Momentum Stocks Hit A Wall… And Gilead’s Shot To The Arm 6/20/24

0:02Live from the Nasdaq market site in the heart of New York City's Times Square this is Fast a slide or the start of a summer slump. Plus, Apple's New China Challenge, the iPhone maker on the hunt for an AI partner on the mainland. So who will they team up with and how long will it take for them to catch up to the competition? And later, inside the rebound at Gilead, charting a comeback for REITs and is now the time to send your money on a French holiday. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinemann, Steve Grasso and Guy Adami.

0:44And we start off with the momentum stocks running out of gas in a big way. Shares of red-hot NVIDIA surging nearly 4 % early in the session, setting a new intraday record in furthering its lead over Microsoft and Apple as the biggest company in the world. But then the stock pulled back on the day, closed down 3.5%, shedding nearly$120 billion in market cap. That drop pushed it back to number two on the leaderboard. It wasn't exactly the only recent rallying name to come under pressure today. Oracle opened at a record, then fell over percent, Broadcom touching its all-time high Tuesday. Netflix was at levels not seen since November 2021, both down today to and outside of tech.

1:23Chipotle, take a look at this one, breaking its six-day winning streak, posting its biggest loss since last July. So has the rally hit a wall, or is it just taking a brief breather? I don't know. We called it a pullback in NVIDIA, but some might say this is a reversal. Oh, look at... Oh, you found yourself outside reversal, Guy? Right in my head, didn't you? And Broadcom, it was the same pattern on Tuesday with Broadcom. Heavy, heavy volume, touching a new high. You seem almost giddy. Why am I even here? Because you're in my head. Well, apparently. There's this idiom, I think it's an idiom, right?

1:58These things, mountain out of a molehill. You never want to do that, right? Never. But with that said, you have to be respectful of what's going on. And what you just alluded to, listen, go back to Friday, March 8th. Remember having the conversation on this desk. We said, you just saw a very important engulfing pattern in NVIDIA. You saw it in a number of different stocks. You want to take note of this. And quite frankly, by the middle of April, NVIDIA actually had one of its biggest pullbacks in quite some time. It traded sideways for the week and a half after or so. Then it sort of fell out of bed.

2:25You have a very similar pattern today, as you said. Now, it can be potentially explained away by this options expiration tomorrow. I have no idea. But to discount it entirely, given what we saw a couple months ago, I think is foolish. You got worried. I did get worried. And? Well, a couple things. So they opened up really big Dell, and I had some Dell call spreads going away tomorrow. So I thought, all right, let's just get out of those. That worked out well. But then NVIDIA, it was$140 and change, and then it started trading down to flat and then below flat. And then I'm like, well, that's not good, sort of channeling a little bit of guy there.

3:00And I thought, you know what? This has had a very nice run. I've got to take some off the table. Sold some. Yes, I did. What did you make of it? Well, after a 40 % move in the semis in 40 days, I mean, this is staggering even relative to a group that's had staggering moves. So, you know, this isn't the market hitting a wall. This is absolutely a breath. And so what are the reasons why the market would be suddenly hitting a wall? I'm not sure. And, in fact, I think the macro, whether it has, you know, jobless claims are creeping up. Retail sales was a little weak. We have very sticky inflation, certainly in commodity prices and certainly various inputs.

3:34But you have to go to parabolic charts. And so that alone could be a reason to be concerned, especially given the concentration in only a handful of names and also just how overweight the street is. So those are things to certainly play in. All we do on the show, I think, is talk about how the Dow has underperformed or the industrials have underperformed as an index, the S &P, by 1 ,200 basis points. Equal weighted is barely up on the year given how strong this year has been. We look at small caps and two days ago they were under water for the year. So these are concerning trends. But getting back to strategists that are upgrading the market overall while this is all happening, pointing to the fact that they don't care that all the earnings are coming out of six companies because they're making a call on the market.

4:20And they in aggregate, even though it's, you know, as Karen says, it's not a monolith or it is a monolith. It's not seven stocks. And yet that is what the street is given us so far. So it's fascinating. This comes on a week where really we talked about Citi. We talked about Goldman. We talked about we talked about Evercore. We talked about, you know, you name the strategist and it feels like they're upgrading here. So you think that this is molehill? This is by the way, I have moles and I consider them mountains. You get them on your body or in your backyard? All right. Here we go. Not on my body.

