommodating, and trends around spend in technology and infrastructure that I don't see changing over the next few months. So for this quarter, I'm taking the money and running into the equity market. Julie, round it out. What's your answer to the question? I would probably take the 4%. I think that we have valuations at all-time highs. We have something like 30 % of CapEx being driven by four companies. That is a lot of concentration that makes me nervous, not just in terms of the valuations in the market, but in terms of actually economic output that we see going forward.

9:49All right. For more on the markets, let's bring in Verdant's CIO, Megan Hordeman. She joins us here. Megan, great to have you with us. I'm going to pose the same. Let's start off the conversation with the question I posed to the desk, and that is markets at record highs here or a 4 % CD for the next six months? 4 % CD all the way. Wow. I wouldn't be. Absolutely. You know, I've listened to the other guests. We've talked about capitulation into year end. We've talked about momentum. I think we need to talk about complacency, and that's what we're seeing across a lot of different technical factors.

10:22You know, if there is chasing this market as quickly as the momentum can drive these markets up, as soon as that momentum loses steam, you're going to see those big names, the ones that there are actually profits on. They're the ones that are going to take a hit. And you're looking at, you know, Infotech and the S &P 500, these tech names, they're trading at 90 percent premium, their multiples versus the historical average. This just simply isn't sustainable. Let's say that one does believe that valuations are high and that it's not sustainable. But at the same time, you believe that rates are coming down.

10:54I mean, is that sort of the one thing that will kill this rally if the Fed doesn't deliver what the markets are expecting? Because it does seem that if you think that inflation is sticky and the Fed is sort of pinned, they might not, in fact, deliver as many rate cuts as the market wants. Absolutely. And that's what keeps me up at night, is that this market is fully pricing in the fact that the Fed will just gradually cut rates at every meeting from here on out, that they'll save the labor market, that inflation is, we're completely behind us, that the Fed's going to just be satisfied with a 3%, you know, maybe even 3 % plus inflation rate.

11:30That's just simply not the case. So this market, where we are with valuations, and we're as extended as they are, it is, there's so much more room for downside than there is for upside. Understanding that the bond market's a confidence game, and I'm setting this up a little bit, is a prolonged shutdown bond bullish or bond bearish in your opinion? I think it's bond bullish, but it's not bond bullish for the long run, because what's going to end up happening to get the government reopened again? It's going to have to be some meeting in the middle. And meeting in the middle, what we've seen historically, always means more spending.

12:03More spending means potentially inflation, and that's bad in the long run for bonds. So if you are negative, Megan, on the markets, or you're concerned about the outlook, how are you positioning your portfolio? What allocations go up, which go down? So first of all, make sure you're in balance. We did a big rebalancing in our portfolios not long ago with the run we've seen in the market. Make sure you're where you want to be long term. We still think don't forget the value side of the market. It has been all growth. And if this is we do get an inflation scare, that value side should outperform.

12:34Look at the areas that are pricing in the worst case scenario or at least pricing in some downside risk. So if you're a long-term investor, even though I'm negative on the market here in the short term, I'm negative on the large cap growth side of the market. Over the long run, if you look at the small and mid-cap side of the market, there still is room there. And there are some opportunities and valuations are very cheap. If you can withstand the volatility in the near term, those are some of the areas you can invest in for a longer term horizon. Megan, great to speak with you. Thank you. Thanks.

13:06Megan Horniman of Verdance. Julie Beal, small and mid-cap, music to your ears. We'd love to hear it. We'd love to hear it. And I agree. I think not only are the valuations more attractive, but the growth prospects, too, are better if you're lurking at analyst estimates. They're showing much better growth. And part of the reason is they have very easy comparisons. But I do think that most small businesses have now figured out inflation. They've now sorted out a lot of the labor picture. And a lot of them are really starting to get their interest costs under control and at a much more manageable level.

