Oil Prices, Geopolitics & The Fed 8/22/24

0:02And live 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. On the clock, Fed Chair Powell just hours away from his must-see speech in Jackson Hole, Wyoming. Will he tip his hand on rate cuts in September? Will he spell out how many cuts we'll see by the end of the year? And how will the markets react? We are live in Wyoming straight ahead. Plus, bottom of the barrel, crude now hovering near its lows of the year as fears about global growth take hold. Should investors bet on prices falling more from here? We're going to debate it.

0:34And later, a throwback Thursday for a couple of COVID darlings, Peloton and Zoom on the climb again. But can this duo ever recapture the magic they had during the pandemic? I'm Sarah Eisen in tonight for Melissa Lee coming to you live from the Studio B at the Nasdaq on the desk tonight. We've got Courtney Garcia, Karen Finerman, Guy Adami and Tim Seymour. But we start with a tough day for stocks. The major averages closing around session lows. Second negative session in three. The Nasdaq tumbling almost 30 points. Worst day since August 5th when we had that big sell-off. The S &P and the Dow also falling.

1:09Today's weakness coming ahead of Fed Chief Jerome Powell's key policy speech tomorrow at Jackson Hole. CNBC senior economics reporter Steve Leisman is in Wyoming pre-gaming. Steve, so what can we expect from tomorrow? Sarah, hey, yeah, Fed Chair Jay Powell's speech tomorrow. here in Jackson Hole, likely to affirm, I think, the market's expectations for coming rates, rate cuts based on greater confidence in inflation heading back to target, and some growing concern about the employment side of the Fed's dual mandate. Krishna Guha from Evercore ISI writing, We expect Fed Chair Powell will use his Jackson Hole speech to explain why the Fed is now sufficiently confident inflation is heading back durably to 2 % to begin dialing back rates soon, September, he says, and provide a basic framework for the cutting cycle ahead.

1:55That's important. Philadelphia Fed President Patrick Harker affirming that sentiment this morning right here on CNBC from Jackson Hole. It was all inflation, inflation, inflation for a while. Right. Now we're starting to see things, the balance of risk getting more equalized. So we do need to take more into account when it comes to the labor market, for sure. What does that mean, taking more into account? Well, I think it means this September we need to start a process of moving rates down. Now, I expect Powell to leave markets guessing about a 25 or 50 in September. He's going to be held back by the idea that there's another inflation and employment report between now and the next meeting.

2:33And some disagreements on the committee about how fast the Fed ought to move and how restrictive it is. But markets will likely walk away clear that the Fed is entering a new regime with lingering uncertainty, Sarah, about how quickly and how aggressively it adopts those new changes. I mean, there are high hopes that he will signal that the cut is coming. I wonder, though, if there's scope for disappointment, Steve, because he can't really pre-commit, say, to 50 basis points or even 25 basis points. There's just no payoff for him in doing that before a big jobs report. No, he can't pre-commit to that, as you said, with the with the two reports coming.

3:12But I think the Fed has sort of committed to the idea of this new regime. I think they did that in July. They affirmed that in their minutes. We've heard that from other Fed officials that we've moved away from the idea that it's just all about inflation. It's now about both sides of the mandate. And to be balanced, Sarah, about both sides of the mandate, you've got to come back some measure from the Fed's restrictive policy. With a question of how far do you come back to the point where you're ready if the power likes to use its phrase, the Fed is well positioned. Is the Fed right now well positioned to address the employment side of the mandate if it does indeed weaken?

3:51I think it has some work to do to get there. And that's why the market, by the way, I think is very aggressive in what it expects the Fed to do. Steve, it's Karen. Thanks for being on. The news that we had yesterday about the adjustment to the employment numbers. So how do we think about that? I mean, should we have thought, oh, all along things are worse than we thought, and yet the economy still did well anyway? How do we think about that? And does that really just open the door for the Fed wide open, even if some of the inflation data or the jobs data updated, I guess, is better? Well, I've asked a bunch of Fed officials about that here, and nobody's telling me it's a big factor in their thinking.