4:52You know, with age comes everything. Maybe this is not as big of a deal. This is an appropriate and really, frankly, a late reaction to what has been euphoric activity. So let's pick up where guys started. So there's$5.1 trillion in options expiration rolling off tomorrow. So that's big. So I do think a lot of this is people just letting their stuff roll off or leveraging or deleveraging. And then if you look at the buyback window closing, buyback window closes. It was peak buyback window all the way up 5.5 billion was the demand every day in the marketplace. That window has closed. So I think we are primed for a sell off or a test.

5:37But I think this is a molehill at this point. So, I mean, this Nvidia move just takes us back to Tuesday. It's not like this was a cataclysmic thing. However, when it's kind of over, you don't really know until after. I do think I fully believe in the underlying story, but the valuation here and the way it's just traded the last few days, I can't sort of get that. That makes me uncomfortable. Could it trade down 20 percent? Absolutely. It absolutely could with the underlying story still being very much intact and nothing really different. So you never know what was the thing that made it sell off.

6:16I don't know if this is it or not. I just had to do some portfolio management. Aren't there plenty of people that can't wait for a 20 % pullback in NVIDIA and are saying, I'm going to buy the next one? I mean, until further notice, this is stuff where we are buying the dips. It was certainly in companies where if you told me without there being any news, and again, there was no news today, that Lilly and NVIDIA pulled back 25%, I wouldn't be surprised if you told me that in both names, You've got as many people that want to buy this as there ever have been that are waiting for a pullback. I would agree with that.

6:50Right. And they still have sorry. They still have 80 percent to 85 percent market share in A.I. And that's for the foreseeable future. No one's knocking them off of that. AMD and Intel have roughly five percent, not a piece, five percent combined. So it doesn't they have a long ramp where they can keep the market share and they can keep earnings growth, both not to parabolic levels, but at least for the next year or year and a half, they still can keep that earnings level. Right. The context of the NVIDIA pullback, the Broadcom pullback, if you want to put that in there, too, is that AMD actually traded higher today.

7:25That's been a loser for the past month and a half or so, since April-ish. Significant. Pull an AMD chart up. When you say loser, it's been a vast underperformer. So, yeah, I understand why you say that doesn't make sense. It actually does make sense if you think about just rotational flows within a sector. You know, maybe people, the rotation out of NVIDIA got themselves into AMD. At a certain place, AMD makes sense. But, you know, Karen made an interesting point, and she's right. We're only getting back to levels we saw theoretically a couple days ago. But you could have said the same thing back on March 8th with that sell-off.

7:57That Friday sell-off probably got us back to the level we saw the prior Wednesday. And it's not necessarily where we're back to. It's the setup and how it got there. And this setup, to me, is the same thing we saw a few months ago. So in terms of the follow-through in declaring this a key outside reversal day, how many days, what do you need to see happen, just more action to the downside, heavy volley? I mean, what are the sort of telltale signs? Good question. I'll be quick. I mean, that March 8th, we never got through that prior high. We traded sideways. We actually traded slightly higher a couple days, but never through that prior Friday's high.

8:31And then we sort of fell out of bed. So that's what if we were to take out whatever high we made today, which was an all time high, then OK, it didn't hold any water. But if we continue to tread water, trade slightly lower. It's safe to think that by early July ish, you could see a similar move. These saw a few months ago. There has been a crowding out of other stocks. And so whether even in the semiconductor space where seemingly everyone has gone higher, the conversation we had yesterday was that AMD, which was flat year to date, is an extraordinary thing, especially given the fact that we know that they have a product line that some point, whether they compete with Blackwell, for example.

9:03I don't know. Piper's got a note out this morning, though, reiterating their overweight, saying their MI350, which comes out next year, will compete with Blackwell. So this is the dynamic. And I nibbled some AMD yesterday, mostly because, in fact, of the rotation dynamic. I think people are looking for not only adjacent AI, but I think they're looking for second place. And as Steve said, I mean, and I don't know if I'm putting Intel in third, even though I have a position in Intel as well. I think owning semiconductors, which are now 12 and three quarters percent of the S &P, largest they've ever been, second largest waiting, I think you kind of have to be there.