13:36So I think that's positive. Large cap tech and value don't necessarily preclude one another. There are overlaps, aren't there, still or not anymore? When I hear get back to where you want to be long term, and I hear that there's something wrong then with large cap growth tech, I mean, that's where you want to be long term. That's where you should have been for the last 10 years, and it's where you probably should be for the next 10. I don't have a crystal ball, But again, I agree with Megan in that you want to think about where you want to be positioned, not for the next quarter, not for where the momentum is, but truly what the allocation looks like.

14:14And it's probably a barbell. But large cap tech is certainly that's the part that that I don't think you can be without. Yeah. Large tech tech is waiting for a moment. It's kind of like that deep seek moment. And it's going to be different this time. You know, that was late January. We had just such panic in such a short period of time. NVIDIA closed down that day 17%. And I think that what our last guest just talked about with the level of complacency, though, that's when you do have those sorts of shocks in a way. You know, when we're in January, we're making new highs every day. We were just coming off a 25 % year in the market.

14:47It's actually two consecutive ones, that sort of thing. And I just feel like there's just so much confidence in this trade. And, Tim, you are right. Ten years from now, we're going to have$10 trillion market cap companies. And most people are positioning for 10 years or they're positioning for 15 or 20. Right. So, I mean, and a lot of them are going to be these names or this theme. You know, there's no doubt about it. But I guess in the in the near term, I just do think there's a lot of risk. I'm not sure it happens, you know, between now and the end of the year, but sometime soon. All right. Meantime, Tesla shares tumbling even after beating the streets.

15:16Q3 delivery expectations are Phil Lebeau has more than numbers and the investor reaction. Phil. And I think generally speaking, Melissa, most people look at these numbers and they say, well, we knew they would be better than expected. I'm not sure we expect them to be this much better than expected. Almost 500 ,000 vehicles were delivered last quarter. Go back to the first quarter. Remember when it was 366 ,000? The hand-wringing, oh my goodness, what's going to happen this year with Tesla? Is this the end of them growing their deliveries around the world? Well, clearly they've rebounded, though the consensus, as you take a look at annual deliveries, there's nobody who is predicting them getting back to where they were last year, just under 1.8 million vehicles.

15:57Right now the consensus is just over 1.6 million vehicles. And I'm not sure that's going to change. Ah, there you go. That's fine. Get in the shot. I'm not sure that's going to change by the time we get more analyst estimates because the pull forward in sales in the fourth quarter here in the United States. So what do the analysts say about all of this? Generally speaking, most were very positive. There was CFRA reiterating a sell, but Ben Callow at Baird, he came out with a note today saying, We now expect shares to outperform as Tesla is increasingly viewed as the leader in physical AI. Adam Jonas and Morgan Stanley also out with a note today where he basically reiterated all the numbers that were there and said the softening performance by domestic Chinese OEMs were a contributing factor to Tesla's performance.

16:44And that's true. China is probably not getting as much attention as it deserves when you look at the quarter from Tesla. As you take a look at shares, keep in mind that one number that came out today that didn't get a whole lot of attention or hasn't historically, Melissa, but should, energy deployment. It was a record at 12.5 gigawatt hours for the quarter. And one thing to keep in mind, Melissa, year to date for the first three quarters, Tesla has deployed more energy storage than they did all of last year. Speaks to the growth of that business. Well, Phil, thank you. Phil LeBeau, thanks to the cameo appearance made by one of our tech crew at CNBC.

17:26Down 5 percent. What was that all about? We were just talking about how the momentum trade was on fire today. Tesla has been a momentum stock. It was up 33 percent or so in September. Is it just the natural pullback on the news? So I find that, you know, when deliveries are bad, and I'm not saying this is Phil, but people will come on and say you're missing the big story. It's not about deliveries. It's not an auto company. It's about all the other things. When deliveries are good, look at how robust deliveries are. You really can't have it both ways. And again, I'm not suggesting Phil's doing that.

