Plunging Rates Help Banks, Builders Boom, and What Might Be the Best Earnings Report Ever 11/3/23

0:01Live 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. The great rate retreat yields on 10-year Treasury is down a whopping 50 basis points from the highs hit at just the start of last week. And you won't believe the impact that's having on a couple of key sectors. Should you buy into those rallies? Plus, shining bright. Gold miner stocks in rally mode today as the precious metal climbing back towards $2 ,000. So as underperforming the broader markets all year, are these shares finally ready to play catch up? And later, this stock soaring to nearly two-year highs in the back of earnings.

0:34And one One of our traders says it's one of the best reports they've ever seen. We'll tell you what it is and find out if you should roll the dice on this. I know where this is going. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Steve Grasso, Guy Dami and Julie Beal. We start off at the big Friday rally on the street as a Goldilocks jobs report sent stocks rocketing higher. The Dow popping 222 points, S &P 500 adding nearly 1 percent, and the NASDAQ leading the group up nearly 1.4 percent. All three major averages posting their best week of the year.

1:05Smaller than expected gain in payrolls increase hopes that the Fed is done raising rates. And that sent yields tumbling. The 10-year briefly falling below 4.5 % for the first time since September. It was above 5 % just two weeks ago. And take a look at the moves that sparked some of the sectors most tied to yields. Homebuilders jumping 11 % since Monday, best week in a year. Both the KBE and regional bank ETF seeing their biggest gain in three years. And the IYR real estate ETF was up nearly 9 percent, its best run since 2020, June 2020. So is now the time to buy into this rate sensitive rally?

1:41Guy, what do you say? Unbelievable. I mean, listen, no way I saw this coming. On Monday, I think Tyler was here. Somebody who was here on Monday? Tyler? Why are you nodding your head at me? He's going to feel so good that you forgot about it. I don't remember what I had to wreck this guy. I apologize. I don't know. But we had a whole conversation. Carter actually came on the show. I said, listen, rates probably may back off a little bit here. 88.5 makes sense in the TLT. I didn't think it was going to happen by Friday. They actually traded 89 and change today. And this move off the lows in the S &P, listen, Tim has talked about it.

2:10Steve has talked about it as well. Didn't see this coming. With all that said, now's not the time to go racing into the things that I don't think that have rallied on the back of this. If you look at the internals, not great. And Goldilocks, which I can't even believe I'm saying, maybe, but it's not for the people that are losing their jobs. And they've revised down now eight months in a row in terms of these job numbers, which I don't think is particularly good. If the consumer is 73 percent of the economy and if jobs are going away, that at some point has an impact. Well, I mean, I think there are a couple of things here that people may be conflating, and that is the Fed may be done.

2:41And I think a lot of economists walked away and said, you know, put a fork in it. The rate hiking cycle is over after this past jobs report. That doesn't mean the impacts of what the Fed has done still won't come. So the market's rallying right on this notion that the Fed is done, but the effects are not done. So how do you. So a couple of things there. So if the effects aren't done, then the Fed should be done. Right. So that's I could take that as a conclusion from there. So I had my wish list. I said rates would be lower. You a W would solve itself or figure it out. Dollar would be lower. Oil would be lower.

3:15We've gotten the whole wish list. So I think we're smooth sailing until year end. So I think you should be buyer. Every time we talk about strikes, I want to say Tommy used to work on the docks. He's been on strike. He's down on his luck. It's tough. But today's not. I like how you hold yourself. So let me talk a little bit about what I think are some of the relationships between you've got rates. You've also had a relationship with the dollar and obviously with equities a week ago today to the intraday high. We were up six and a half percent on equities. The move in the dollar to me is something that is part of the next ammunition for markets.

3:49If they're going to go higher, breaking kind of one of five fifty on the Dixie, the Dixie's given up two and a half percent over. the last couple days. And frankly, again, that is, I think, sniffing out Fed policy. And I think that is part of at least where we are. Higher for longer is great. But today was really one of the first unambiguously weak job numbers. Now, it could be revised next month. There could be a lot of things going on. And again, I talk about the participation rate. But I look at where equities came into this period. And so really, not only are we in the best month of the year for equities, But really, where was sentiment and where were we on the S &P and where were we on some of the mega cap tech stocks?

4:26The takeaway for the week for me on equities is that RSP ETF or the equal weighted S &P, however you're following this, outperformed the S &P. And it does that after consolidations, but it also does that when there's some sense that the broader environment for equities is good. And we'll talk about the places to see that breakdown. Yeah. And as a corollary, small caps did very well. Julie Beal, that's music to yours. I mean, has the environment really changed in the past week or so for small caps or that trade? No, I think it's really just changed for investors and their willingness to spread out their risk appetite towards small caps.