4:30First of all, it's old data. It ended in March of 2024. I went back and did a piece you can read on CNBC.com that looked at how this time compares to the last time they had a big adjustment like this, 2009. And in 2009, Karen, a lot of other stuff was tanking. Jobless claims were through the roof. The economy was in the tank. It was already contracting. So this time is nothing like that time. There's some interesting questions about whether or not immigration played a factor in making this number larger than it was. I don't see anything else in the data that makes me think there is a major problem or weakness right now in the jobs market.

5:09On balance, it makes people think things are a little bit softer than they were. But what are we talking about here? The fact that we did$242 ,000 is what we thought we did. And now we did$174 ,000 average per month in the 12 months ending of March 2024. I don't think that's a reason for a wholesale reassessment of the past or the present. Okay, Steve, thank you. We'll look for you right and early tomorrow morning from Jackson Hole, our Steve Leesman. So, Guy, how are you feeling about tomorrow? Well, I'm feeling great that you're here. Sarah, welcome, number one. Let's get that out of the way.

5:39I always love joining you guys. I think, listen, this is important, but the fact that you're here is fascinating because there's also a Bank of Japan governor that's testifying in front of Parliament about their rate hikes and what it did to the market. That's something the market should absolutely be watching. I think he's going to face a little heat. More than a little heat. I mean, if you think about what's happened with their currency, with their bond market, with their economy, a lot of heat. With that said, do they stay the course? Are they going to continue to raise rates or do they succumb to the pressure?

6:04So that, to me, might be the main event. The Fed obviously is a main event as well. I don't know if it's as important. I'll say this, though. The fact that Warren Buffett now owns almost$300 billion of T-bills suggests that he's betting that rates are going to go lower. But I think he thinks rates are going lower because things are slowing down, as seen through his selling of Bank of America and some of others' holdings as well. And the economy. Yes. But that's not factored in. Tim, the dollar strengthened today. Treasury yields came up a little bit today and stocks sold off. I wonder how you think that that means markets are positioning ahead of Powell.

6:38Well, they had to. And that, as you know, that move in the currency, the dollar index was is down almost four and a half percent from those highs July 1. That that yen has been quietly strengthening. And I would make an argument. It's been relatively positive that the yen has been appreciating as it as it needs to. But I think today was kind of the revenge of the dollar rates, oil, you know, a handful of other things on a chance to evaluate that, you know, S &P has had a 10 and a half percent move, I think, from the intraday lows on August 5th to where we were on an intraday high. Semiconductors did 26, 27 percent from that, you know, that intraday low.

7:15So the markets had, again, another one of these. This is a historic run in the middle of what's been a longer historic run. And what was interesting about today's action is you saw equal weighted be effectively flat. You look at S &P value or the SPYV, that was actually absolutely flat on the day. So some of this rotation exists, I think, as we've all framed, both with Steve's conversation and how we're looking at the markets. September 6th is the day. I don't really care so much about tomorrow. I know the Fed is always going to be critical. That's the jobs number. That's the jobs number before the Fed meeting.

7:49I do wonder if there's some scope for disappointment, Karen, because now the market's gotten into this place where it's priced 100 basis points of cuts. Right. We're going to sell the news. Yeah, until the end of the year. I don't think we're going to get any comfort at all on 100, right? Not that you're expecting that. But, I mean, why should he move quickly? I think that also these 25 basis points, I don't know how much that really makes a difference. So why back himself in a quarter? But I think 50 would be more of a message than he wants to send right now. But I actually think before that, I think some of those earnings, I think NVIDIA will make a difference actually in the market.

8:22I know it's sort of its own thing, but so much revolves around it that a disappointing number from them, I think, would be a much bigger deal to the market than 25, 15. Well, NVIDIA tops the Fed. Is that where we are? Yeah, at the moment. That's out next week on earnings. Courtney, what do you think about Powell? How are you positioned? Yeah, and I think a lot of investors are arguably like waiting for what he's going to say tomorrow. But I don't think it's going to be anything like that overwhelming. I mean, you're probably going to hear more like, oh, we're data dependent. You still have payroll numbers coming out, CPI, PCE, all coming out before they actually do anything with interest rates next month.

8:56And I think that's going to be a lot more indicative. So I don't think you really should trade based off what they're saying here. It's very likely rates are coming down next month, probably a quarter basis point. But at this point, the bigger question is what's happening after that. And I think that is the question is are rates going to come down as much as you're saying? because I do agree with you. Rates are probably coming down short term, but we're not going back to where we were in the last decade. And I think that's where you do want to make sure you were positioned as an investor. Well, a lot of it depends on what's going to happen with the economy, Tim.