17:54What I do think happened, though, this is a classic sell the news. And it was three or so weeks ago Dan said, you know, bullish to bearish reversal. It happened. It's upsetting that we didn't test the levels we saw in December. But given now that this catalyst is out of the way, I think it's reasonable to think that 360 level, which was resistance for the longest time, becomes support on the downside. A couple of other catalysts, though, earnings being in October, October 22nd, I think it is, and also the annual general meeting, which is in early November, which is also seen as a catalyst here.

18:22Yeah, I think the auto business is just a pull forward. I mean, we know exactly, and it's going to come against fourth quarter. There's just not a lot of demand right now. And if these guys don't adjust their pricing lower, Q4 is going to be a disaster, and a lot of their competitors are already doing it. So the AGM you're talking about, it's going to be about his trillion-dollar pay package. It's going to be about robots and robo-taxi. But that's what people want. That's what the market cap is based on, robots and robo-taxi. I just, like, you know, and he's sitting there, you know, Space Karen over there is tweeting about, you know, canceling your Netflix.

18:49So if I'm a shareholder, I'm not enjoying much of that. Space Karen. What is space? I don't know. I don't know. Dan has his own language. You know that expression when someone's a Karen, you know what I mean? Space cowboy. Space cowboy. You're a space Karen. He's, like, whining about stuff. You want to trade Tesla, GM, Ford, you name it, automakers. Well, I'm just going to chime in with Guy on this one. I just think it's interesting that we call it an auto company when we don't. There's no question that the valuation has to be in all the things that you just talked about and maybe some space cowboys as well.

19:22I just think you're in a place with the stock that I think in terms of the EV cars out there in the competitive landscape, they're not winning. All right. Meantime, we do have news on the developing story out of the White House. A host of publicly traded companies set to lose federal funding on cuts to green energy initiatives. Emily Wilkins is in Washington with the very latest. Emily. Hey, Melissa. We're getting some more clarity on which companies are going to be impacted by the White House's $8 billion cut to green energy programs that was announced yesterday. Right now, more than a dozen public companies are set to lose funding they were previously awarded.

19:58This includes General Electric, Cummins, Excel Energy, John Deere, and Caterpillar. And, you know, when the cuts were announced yesterday, Trump's chief budget officer, Russ Vogt, said the cuts would hit states with Democratic senators. But we've got actually it's a it's a number of pages, a list of all the cuts here. And some of them are going to be occurring within the districts of Republican lawmakers as well. Washington State Governor Bob Ferguson, one of the states that was targeted, said in a statement to CNBC that it is outrageous that the administration is using a government shutdown. to punish blue states like Washington.

20:35We're working with the Attorney General's office to fight this illegal action. Now, the removal of funding was meant to put pressure on Senate Democrats to have them vote with Republicans to keep the government funded until November 21st. However, it doesn't seem to have worked yet. We've only seen three Democrats vote with Republicans. The number you need is eight. Next chance they'll have to vote is going to be tomorrow afternoon. Although, guys, at this point, it does sound like they're likely not going to have the votes then either, meaning the shutdown is going to go through the weekend and into Monday.

21:08Melissa? Emily, in terms of these cuts, are these cuts permanent cuts, or is it funding that would be restored if the government opens up again? That's a great question, Melissa. I've certainly heard from some folks who have been chatting with lawmakers trying to make the case that this funding is needed, that they need to restore it. I mean, certainly lawmakers could try to negotiate as part of getting the government back open in restoring some of this funding. But at this point, I think there are a lot of question marks as to what it's going to take to reopen the government. And there's just no clear answer at this time.

21:40Right. And it's not just the states that are being used as a pawn. Publicly traded companies at this point are pawns as well. Emily, thank you. Emily Wilkins in Washington. Coming up, a Baba breakout. The Chinese tech giant leaving the country's biggest names higher this week. Whether it can power the emerging markets trade to new heights right after this. Plus, Fair Isaac faring very well today thanks to a big change in how it interacts with mortgage lenders, the implications for consumer credit, and the housing market. Next.

22:13This is Fast Money with Melissa Lee right here on CNBC.