Markets Enjoy Short-Lived Highs… And A Possible Fed “Shadow Chair” 6/27/25

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. Record highs for the S &P and Nasdaq, just barely. A look at the sectors and the stocks driving those gains and whether the run will continue in the heat of the summer. And Nike swooshes higher for its third best day on record. Has the Elliott Hill turnaround truly taken hold? We'll debate that. Plus, we're watching bank stocks after the latest stress test results. Boeing continues bouncing on its latest upgrade. And we're going old school for the options action on Coinbase.

0:32What is next after the stock's 40-plus percent jump this year? I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Bono and Isen, Steve Grasso, Carter Worth, and Mike Coe. We start off with markets eking out a record close for the first time in months. The S &P gaining half a percent, eclipsing the all-time high setback in February. The benchmark index closing in on the 6 ,200 level. The NASDAQ also setting a record its first since mid-December. The Dow was the biggest percent gainer on the day, adding 431 points. But that index still nearly 3 percent from its best ever levels.

1:04And take a look at the sectors leading the games this year. Industrials up a whopping 11 percent since January. They closed today at a record. Communication services up double digits while financials come in at number three. Today's gains, though, come even after a midday drop when President Trump said he is ending all trade discussions with Canada effective immediately. Trump also just making some comments about Fed chair Jerome Powell in just the last few minutes. Let's get to the latest developments with Megan Pasella in Washington. Megan. Hey, Melissa, just a few moments ago, the president wrapping up some remarks with reporters in the Oval Office, where, as you said, he went after Fed Chair Jerome Powell once again.

1:40He called Powell, quote, a stubborn mule and a stupid person. He went on to say he would like to see rates at 1 percent right now. That's where he believes they should be. He also went on to say that, quote, I would love him, meaning Powell, to resign if he wanted to. He's done a lousy job. So more of the same, but the rhetoric perhaps getting stronger there, Melissa, against Powell. But of course, a lot of what he was talking about in that appearance was Canada, as you mentioned, because the tariff tit for tat could be heating up again with our northern neighbor. The president posted this afternoon that because Canada is moving forward with the digital services tax, that he will be ending all discussions on trade effective immediately.

2:17He went on to say that he will be letting Canada know the tariff that they will pay to do business with the U.S. within the next week. Treasury Secretary Scott Besson also told CNBC in the last hour that the White House knew this was coming, but they hoped that Canada wouldn't follow through. We think it's patently unfair to do it retroactive. This was something from the Trudeau years. So we were hoping as a sign of goodwill that the new Carney administration would at least put a break on that during the trade talks. They seem not to have. President Trump has responded. Now, the backdrop here, Melissa, is Canada is not facing a reciprocal tariff like the other countries, but it is subject to steep sectoral tariffs on steel, aluminum and on cars.

3:04So there have been ongoing trade talks to try to strike a deal with Canada at least covering those sectors. And Canada has been threatening to retaliate if they didn't get a deal soon. So now there's this new wrinkle. And the question is what the new tariff might look like, what it would cover and just how much Canada pushes back. Melissa? There also is, I mean, all of this is uncertain, but President Trump also made it sound like the path forward was really, he could do whatever he wants. And I think that that almost injects another level of uncertainty to this whole thing. I mean, whether there be deadlines or whatnot, he basically said, we're going to issue a letter, and Canada will know shortly what it will pay.

3:40Absolutely. And adding to that uncertainty is Morgan Brennan, our colleague, tried to pin Besant down on this in his interview, and she asked what authority essentially he would be using. Besant talked about Section 301. That's the tool that was used to impose tariffs against China in the first term. Besant has said today that he believes USTR could launch that investigation as soon as Monday. But that's an investigation. It could lead to tariffs down the road, but it would take a long time. Besant then also said, but he could also just do this with emergency powers under EIPA. That would be much quicker.