9:22I mean, the Fed would cut more if the economy weakens. And we've been in a place where the economic data is coming in not too bad, and the market's rallying off of that at a time where the Fed is about to cut rates. And we've been in this sort of sweet spot where it does look like they're going to pull off a soft landing. And I guess I wonder how much that can go on. Tim, how's it to you? I'm sorry, you were talking to me. Yeah, look, I think that sweet spot is something that markets have, yes, priced in. And I think as we look at this earnings season, it's a case of where margins have really been part of the story.

9:57We're going to talk about a couple of companies today where I think you had a mixed view on what margins are. But that sweet spot, both for CapEx, especially in the tech sector, especially around the hyperscalers, especially around NVIDIA, and what that's meant in terms of the entire market cap of the market is something that I think is really the question. I think everyone's saying here that the Fed is going to be between 25 and 50. I think 50 would also be more than they need to do. But it does get back to what you're paying for stocks. And I think that's really where we're going to end up. We're seeing that bifurcation.

10:29We're seeing that rotation into value. That's really the story because the market has priced this Fed in. It's already priced in. Right. The question is, has it gone too far in pricing the Fed in, which it did earlier this year. No question. And had to sort of walk it back, got very excited. Well, you know, it's interesting to talk about the economy, and it's great that Peter will be on in a second. But there's parts of the economy. The service side clearly is seemingly doing well. The manufacturing side, not so much. And I think, you know, that's sort of the problem that's been created by this entire thing.

10:55I'll say this as well, you know, and I know you listen and pay attention to these things. I mean, the commentary out of now a swath of retailers, you throw Home Depot lows, some of the restaurants, they're all pretty much saying the same thing. And that should be concerning. Now, the market's discounting it all, but at some point I think they're going to pay attention. Okay, but let's talk about what they're saying. They're saying softening, softer growth, value-seeking consumer. But they're not saying recession. Nobody's going to say, you know, Sarah, you've been doing this a lot. Nobody's going to come out and overtly say that.

11:21But, I mean, below the surface, there are things that should be concerning. I mean, the number of people working two jobs now in the country I think is an all-time high. Delinquency rates, I think, are at 10-year high, 11%. So a lot of things, without question, to be worried about. And I say this all the time. Peter's the economist. I'm not. I'm not smart enough nor humorous enough to be one. But if you look under the surface, there are definitely things to be worried about. So you think the market's overestimating the stock plan? On the upside, yeah. On the upside. Well, let's bring in Peter Book, far from more on what to expect for the Fed and the markets.

11:49He's the chief investment officer of Bleakley Financial, a CNBC contributor. So what will you be listening for tomorrow in this speech? Which, by the way, we get in a text. We don't get to see it on camera in Jacksonville. We just get to see his walk out onto the deck. Well, because there's no question and answer afterwards, he can be very careful with how he words this. And I think to your point earlier, I don't think he's going to put himself out there. He'll acknowledge that they'll probably cut in September by just saying we're shifting our attention more to the employment side than inflation.

12:18That's sort of an endorsement for that September cut. But he's not going to tell you 25 or 50, and he's not even going to tell you what he's going to do after that because there's no— They don't know. They don't know, exactly. I mean, when Powell wakes up every day, he's trying to figure things out just as we are. So the way that the market has priced in a lot of cuts over the next year, that implies a certain economic scenario. And I think the only way you get 200 basis points of cuts is if the economy is really weak, not because inflation is just staying at 2 percent. So is the bond market telling us that it's, to Guy's point, weaker than the equity market thinks?

12:56I think it's implying that weakness in the sense of they think the market is going, I'm sorry, the economy is going to need that level of interest rate cuts through next year. But I think tomorrow can end up being a total non-event. And I agree with you that NVIDIA is more important than what Powell says. And I think we got evidence of that over the last couple of weeks where the economic data actually mattered more for the markets directly, not in terms of its implications for the Fed. And the earnings from the big names had much more of an impact on the markets than the Fed also as people reassessed this whole AI trade.