9:36All right. Well, new data shows retail investors have been putting money to work in the market, but it's not being spread across all sectors equally. CNBC's Kate Rooney's got all the details. Kate. Yeah. Hey there, Mel. So individual traders have actually been under participating in this market lately. There's been this lull going on activities. Activity, rather, for this group is at the lowest level since before the pandemic. That's according to data from Vanda Research. But they are concentrating in just a few areas. You've got the Mag7, NVIDIA, of course, as you guys were talking about. And then these turbocharged NVIDIA plays leverage semiconductor ETFs.

10:08For mega caps, Vanda shows roughly a 29 % jump in purchases of the Mag7 as a percent of total trading. This is a crowded position. Bank of America's recent global fund manager survey shows long Mag7 is the most crowded trade on record. Retail traders are also over-indexed to NVIDIA. It is the most widely held name by individuals topping Apple and Tesla. And then some are looking to amplify that NVIDIA upside with levered ETFs. The NVDL ETF, it's a two-times NVIDIA leverage fund. It's up 500 % or so this year. Then we've got the SOXL, offers three-times leverage of the chip sector. This leverage, of course, also is going to amplify things on the downside.

10:46The narrow strategy has actually been working. The retail crowd has been outperforming the S &P so far this year. There's a lot of risk, of course, in being so heavily indexed to big tech and this AI narrative and story. All of this interest is also resulting in growing short interest and could add to some of the volatility around these names. Mel. All right. Kate, thanks. Kate Rooney. Meantime, what can go wrong? Exactly what I was going to say. What can go wrong with a four times levered SOX? Nothing. It's fine. Nothing. Nothing. All right. Investopedia's new survey showing growing market optimism.

11:17Caleb Silver is the Investopedia Editor-in-Chief, friend of the show, of course. Caleb, great to see you. Good to be back. So Kate has data showing that retail investors aren't in it, but your readers have been. Yeah, they want to be in it in some of the huge journey because they don't want to stop believing here. They're as optimistic as they've been in 12 months, either cautiously optimistic or very optimistic, about two-thirds of them, and they are putting money to work. Funny, they weren't doing it in April and May. If you saw retail flows, they were really, really light, really low activity.

11:47But they started getting more involved, more interested as we hit these record highs. And then they had the Nvidia story. So they're kind of not all in, but pretty close to all in two thirds. Very aggressive right now. It's interesting, Caleb. So we always have the conversation. Is the stock market, the economy? And OK, but what you just described, if you think about the optimism in terms of your readers and the people that respond, the flip side of that coin is the approval rating for the administration is at historic lows. So clearly there's something wrong there. I mean, what is your sense?

12:15Why the optimism in the stock market and the pessimism in terms of the economy? Well, it's been a great time to be a shareholder. I mean, please. We have record highs after record highs. We have companies buying back their shares. We have new dividends, companies increasing their dividends. Are you not entertained? This is as good as it gets. If you're a shareholder, that said, not everybody is or not everybody has that concentration. When You look at the 401k balances, they really go to the top 1%. So the economy, stock market, not the same. But we do know the presidential election is their number one concern.

12:43It's been that way for a while, and we saw that heat up even more this round. What's interesting, though, is that even though they're optimistic about the markets and they're feeling good, putting money to work, et cetera, they think that a change in administration would actually be better for the markets even. I mean, I don't know what better will be, but better. Yeah, we asked them, OK, so if it's your number one concern, Do you think either of these candidates are going to deliver better returns statistically, historically? Actually, they don't. But in this case, our reader said President Trump, about 37 percent, said that he would deliver better returns compared to like 23 percent for buying.

13:17Not a huge split, but a split by and large. And these are, again, investors that have pretty large portfolios. They've been in it for a while. They may sniff the fact that maybe lower tax rates could come if President Trump gets elected. So there's a lot of things that they're boiling into that equation, I think. But the fact that they've actually made that decision, even on a very small scale, is interesting. Caleb, the retail investor usually gets a bad name because they're always late. They always have this perception of being late on both the entry and the exit. Did the pandemic change any of that?