4:09One's more quickly. One's more durable. We just don't know at this point. It's not clear what path they're going to take. There's so much uncertainty wrapped into all of it. All right. Megan, thank you. Megan Casella. We did see we did see the markets react just a bit, but still pretty close to highs here. Steve Graff. So what do you make of all of this? Yeah, I think that people if you look at the response time that all of these stories that they've taken to be digested with the market, we've all been around long enough. Right. The financial crisis, trade crisis, dot-com bubble, COVID, all work through more rapidly with every consecutive crisis.

4:49So I think the market right now has moved on and said, this is probably just the sausage making in the process. So we're just going to buy the market and go to where the puck is going. I mean, at the same time, there's also this July 9th deadline. And supposedly we're closer to a deal with the EU. Both sides have confirmed that. But still, this whole thing, this is our northern neighbor. I mean, right now we're working on exemptions, under exemptions with USMCA. Well, as it pertains to interest rate policy, I'm hoping that he means 1 % real rates. Because given that we just had a PC reading slightly over two, I...

5:23I'm guessing it's not real rates. Well, I'm just trying to take the moral high road here and give the benefit of the doubt. But perhaps it's undeserved. As you said, I'm hoping here that this whole... This is essentially a way for him to push back against the taco trade. and perhaps present himself as being a hard and fast negotiator with a very close, a neighbor of close proximity and doing this. Because what we've seen is a delay, and it's more likely, to your point about a July 4th or July 9th deadline, that that's likely going to get pushed out. They've already given themselves runway to say, OK, it's not really a big deal.

5:59We're willing to extend. So I just think this is them bringing in another pillar and saying we are willing to be tough negotiators because their recent history has suggested that they will continue to kind of acquiesce and provide flexibility. And I think that's kind of undermining a bit of their credibility. You know, Mike, we started the show with this trade stuff because of the uncertainty. And in spite of the uncertainty, we're hitting record highs. So what does this tell you about the durability of this market rally in your view? ED HARRISON I mean, I would say that it seems like you sort of hold your nose and buy it, actually.

6:34I mean, I was a little bit concerned, I have to say, when it looked like we had opened at fresh highs, and then it looked like we might actually be heading lower, which it did with about an hour before the close. We did see the market actually get to negative territory. And I actually lightened up a little bit there because technically, that just feels terrible to me. When you open at a new high and then close lower, that's usually the kind of reversal you don't like to see. But people bought that dip. And I think the confirmation we had that the market was in good shape came when XLK, when the technology stocks broke out to fresh highs first.

7:10And of course, they've been market leadership. So you kind of expected some of these other things to follow along. And a lot of the news has generally been pretty good. With respect to Powell and all of that, I mean, I think there's a lot of bluster there. It's not in the dual mandate for the Fed to try to help out the fiscal debt and deficit situation, which I think is really one of the things that Trump is kind of upset about with respect to rates. Yeah. Carter, what do you make of the technicals behind the S &P 500 move? Yeah, well, I mean, to Mike's point, if we had after the reversal had closed at or near the low, that would have implications.

7:46But in the last, it shook it off and it was a decent day. But really, there's two stories to be told, right? And the first is that the market today recouped its losses associated with essentially tariff or tariff-related news and is now back to where it was, and simply that, right, on February 19th and an inch above. How much above? We're 42 basis points above where we were then. So what that narrative is that the market in four months is up 42 base points. That's an annualized rate of 1.2%. That's quite dull. The other story is from the April low, of course, the lows of the tariff news, the S &P 500 is up 28 % in two months, and it's annualizing at a rate of 203%.

8:33So you can tell any story you want, right? We're annualizing right now from the April low at an annual rate, we'll be up 200%. if we keep this going. Oh, but what about the fact that we're up 1.2 percent over the past four months? We're annualizing at 1.9 percent. Both are true. And therein is the conundrum. Are we putting in a double top? There's a big prospect for that. Or are we going to clearly break out and make new highs? It's anybody's guess. I don't have the answer to that. You don't even have a hunch, Carter. You usually say, but my hunch is. I can give you a hunch. I mean, my hunch is that there's an internal divergence that is either the opportunity or the problem.