13:32And NVIDIA will sort of cap that next week. My counterpoint to that is that just wait for a jobs report that comes in worse than expected or significantly better than expected. And then it's all going to be about gaming the Fed and whether the market pricing is off. Well, yeah, that's going to complicate things for sure. But I do think that that payroll number, even though we learned that why are we trading off one payroll number if it can be revised five times before we get the final number. But, yes, that can single handedly determine whether they cut 25 or 50 in September. And I misspoke. We are we we will see Powell.

14:05He will be live. And we'll of course take that on CNBC. So I love seeing you interview various leaders around the world of like, what are you going to do? Are you saying that means you'll cut again? So just to your question, though, if we get some data, how wide do you think that swath is between it wasn't great, but it's good enough, where they just proceed anyway? How out of bounds does it have to be to change this course that they seem to be? I think it's more of the trajectory. It was August 1st where we had the disappointing claims number. and the market sold off. So to me, that was the first signal that the market was focusing more trading off the data rather than what it means for the Fed.

14:47And that was followed the next day by the payroll number that was weak. Can I counter that though? In hindsight, it seems to me that that yen carry trade was already starting to unwind. Well, that exaggerated everything. Exactly. Yes. So, right. Maybe that as a standalone with no other big unwind, it wouldn't have been as dramatic. Right. But that Thursday, Friday, we sold off. That was sort of the setup for that Monday. I'm saying it was already starting to happen. Yeah, no question. And it started to happen the day that the BOJ raised interest rates. Because while many thought they would hike, it was still 50-50 in terms of market pricing.

15:26So ultimately, I mean, first of all, have we worked through that whole carry trade stuff? That's a big question. I mean, we were talking earlier. I'm going to be up late watching the test rate before. before the lawmakers at the BOJ? So it was very difficult to figure out how big the trade was to begin with. So those that are forecasting how much is left, I don't know whether it's true or not. 50 percent, 75 percent is what people have said. But just to have that sort of leverage that can get such a violent move, particularly in the Nikkei, was rather astonishing. But, yeah, what Ueda says, that trade's either going back on because he says, I'm not going to hike again, or the governmental pressure, as you mentioned, is so intense that he tells the market, hey, I know you had your hissy fit, but I still need to contain inflation, and a weekend is not good for us, and do expect another hike by the end of the year.

16:21All right, Peter Buchbar, thank you very much. It's good to have you here. So, Courtney, final word to you on just the positioning here of the markets into Powell and how the market is priced for rate cuts and whether there's a risk there that it could be wrong. Yeah, and I do think the cuts are really, they're priced in at this point. So I think we're going to obviously want to hear what the Fed says. But I think what's been really positive to see is the breadth that you're seeing in the markets, right? So it's no longer just these seven companies that are dragging the whole markets higher. You're seeing, we've now had two 90 % up days this month, which I think is really indicative that if the entire markets do well going forward, it's a stronger case that the markets can continue as a whole rather than just this AI trade, which I know we've been talking a lot about.

17:00All right. We do have a news alert right now on Paramount and the deal with Skydance. CNBC's Julia Borson here with the latest in the saga. Now what, Julia? The latest in the saga, the Wall Street Journal reporting that Skydance has sent a letter to Paramount's special committee demanding that they stop negotiating with Edgar Bronfman about his offer for the company. I reached out to Skydance. Skydance says no comment. But according to a source who is familiar with the contents of the letter, there are two criteria for the go shop period to be extended. One is that this new offer be a clearly superior bid.

17:40And two, that there was a procedural error in the special committee's notification of Skydance about this new offer. And in this letter, the company is saying that it failed to explicitly extend the go shop period. So it seems like this letter has been sent, according to my source, and we're waiting for comment from Skydance. We will also reach out to Edgar Bronfman and his company for comment as well. Just the latest in the Paramount saga. Back over to you. OK, Julia, thank you. Keep us posted on what you hear. Now we're going to move to Chicago. Big night there. Vice President Kamala Harris preparing to formally accept the Democratic Party's presidential nomination.

18:23For more on what we can expect to hear policy-wise in her speech tonight, let's bring in our Eamon Javers. Eamon, what are you hearing? Hey there, Sarah. Well, I wouldn't hold my breath waiting for a lot of economic policy in the speeches tonight. I mean, this has been about vibes and emotion and rallying the Democratic Party faithful all week long. A lot of that's going to continue tonight. Take a look at some of the speakers that we will be hearing from, starting with Elizabeth Warren. So I think that you will expect to see some economic policy from her. but we're also going to hear from Mark Kelly.

