Markets Sink as Yields Spike, and OpenAI Scores a Big Win Against Apple 05/21/25

0:02Live from the Nasdaq market, this is Fast Money. Here's what's on tap tonight.

0:29Rate And later, Uber stalls the day after Elon Musk says he doesn't need them to build his robo-taxi empire. Target tumbles after slashing guidance. The retail ripple effect and go New York, go. We'll go inside the next valuation surge as the team makes the deepest playoff run in 25 years. That's right. Go next. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Steve Grasso, and former TD Ameritrade chairman Joe Moglia. Joe, welcome to the show. Thank you, Karen. Thank you, Melissa. We start off at C of red on Wall Street. Stocks taking a sharp turn lower midday with the S &P tumbling over a percent and a half.

1:08And the Dow losing 816 points. A small cap Russell 2000 leading the losses down almost 3 percent. The catalyst, a spike in bond yields triggered by a disappointing 20-year Treasury auction this afternoon. Weak demand sending rates in the benchmark tenure briefly above 4.6 percent during the session. Their highest level since February. 30 are hitting its highest since late 2023. Meanwhile, Bitcoin, that hit fresh record highs for the first time since December, getting within a stone's throw of 110 before pulling back from those levels. And gold also higher up now for a fourth straight day. So what was this all about, Tim?

1:45This was one of those days that felt really important. And the price action, yeah, it was the most volatile day we've had in a month for an equity market that's been on a tear. And there's some questions about maybe Apple. And so there's some there's kind of existential stuff out there when it comes to global bond yields, a 20 year auction that like a lot of people probably didn't know we had a 20 year bond. In fact, this was an auction that was only brought back to life about five years ago. It was a 16 billion dollar auction. But more importantly, it was the lack of demand. It was the fact that a coupon settled in over, you know, started out at five percent.

2:17And yet dealers took almost 17 percent of this issue, which is which is a lot. It comes after we've had significant backup in yields in Japan. It comes on the eve of a tax budget, a budget being pushed through that has a big tax cut in it. Whether we already had that tax cut or whether it's a new tax cut, it doesn't matter on the politics. The credit folks are telling you one thing. And in fact, I think even Moody said that, whether people want to listen or not. So it's been a very interesting few days. We all debate all the time. What's that breaking point for equities in terms of bond yields?

2:50We closed at that intraday high of where we were on the day. It seemed like the Trump administration blinked on the bond market, not the stock market. So what do you have in S &P that fell 80, almost 80 handles immediately after that auction? Interesting day. Yeah. Strategist after strategist, four and a half percent. That's a cap for equities in terms of how high we can go. Here we are, 4.6 percent firmly, Joe. And that has proven to be an issue. I think one of the one of the things that creates a lot of agita in the marketplaces, We seem to settle down a little while ago when Trump made it clear that he's willing to negotiate as far as tariffs go.

3:25But we still have an issue with regard to taxes, what's going to happen there. We still have an issue with regard to the budget. We still have an issue with regard to deficit. So if you have a failed auction, all that means is that ultimately we're going to have higher expenses for our debt. That is already close to a trillion dollars. If you look at increased expenses for your debt, you don't have a whole lot of room left over for discretionary spending to cut that. So that raises, I think, major issues in the mind of the marketplace. Right. Yeah, I think we all saw that sell-off, dramatic sell-off, dramatic rally back.

3:59This is just a breather zone. If we stay stabilized above 5 ,500, that's a win. Haven't you been the one who said Treasury is over 4.5 %? You have been among that chorus of people saying 4.5 % is an issue. We're 4.6 % right now. Yeah, that's why I said 5 ,500 in the S &P if we stay above that. So I think we're going to draw down a little bit based on that. I also feel like we could run to that 6 ,000 level again. I had put that a couple of weeks ago on the desk. I said four to six months. We did it basically in a month to get back to that level. Too fast on the way down, too fast on the way up.

4:35If we could stay middle 5 ,000s, I think that's a win for the overall market. I mean, the market seems to be operating in extremes at this point over the past month or so. And it's just startling that a 20-year Treasury auction, an auction we barely ever mention even on the air. I mean, Peter Bookvar wrote in a note today, this is something that I don't write about usually because it's a low-liquidity, sort of like, you know, off-forgotten Treasury bond, the 20-year-old. Right. So why popular bond? No, not at all. It became sort of a bellwether now, or a proxy anyway, for— Well, for longer, long-term debt, right?

5:12Long-term debt, yeah, yeah. Right. So, I mean, the market's selling off. It's just math. If rates are higher, right, discounting cash flow of earnings forward, then you get lower values. But I also think we have such an enormous run. The volatility index was down below 18 today. It closed, I think, near 21. Below 18, that probably shouldn't have been there today. But, you know, we've all been worried about this deficit situation and the math of it just getting worse and worse. And it's sort of, you know, gradually at first, then all of a sudden. Are we in all of a sudden? I don't know. But that is the thing that I find most scary.