9:13Yes, the S &P has recouped its losses and has now made a slight new high. But right now, 225 of the constituents are 15 % or below their respective 52-week highs. That's 45 % of the index. 150 constituents are more than 20 % below. That's 30%. So you're talking about roughly half the index is still some 13%, 14 % their respective 52-week highs. So therein is the opportunity. They catch up. The market will clearly make important new highs. If they continue to lag and not participate, that's how a double top is made. Well, in the bull case about this rally, you can say we had mentioned what led us here.

10:01Industrials. Industrials are up there. Financials are up there. It's not just the same old, same old technology stocks at this point. Yeah. And so I like the way Carter sets it out. But historically, when you have a sell-off that dramatic that we had in April and then a rally so aggressive back, 12 months out, the market outperforms. So I think if you're a longer-term investor, you stay invested. All right. Well, the Federal Reserve is out with its annual bank stress test results to read on how the financial institutions could potentially weather a severe recession. All 22 banks involved this year got a passing grade.

10:40Buzzy Pickers got the details. Hey, Les. Hey, Mel. Yeah, the KBE up significantly in after hours trading. Last I looked, it was up about 1.8 percent after the biggest banks saw far lower declines in their capital ratios from the stress test than they had seen in prior years. This could bode well for dividend and buyback announcements next Tuesday. All 22 banks, as you mentioned, Mel, tested, remained above their capital requirements after absorbing hypothetical losses of more than$550 billion. The scenario by which the banks were tested against was widely seen as more moderate this year, evidenced by the aggregate decline in the common equity tier one capital ratio of 1.8 percentage points.

11:21That's the lowest in years. The 2024 results by comparison showed hypothetical aggregate declines of 2.8 percentage points. This is the first round of stress tests with Michelle Bowman in the vice chair for supervision seat, although the test was developed before she took that role. Under this new regime, though, there's been this broad expectation of loosening capital requirements and regulatory reform. Vice Chair Bowman said in the statement that, quote, one way to address the excessive volatility in the stress test results and corresponding capital requirement is for the board to finalize the proposal that would average two consecutive years of stress test results, which was released in April.

11:59Mel. All right. Leslie, thank you. Leslie Picker. Let's get more in the banks with Chris Maranac. He's director of research at Jannie Montgomery Scott. Chris, great to have you back. Nice to see you. Any surprises to the upside or the downs? I guess there really were no downside surprises, but any surprises there? I think you're going to see more buybacks. And I think on Tuesday when the banks were free to discuss their share and capital returns, it'll be positive. The average bank in the stress test this year had a 3 percent decline in shares outstanding from the end of 23 through first quarter of this year.

12:29So it's more of the same and most likely higher. You know, Wells Fargo had a 9 percent drop in share count while their asset cap was on. And so now that that's relieved, they'll probably buy back less but still be buying back shares. I do think that the results signal that the Fed is not only going to be accommodative in the banking industry, but it wants to spur the banks to lend. So the reality is bank loan demand is somewhat tepid. It's about 1.3 % to 1.4 % year to date. I think we'll see a little bit better second half as we have some uncertainty clear as we get into the fall. But more buybacks are good for stock prices.

13:03And I think we're still recovering from sort of the negativity that was a little bit excessive back in April. Yeah, buybacks and dividends good for investors as well, Chris. And I'm just wondering from the investor standpoint, banks have had a great little rally here. I mean, we've got the likes of a J.P. Morgan, for instance, at basically all-time highs at this point. And I'm wondering, you know, how much of all that expectation of regulatory easing is already priced into these shares? Well, some of it is. But if you even look at the KRE for a broader perspective, it trades about 10 to 10.2 times earnings today.