13:47Did they have more of a sense of the pulse of the market now? Have you sensed a difference from where the retail investor is sort of respected now? Absolutely. And I think a lot of that has to do with time, right? Our bear markets are shorter. Our bull markets are pretty aggressive. They've seen the stock market fall during the pandemic and then climb right back when the Fed floored interest rates. A lot of these people went through that in 2008, 2009. They're used to that sort of lack of moral hazard being there. So they want to stay invested. And they've been rewarded for doing it. They worry about concentration.

14:20They worry about inflation. They worry about all these things. The walls of worry are very high. But if you just kept worrying and didn't invest, you've missed one of the greatest bull markets in generation. So I don't think they want to miss out. And they've seen this before a few times. So even if they're a little bit trepid and a little bit worried about things that could happen, they don't want to be not invested. Caleb, by the way, Caleb and I were talking music in the green room. For sure. And I noticed in the first sentence or two of him speaking tonight, he referenced don't stop believing.

14:46Yeah, because we were talking about Journey. Talking about Journey. I know Guy's a big fan. That's the table of rock. I want to say something. So it might be one of the worst five songs ever written in the history of mankind. No, I'm just saying, please don't at me. I'm just being true. You can put that on the list of songs that I get mad at. I started this. I'm going to end this. Caleb, what about that$6 trillion in money market punch? What about fixed income? What about higher bank yields? What about some sense that actually bond market's starting to give up the ghost and that actually either we should be pushing out duration and actually locking some of this in?

15:16Or is that money coming into the stock market? Yeah, when we asked Melissa's favorite question, what would you do with that extra$10 ,000? Well, CDs are now fourth on the list. Individual stocks, ETFs, index funds, and then CDs. Six months ago, it was CDs. A year ago, it was CDs, even as the market was rallying and coming out of those depths from that bear market. So there's still some people in there, and I think it's an age thing. They want to lock in 6%. 6 % is really nice. We asked them, though, if you have money market funds or accounts, are you thinking about moving some of that money into stocks?

15:43Still around 30 % say, yeah, we're actually considering doing that, those that have them. So they do want to put money to work, some of them, but I think a lot of people are also comfortable having that cash and having that return right now. Got it. And they want to put it in the riskiest. So when you read risky for this group, is that NVIDIA or is that someplace else? Well, we ask them, you know, what areas of the stock market do you think are in bubbles right now? And AI stocks and tech stocks they think are in bubbles. So I would consider that a little bit risky. When you look at valuations, you can't ignore the fact that they're pretty high.

16:14It's a little bit risky. These are not necessarily GameStop buyers and AMC buyers. These buy these investors buy big stocks. They've held on to them to a long for a long time. NVIDIA, Apple, Microsoft. We asked them the stocks you would buy and hold for the next decade. NVIDIA, Apple, Microsoft. Caleb, always great to see you. Thank you. Caleb Silver of Investopedia. So I guess we have to ask the question, does this get you a little bit worried? We've seen, as you mentioned, alluded to earlier, strategists. They're falling all over themselves to raise their price targets for the S &P 500 for this year.

16:45And then now we are getting data that the retail investor is getting really excited at this point in time. Three names. And Caleb does amazing work. But those three names that he mentioned that we talk about every night are now 21.4 percent of the S &P 500, which historically is through the roof. And I think the last time we saw anything close was the early 80s when we had three names. I think it was GE, AT &T and maybe IBM was about 14 and a half. So I believe that they are. But the concentration is clearly there. So is that concerning? Yeah. But it's it's been there. It's been that way for a long time and it hasn't concerned anybody.

17:18You know, you could have this window of an opportunity to have a little bit of a squishy market, a little bit weak on to the downside. But the first 15 days of July are the best two week period going back to 1928. So there's a seasonal bullish call within the markets. 1928. 1928. Remember that year? I was early in my fifth grade. He retired his first time back in 1928. That's very strong. And we talked about this earlier. The Nasdaq, the last time the Nasdaq was down in July was 2007. Wow. All right. Coming up, run over done. How restrictions out of China could put a wrench in Apple's AI plans.