5:51Yeah, you mentioned volatility going to the extreme lower. Carter Braxton Worth actually put out a note pretty much in the middle of the sell-off this afternoon, pointing out the gaps above us here. And the gaps will be filled, meaning volatility will go higher and the markets will continue to be challenged as we fill those gaps. Yeah, I think I think we often say I hear Steve using that term a lot, especially down moves. So I think it's I think it's extraordinary. I think it's extraordinary when you think about that. If you want to take it to the extreme and people are now bringing up the term bond vigilantes.

6:26And what does that really mean? Well, it's not like one big hedge fund. It's just a lot. It's basically the bond market saying at some point enough's enough and we will vote with our feet. And the extreme example of that is Liz Truss in the U.K. budget, when, again, they tried to jam through a budget that was deficit terrible for an economy that was slowing down. So you get a confluence of events that right now are a big challenge. And I do think that this is another one of those challenges. And I think there's a lot of pressure from the White House on the legislators to push through this bill.

6:52In fact, this is really being seen as a loyalty test and being, you know, being phrased that way. And therefore, the market is saying something very different. The market is saying be loyal to the bond market, which is being loyal to essentially funding America at a time when there's a lot of issues here. So it's a fascinating day for equities because equities, we all know, are always second fiddle to what the bond market has to do. And I think this is not the kind of thing you could pressure the Fed, right? This is beyond this. This is not a Fed thing to move, right? It is the markets to move.

7:25Right. I mean, bonds. We're talking in the car ride. We talk on the car ride home about things we talk about on the show. Very exciting stuff. Extremely exciting car ride home. But you're mentioning bond yields. They're not political. They're not biased. They will go where they go. Exactly. But to that point, whenever we start to get to these bond yields above 4.5%, there's always a sneaky headline with the government. It's something that they can't control. So the Trump put will come in, so to speak. Something happens where all of a sudden we're back at 4.3 in the 10-year. Maybe we get some CPI data that's good.

7:59I mean, it's that it's that quick. And when I first started my career in the early 90s, the markets used to take weeks, months, years to play out a scenario. They do it now in days, in hours and days and weeks. So we could be looking at a 10 year that's four and a quarter tomorrow. This is how quick it happens. And then the whole narrative changes. I think the other side to this, though, is we can't we can't forget the president that we have who happens to be a narcissist. So he wants to look good no matter what the situation is. So he wants to make sure that if the stock market is doing well, he wants to be the person responsible for that.

8:38If he always considers himself a great deal guy. So you've got deals going on with regards to the Congress, with regard to taxes, with regard to deficit, with regard to every other country in the world. And he's not going to allow himself to look bad. And if things go too far in a negative direction, he's going to step up. He's going to come up with a tweet. He's going to do something that will help put a halt on the market's down move and help turn it around a little bit. So you also believe that Trump somehow will step in to save them. The markets can't go too far. I 100 percent believe that, Melissa.

9:12I really do believe it. He's not going to let it happen. But the thing that has to give and it's it's so it's so painful for us to get into the political realm on this show because let Washington do what they do. But if you think, you know, what I'm reading from Wall Street economists is that if this tax bill goes through, this big, beautiful bill goes through, it has the implications of about, you know, a$3 trillion impact over the next decade in terms of the deficit. So you get back to what the market is somewhere and the bond vigilantes who are not a particular person, but it's a force that's saying enough is enough.

9:46And it's one thing to have the rating agency that no one really listened to come in either very late or not. But at some point, you can make an argument that, as Steve says, this is happening quickly. Or I can make an argument that since July of 2000, after we digested the worst of COVID, that rates have been going higher. And Carter comes on here, and he's right to point out that we've drifted in a range for two years on the tenure. But I can look at that chart, and I can tell you we're going slightly higher. How about if the reality is, though, things really get bad? Can't we count on the Fed to actually come in then?

10:16Isn't that when they're going to tend to be more accommodative? What's really bad, though? I mean, if it's a labor market that gets really bad, the market's in a bit of a freefall. Rates really, really much higher. I mean, I think at the end of the day, at some point in time, I think the Fed does act. I don't see that happening tomorrow, but I think if we look like we're going into a recession and we're going to have some serious issues, I think the Fed potentially does wind up doing something. It feels like the Fed's going to want to see an uptick in unemployment. Like, we are going to be either in it firmly.

10:46They're going to go with whatever the first thing that shows on their mandate. So if it's inflation that spikes, they're going to treat inflation. If it's if it's unemployment that spikes, they're going to treat that. That's going to have to do the dual mandate. But if we think back to Tim's point, the Biden, the first Trump administration wrote seven point six trillion dollars extra in deficit spending. Biden wrote eight point four trillion. The markets were still terrible on a fiscal level, but better than the entire globe on a fiscal level. So something to keep in perspective. All right, let's get on to Washington here.