13:36And we were at 12.1 before Liberation Day. So I still think there's a comeback to happen. We haven't had earnings estimate cuts, which is good. I think we can see actually estimate increases as we process in buybacks. And also capital and credit costs could really be more positive than investors and analysts have thought. We don't see major credit shifts at all this quarter coming up. And I think overall, the bank's ability to weather the storm from credit issues down the road is still very great. The profitability this year has been higher because of net interest margins. If the Fed were to cut at a later time, that's going to be good for the deposit costs, which therefore will, I think, improve earnings further.

14:16Chris Bono here. Thanks for being with us. So I'm thinking back to March 23, roughly. Can you kind of give your thoughts on finding the fine balance between making sure that we have ample liquidity within the long-term treasury market and treatment of those longer-term assets, particularly the hold-to-maturity treasuries that kind of led to the conundrum in the first place? Sure. So I think if we look at how rates have been through today, it's been a very de minimis mark to market. It's going to be flat to slightly down on interest rates as of today. That's not going to change the mark to market.

14:49What you have every year is about 10%, 12 % of the portfolio is paying off because of the high percentage of residential mortgage backs. That's the predominant security that banks hold. It's less treasuries and more RMBS. However, I do think that the payoff of these old vintage from 2020 and 21 is going to get accelerated this year and into next year. So I think it's less of a problem. Banks' liquidity is actually higher today than it was pre-Silicon Valley and FRC failing. I think that there's probably too much liquidity in many banks' eyes. They'd like to see the Fed relieve them on the LCR liquidity coverage ratio.

15:26That's probably coming in a few more months, in addition to what we had this week on the SLR. Trading securities for the big banks, that is getting better. I think it can still get even wider, but I think it's a progress that we're making with the rule changes that we just had in the past few days. If you're going to buy banks today, Chris, would you buy the larger, higher quality banks or would you go down the cap scale? I would move down the cap scale because I think those stocks have not moved as much. It's been a very strong month of June for the large caps. So I think your mid-cap and regional banks still have more to recover.

15:58I also think the earnings and the buybacks will be very strong for those companies as well, even though they're not part of the stress test today. Chris, great to see you. Thanks for your thoughts. Thank you as well. Chris Maranak. Carterworth, would you agree with Chris? Midsize and regionals over large cap? Well, I guess I'd prefer if you were to play it, there's an ETF, KBWB versus the KRE, and that really is focused on the big banks. And while the big banks have just now returned to their former highs, similar to the market, the big banks are still so far behind the S &P going back five and seven years.

16:38In fact, I was just looking that up. I mean, right now, going back to June of 2018, the S &P is up 120 percent. and the BKX is up 45. Think of that. So there's plenty of catch-up, so to speak, playing big banks to the market. And I'd rather speculate that way than playing small and regional banks as catch-up to the big banks. Mike? Yeah, I mean, what's interesting, if you're playing on the big bank side, if you're taking a look at XLF, for example, I think that you could play this one for a potential breakout. First of all, it didn't hit a new all-time high today. It's just short of it. But the second thing I would say is that this is an area where actually the upside options are quite inexpensive.

17:18So it's not like you have to take a lot of risk if you want to get long some deltas in financials. Buy some upside calls in XLF. If you're taking a look at the regional bank index, by contrast, and this is Carter's bailiwick, it's not mine, but that one still looks pretty weak to me. When you look at JP Morgan, you said it, it's been leading the pack, but we don't know when Jamie Dimon is leaving, Right. Or 2026. Or is that what is that a given yet? Or he hasn't announced. I know he said he would stay until official date. He said he would stay. Whatever. It's it's getting closer. Yeah, it's getting closer now.

17:51Now they're professionals, so they're going to stack. There's going to be a lot of news flow that's positive into him departing. So if you're going to play this, you either go with Wells Fargo that continues to be make up for the last couple of years or you stay with the best in breed, J.P. Steve Morton. Yeah, I tend to agree in terms of the large banks, only because I kind of have the opinion that we are later in the economic cycle and I just don't want to take the risk. I think if I'm really chasing alpha, there's other ways that I can play it. If I want to take risk, I don't really want to take it in like an economically sensitive situation.