17:55Could it mean that the stock's recent rally is in jeopardy? That's next. Plus, overseas resilience. We're looking to Europe as French and German markets rebound. How to trade those international stocks ahead. Don't go anywhere. More Fast Money in two. This is Fast Money with Melissa Lee right here on CNBC.

18:23Welcome back to Fast Money. We've got a news alert on Boeing and Spirit Air Systems. Phil O 'Bose got the details. Phil. Hey, Melissa. So Reuters is out with an article saying that Spirit and Boeing are nearing a deal that would essentially bring Spirit back into the fold with Boeing. The article citing sources says that there has been good progress made between Spirit and Airbus because about 20 percent of Spirit's business is for Airbus, where they would be able to complete some type of a deal where Airbus would take those assets, mainly production that is over in Europe. and that would allow a deal between Spirit and Boeing to go forward.

19:02Now, they're not putting a timeline in terms of when we see a deal take place, but I know from talking with sources, and they basically allude to in this article, it's likely going to happen sometime in the next several weeks for a number of reasons. One, we're coming up on mid-year earnings for Airbus, where they would like to have a deal wrapped up before then. There's pressure on Boeing to as quickly as possible get things wrapped up with Spirit. And both Spirit and Airbus, or both Spirit and Boeing have said they're making progress in terms of their separate talks between them, aside from the talks between Spirit and Airbus.

19:37So again, as you take a look at shares of Boeing, remember this, Melissa, there are four things that are really viewed as catalysts for the shares of Boeing. Getting a Spirit deal done, seeing improvement in production of 737 MAX, which we're starting to see some indications it's improving. And also, you get a new CEO for Boeing. Who knows when that's going to happen? And then finally, what the DOJ decides to do in terms of further criminal charges, an extension of the deferred prosecution agreement, et cetera. So those are the four stumbling blocks that are out there for shares of Boeing. This may be the beginning of seeing one of those resolved.

20:10Phil, can you remind us of what the dynamics are for this deal in terms of does Spirit need to do this deal in order to stay afloat? Does Boeing need the deal even more for efficiencies? Why would the regulators allow it to happen? Well, look, spirit spirit's not going out of business. But Boeing wants to bring spirit back into the fold. It wants to go back to vertical integration, that the problems, a lot of the problems stem from the fact that coming out of covid, that the production line in Wichita was causing a number of the issues that were manifesting themselves at the rent and plant for Boeing.

20:46And Boeing believes bringing spirits into the fold again is the smartest way and the quickest way for them to drive greater efficiency and also to improve quality control. So that's at the heart of this deal. And again, part of this is it'd be simple if all of spirits business was with Boeing, but it's not. About 20 percent is with Airbus. And obviously, Boeing's not going to buy a company and then sell 20 percent of the business or work 20 percent of the time with its chief competitor, Airbus. So you need to have the part between Spirit and Airbus that has to go forward in a separate deal or at the same time as a deal with Boeing takes place.

21:24Phil, it's Karen. Let me ask you something. There's obviously a lot going on at Boeing. It would seem like now is a difficult time to do an integration that was probably very complex and undoing what was a monumental shift in their business. Yes. You're right about that. Having said that, they made this decision shortly after the Alaska Airlines incident when they started looking at all of the issues. And you can trace a lot of them back to what was happening with production at Spirit in Wichita. Not all of them, but a number of them. You take that along with the fact that Boeing was continually putting money into spirit in terms of making sure that they could their chief supplier was able to continue to function as production levels were changing.

22:13And that's when Boeing's management made the decision. You know what? We're better served bringing these guys back in house. So you're correct. Incredibly difficult time to do a complex transaction like this. But that train started several months ago, and now that it has, they seem like they're close to getting it finalized. Phil, thank you. Phil LeBeau. You bet. Tim, as a shareholder, do you want the steel to proceed? Well, this isn't about efficiency because becoming more vertically integrated isn't efficient, but it's about the perception of quality control. Whether it leads to quality control, I don't know, but there's fingers pointing all over the place that nothing is done at Boeing anymore.