11:20All these moves come as lawmakers scramble to finalize a budget bill before Memorial Day weekend. Emily Wilkins is in Washington with the very latest on this. Emily. Hey, Melissa. Well, yes, President Trump just met with the deficit hawks today at the White House, trying to get them, yes, on his mega bill. That includes number of legislative priorities. most importantly, perhaps, his tax proposal. And we understand that meeting just met. We're still waiting for a bit of a readout here. But the two groups traded barbs earlier in the day as Trump has been pushing for a vote this evening or as soon as possible.

11:52And these holdout lawmakers are pushing for deeper cuts. They want more spending cuts, including phasing out certain green energy tax credits completely within the next few years and implementing work requirements earlier for Medicaid. aid. Chip Roy criticized the current proposed cuts in the bill as not going far enough today. He tweeted that writing a deficit-backed blank check, and he's referring to the state and local deductions there, is easier than cutting spending. And he lists a couple things like Doge, those green energy tax credits, and post-COVID spending. The congressman said that Congress in the swamp will always choose the easy route, but we can't afford it.

12:33The White House responded soon after that in a statement touting the bill's positive impact, but it ended with a warning saying that President Trump is committed to keeping his promises and failure to pass this bill would be the ultimate betrayal. Speaker Mike Johnson, who was also at the White House, he had hoped to have a potential vote on the bill today. He was thinking maybe today or tomorrow, but lawmakers have been waiting since 1 a.m. for a final agreement to come about from leadership and these fiscal hawks. They could not be they could be having an agreement around the corner or they could be waiting for much longer.

13:09We're all waiting to see exactly what the outcome of this meeting is. Melissa. Emily, thank you. Emily Wilkins. I wonder if any of these guys are going to point to the bond market and what they did, what the bond market did today as a sign that maybe it's not going far enough in terms of all these cuts. Who's going to explain the bond market to them? All right. Let's say that for another show. Well, I do think that there is pressure here. And I do think that there's pressure at least again. It's it's so interesting that folks that claim that they are conservative Republicans are really stepping into what at least has been a traditional role.

13:44I mean, they are fiscal hawks. They are dyed in the wool. They are doing what they should be doing. And it gets back to what markets are willing to tolerate. Today was a day that felt a lot like a month ago, not just because the S &P was down, but again, it was one of those days where the dollar was weaker. Equities were weaker. Bonds were weaker. We had the emerging markets feel to us in this country. This is all also happening on a week when the G7 gets together. And there's a lot of politics around the dollar. And there's a lot of sense from a lot of our foreign trading partners that this administration would like this dollar significantly weaker.

14:16That's playing into some of this, too, all the time when, again, I know, folks, you're not looking at Japan's bond market. But what's happened in Japan over the last 10 days is a lot more significant in terms of the impact, at least the relative move there, than what went on here today. It's a big deal, and it will put upward pressure on U.S. rates. All right. Meantime, more signs of cost pressures in the retail sector today. We had a number of earnings reports. We also have The Wall Street Journal just reporting that Walmart plans to cut 1 ,500 jobs to help manage expenses and speed up decision making.

14:47This after all these retailers this morning raising concerns over the impact of tariffs. Target cutting its full year sales outlook. TJX warning it could miss Q2 earnings estimates and Lowe's saying it is seeing a drop in demand for do-it-yourself projects. For more on all this, let's bring in Brian Gildenberg, Managing Director at Retail Cities North America. Brian, great to see you. Great to see you too. So when are we going to start actually seeing a consumer in distress? Because so far we haven't really seen it, but we've gotten signs and clues. Well, I think you've got a couple of things that are going on right now.

15:20And the easiest way to think about this is the two-prong issue. You've got, one, you've got the math problem, which is what will happen to products that are tariffed and how retailers are going to treat the prices of those products. And you heard a bunch of the retailers talking about their varying approaches to that today. I think the second problem, which is harder to forecast, obviously, but more pronounced right now, is the impact that the inflationary narrative is having on consumer confidence. Consumers right now are expecting a 7.3 % inflation rate for the next 12 months, which is the highest number since 1981.

15:51Is that right? Probably not. But whether it's right or not matters less than whether the consumers believe it or not. So I think right now what needs to happen is the actual math on tariffs will be one thing, but I do think that the narrative settling down around what a known amount of inflation and a known trading and a known balance of what's going on from a trade terms point of view would be extremely helpful to helping both the consumer and then the retailers forecast results. Brian, it's Karen. Thanks so much for being on. So we're heading into summer. We got back to school season coming up.