18:54We're going to hear from the Michigan governor, Gretchen Whitmer, and on and on. The keynote absolutely is going to be Vice President Harris herself. And this is an opportunity for her on a big, big national stage to really introduce herself to the American people who haven't had a lot of exposure to Kamala Harris as a public speaker and really as a public figure because of the nature of the vice presidency itself. I would expect to hear her highlighting words like you see on the screen there. freedom has been a big buzzword for the DNC all week. Joy has been a big buzzword for the DNC all week.

19:27I expect some biographical details in her speech tonight about who she is and what her values are. In terms of economic policy, though, Sarah, I do think if you are going to hear anything, it's going to be about price levels and how hard they are to deal with for American consumers. That's one thing that the Democratic Party is really sensitive to. They understand that that criticism around inflation really hurt Joe Biden. They want to signal that Kamala Harris has an economic plan that's going to do something about prices for Americans. I would expect to hear her talk about that tonight, but I wouldn't expect a whole lot of nitty gritty detail economically, Sarah.

20:03But her prescription to that has been this federal ban on price gouging, which I feel like has been panned by most economists even on the left. Yeah. And, you know, there's almost not enough substance in it to pan it, right? Because there's not much to it. They're saying that they would authorize the FTC to conduct investigations into price gouging. No mechanics there of what that would look like, how that would happen. No definition even of what price gouging is, how they would come up with a determination of what price gouging is and when to investigate and when not to. So without any of the real detail there, you can't really even say that there's a plan there that you can really affirmatively pan other than saying that there's rhetoric there about price gouging and there's an effort there to blame corporations for high prices because the administration, of course, doesn't want to take the blame for themselves.

20:50Right. All right, Eamon, thank you. In Chicago, Eamon Jabers will be watching. Karen, what you're hearing from the DNC, are there implications for what you're doing in the markets? No. Well, I think Eamon said we're not hearing anything on any kind of policy. You know, that's that's sort of what that's not what they're trying to do right now. They're just trying to, you know, be as positive as they can and sort of build up Kamala Harris. We don't know very much about details at all. But I do think it's interesting how both parties are aggressive for the FTC, right? That I would expect that the Republicans would have a different take on that, but they don't.

21:29J.D. Vance is, you know, went out of his way to say the one person doing a good job in the Biden administration is Lena Kahn. That was sort of interesting and surprising. So there's that. And I think she's trying to move more to the center on fracking, on energy. Right. So I think they're sort of oddly converging, except for taxes. That's a very big. Right. The tax, the tax plan that's come out. I mean, corporate taxes is very different. Taxing unrealized gains for over a hundred million dollars. There's no way that flies. Raising the tax rate and then getting rid of capital gains for those that earn more than a million dollars.

22:05I don't think those are. I think those are sort of wish list kind of things. But I think the corporate tax rate moving is something that could that could happen. But I think so much of it depends on what's the rest of the ticket. If it's a divided, right, you have the president, you have the Senate goes Republican and the House state. I think you'll be gridlock. That's a huge. Let's understand the composition of that. That's everything. Right. But just let's play it out for a second. You're going to hate to hear this. But the reason why gold's done as well as it has, I think, is predicated on everything we hear on one side of the aisle and everything we hear on the other.

22:38I mean, if Trump were to be reelected, the tax cuts, I think that's inflationary. I think that's why gold goes higher. And everything you've heard on the other side suggests the same type of thing. And you throw on top of that other central banks. We just mentioned bankers. And that's why I think this gold trade is far from over. Why do you think I'm going to hate to hear that? Because I know you. I've been around you a long time. Come on, Sarah. We've had this conversation. Just because I'm not a gold bug like you. I'm not a bug. I'm just a believer. Look at what it's done. Gold went up today.

23:03Gold went up today. Even with the dollar going up, I'll give you that. Thank you. Okay, when we come back, a buzzkill brewing in shares of Williams-Sonoma. The numbers that have the high-end home goods retailer spiraling next. Plus, euphoria for Crocs as one of Hollywood's brightest stars inks a blockbuster deal with the company's Hey Dude brand. There was a hint in there for you. We're going to try this one on for size next.