18:23I'd probably do it within parts of the tech market. Coming up, Boeing flying high and one analyst says it can rise much, much higher. But do the traders agree with the call? We'll find out. Plus, Nike sprinting to its best day in four years. What is next for this sportswear stock as it tries to break out of its slump?

18:43This is Fast Money with Melissa Lee right here on CNBC.

18:58Welcome back to Fast Money. Boeing flying higher today. Analysts at Rothschild and Redburn upgrading the stock to a buy from a neutral, hiking the price target to 275. That's up from 180. The firm citing improving financials, culture, industrial processes and strategy, saying those factors combined with accelerated production should boost the stock. The stock, though, still hasn't quite recovered since a deadly Air India crash earlier this month. It is positive, though, for the month of June. Mike, I'm curious as to what you think. They had some pretty bold predictions in terms of the number of planes it would eventually produce every year.

19:31And it's a matter of if they can get the production actually up to meet that demand? Yeah, I mean, I expect obviously some of the snafus that they were experiencing on the production side and some of those issues related to quality control inspections and the culture essentially in the workplace. I think those things, they've been working hard to get that solved. And I think they are doing that. And I think they will continue to do it. My only challenge here really is that, you know, in the duopoly, if I'm comparing Boeing to, for example, Airbus is just, and that's really what we have. I mean, the tailwind for both of these manufacturers is that there is a duopoly.

20:06There's going to be increased demand for commercial aircraft, both single and dual aisle. And that's obviously going to continue to be a tailwind for both of these. But it's just that Airbus trades at a significant discount. It has a better balance sheet. And it's hard for me to understand why one wouldn't sort of look favorably on that. So I kind to favor Airbus over Boeing at this point. Yeah. The other part of the analyst argument is that they're going to Boeing is going to reduce the debt to the point where in a couple of years, they might be able to actually return capital to shareholders.

20:39Bono, and I don't know if you believe that they do have a lot of debt, as Mike was addressing on their balance sheet. They have a ton of debt. I think, I mean, that's going to be there that they needed to do that to kind of get through the snafus, as he as he mentioned. I do think investor sentiment clearly has shifted. I think we touched the lows around 140, 145, and you've seen a very sharp recovery from them. I think that a lot of the production issues have been resolved. They have a strong backlog. So I understand the bull case. The real issue is, do I really want to chase it at this point?

21:07I think if you've been in and there was a lot of us that said, hey, things are getting so bad or sorry, things have gotten so bad and they've gone from terrible to bad, from bad to not so bad. That was likely the time that you wanted to get in with the stock. I just don't think at At this point, with the market making new highs, I just think there's so many other places where you can be investing that incremental dollar that I don't know if this is the name that you really want to chase. Yeah, this is this is not something I don't like. I own Boeing 20 years ago and then I would sell it and trade it.

21:36But you can't trade these events. And there was no clear evidence that they were at fault in the India crash. That's why the stock rallied back. And where Mike started off, it's a duopoly and it's 40 percent government paid revenue. But to Bono's point, there's plenty of other spots in the market that make money. How do the charts look, Carter? Right. Well, it's always the case. I mean, compared to where it was at 450 10 years ago, here we are at 220. That's a sad story. But the here and now chart, a typical standard one to two year chart, this has all the elements of a bearish to bullish reversal.

22:14And debt, of course, is a thing that can kill you off and choke you. and yet it's what leverage is all about. Think of the huge debt assumed by the cruise ships, and they've been great performers. My hunch is the momentum here is intact, and that Boeing is going higher. All right. There's a lot more fast money to come. Here's what's coming up next.

22:48in full focus as chair Jerome Powell's tenure comes into question. How one former insider thinks the future of the Fed head could shape monetary policy and the outlook for rates. You're watching Fast Money live from the NASDAQ market side in Times Square. We're back right after this.