16:25How often does consumer sentiment not align with what the consumer actually spends? I think we always try to look at consumer sentiment in terms of its directions, probably more important than the absolute number. And that consumers, it's kind You would assume the consumer sentiment would drive purchase behavior, but what we often found was exactly the opposite, which is that what you were able to buy changed your sentiment. So I think there's going to be an interesting impact to that as prices go up, if prices go up, and as they do, shoppers are going to feel worse about their situation in the short term and in the medium term.

17:06And that'll probably put a bit of a crimp on expenditure. I think the other thing right now is that it's important to remember that the American shopper is extraordinarily gun shy about inflation, having just gone through two or three years of relatively extreme inflation for us. And as a result, I think any narrative or any evidence that they can find will be sort of confirmation bias for the shopper. So I don't know how helpful it is to look at the past sometimes of this. It's really important to understand how consumers feel about inflation now and what they're going to see and hear now that's going to change or influence that behavior.

17:40Walmart really got a drubbing, Brian, from President Trump when it said that it was going to might have to start raising prices on tariff goods soon. And it seemed like the other retailers learned their lesson in terms of how they approach price increases on their conference calls. Do you believe that? Is there a way for them to continue to keep prices low by haggling with vendors, et cetera? How much leeway do they actually have? Or did they just learn their lesson and, you know, they said, we're not going to talk about explicitly on the conference call, but, you know, off the call, they're like, yeah, that's probably going to happen because it has to happen.

18:15You mentioned it's a math problem. It is a math problem in terms of margins. I thought Target had the senest approach I've heard today to this, which is to say, look, prices move a lot and we're going to, tariffs will be one of many inputs into how we need to think about that problem. And I think Target was right, because even just a stupid headline, but the DailyMail.uk had a headline from a Target employee who posted on Reddit that the price of some charger went up, and that became news. So, I think Target and a number of retailers realized that if they say they're not going to raise prices, that they're highly subject to somebody pointing out that they have.

18:56And I think Target's particularly gun-shy about negative narrative at the moment, so that makes sense too. But yeah, I think there are certain retailers that are certainly less China-dependent than Walmart and are in a more comfortable position with that. Walmart does derive a lot of its import volume from China, and as a result, I do think has to be more cautious about that. I think other retailers like Target, whose supply chain is more apparel-centric, have been diversifying away from China as a sourcing place for years, partially because that's kind of where the whole apparel industry has moved.

19:29And that's a very big part of Target's business vis-a-vis Walmart. I think every retailer is in a slightly different position with this. And to some degree, I think retailers are going to have to, they are going to have to figure out within the context of the politics what the narrative needs to be. Yeah. Brian, great to have you. Thank you. Brian Gildenberg. Thank you. Bye. What are you seeing on retailers? So when you look at Target, Target's on a one-year performance is down 40%. We're all saying the same stuff. They've had their issues on a multitude of different problems, and it's an ongoing basis.

20:02Walmart has the ability to haggle with any one of its suppliers more than any other retailer across the board. They're a behemoth. When I look at the stock I want to invest in, I look at TJ Maxx. What's their bread and butter? They're figuring out how to have the right inventory, figuring out how to take someone else's surplus and sell it for a cheaper amount of money. And people go to them. They flock to them. This probably plays right into a TJ Maxx or a Ross Stores where they're taking someone else's era in inventories and making it their tailwind. Yeah. When I think about where I'd like to put my own money, I think the last place I want to put it is consumer discretionary.

20:48They've been in a bind. They are in a bind. They're going to continue to be in a bind. So we're the CEO of one of these companies. You always have to care about market share. You have the threat. You have tariffs that are very, very real reality. Market share. You can enhance your market share or maintain it by lowering your prices or not allowing them to go up. Or you have a better product and service. So if you if you choose to absorb, if you choose to eat the tariff, then that may help you near term as far as your market share goes. But eventually that's going to shrink your market. Your margins are going to have a negative impact on your stock price.

21:20And how long can you continue to do that? So I don't I don't see I don't see anything that's really going to help the consumer discretionary sector with the stress that they're under and the pressure politically, frankly, from the present. Coming up, shares of Medicare Advantage providers sinking after hours on news of more aggressive auditing efforts from regulators. The details moving the socks next. And Uber slams the brakes how Elon Musk's comments yesterday put shares in reverse and what the future of the ride-hailing space could look like.

21:52This is Fast Money with Melissa Lee right here on CNBC.

22:04Welcome back to Fast Money. We've got a news alert on Nike sending shares higher after hours. Or Kate Rooney's got the latest. Kate. Hey, Melissa. Well, it looks like Nike and Amazon are getting back together. This is according to the information reporting that Nike is coming back to Amazon. This is six years after the retailer stopped selling through Amazon in favor of going direct and selling through its own stores and websites. Nike shares, as you mentioned, higher on this news. An Amazon spokesperson confirming this to the information. We are reaching out to both companies. It's a win for Amazon after losing that major brand.