5:04And, you know, I think everyone feels like, look, if rates are going to come down and now, you know, the futures market are pricing a rate cut in May, which I think feels very optimistic to me, People are assuming, you know, small caps, which have more leverage, should do better. I still think you need to be incredibly choosy because what's driving that softness is weaker employment. And, you know, not all small caps are going to survive weaker employment very well. You really have to be choosy, Goldilocks or not. Yeah, I think the other thing that we learned this week is that we don't need Apple to be solid in order for this market to go higher.

5:39I think that was that was a concern right going into this week that Apple was going to whiff. If we're going to be bad guys, that's what we got. And yet here we are. Which is encouraging, no question about it. I mean, it went from 165, where did we get up to, 178 or so? We closed today, 174. Yeah, so to your point, Apple didn't perform today on what was obviously a good tape. But that's a good sign for the broader market as well. I mean, I guess the question is, right, when is bad news going to be bad news? Because it's clearly deteriorating. The ISM numbers have been a disaster. Manufacturing that good.

6:07Listen to what Maersk said. They laid off 10 ,000 people over the next six months, 6 ,500, another 3 ,500. And they said, I'm paraphrasing now, but they see dire things in 2024. I mean, that's one of the biggest shipping companies in the world, if not the biggest. And they don't think things are particularly rosy. So at some point, bad news is bad news. One thing on the way you opened the show, you said, should we be a buyer of this rate volatility or the way the rates have come off? So the pushback is, should we have been a seller of the rate spiking? So we should have been a seller of the rate spiking.

6:40Therefore, we should be a buyer of the rates falling. So does everybody think that the 10-year is going to 4 % now? No, I think that we should. I agree. I actually agree with the way Guy opened up the show. I think that we saw these spikes, and you're probably going to level off somewhere between 5 and where we bottomed out, 4.5 or so, in the 10-year. And I think the market can handle that. Well, the ISM 51.8, I mean, you're not terribly far away from contraction to the services part of the economy that we all know is the U.S. economy. So bad news isn't good news, ultimately. But for a market that is looking for the strength and the rally, and I'm just going with at least the market we have in front of us in terms of a market that was the anxiety where we were one week ago today based upon a 10-year.

7:26We were 496, and in that time, and really even in three days since we got the refunding announcement and the Fed meeting on Wednesday, we were 494, 495 that morning. We got as low as 448 today. that that that's extraordinary by any measure. I don't think we're going straight lower on yields. And I do think that there's going to be some mixed data ahead. Remember, we came out of the this last quarter. I know GDP is very backward looking, but I don't think the U.S. economy is falling out of bed. I think equities as we've gotten through earnings season. Let's be clear. The numbers haven't been terrible.

7:58And if you think about where we are in terms of expectations on EPS going into, you know, this this fourth quarter, I don't think things are so high here, if you think about it. I don't think stocks are cheap. But I think there's enough backdrop here with the dollar weakening up and with yields having given some ground and the Fed's out of the way. Why can't we continue to take this a little higher? Yeah, and there's nothing to say that you can't rally into your end and then still believe that a recession is coming in 2024 and things will go south then, Julie. Yeah, I completely agree. I think it's absolutely possible for us to kind of continue melting up people feeling more enthusiastic about the, you know, finding this Goldilocks, happy landing, whatever it is we're saying.

8:38It makes sense to me that the investor rationale around that, right? Because there was so much pressure on markets, you know, in the third quarter. So that makes sense to me. But I think the longer term outlook to me looks pretty cloudy. and I would be concerned being overly aggressive on things like cyclicals when clearly, if you listen to the transports, they're not in good shape. You listen to certain retailers, they're not in good shape. And this market doesn't have a lot of conviction because if you're paying attention to individual stocks on earnings, if they miss a little bit, if their guidance is a little bit weak, the stocks are down 10%, 20%, 30 % in a single day.

9:13To me, that tells us that we don't have a lot of conviction in this market. Yeah, it'll be key when we start getting the retail earnings. That'll be an interesting read on the consumer in terms of trends extending into the month of October and early November. Guy, but we started the show off highlighting some of the big moves that we've seen on the week in sectors. So regional banks, would you buy, if we have a rally into year end, are these still the sectors that you want to be in? So if we have a rally in the year end, regional banks should outperform. I think that's true, especially because that would assume there's no bad news on the margins in terms of the banks.

9:49So, yeah, they'll probably outperform. I just don't think that's going to happen. And quite frankly, this bond move we're seeing, now you have a Mohammed Al-Aryon tweeting about bond volatility. You know, somebody's going to get chopped up in this as well. And it's probably going to come down on regional banks at some point. I think about staples. I think about utilities also are doing better and do, I should say, will do better, always do better in a lower rate environment. And they were so oversold. And I think on some level they also marked some of the bottoms here for the market. And I think they can continue to play.

10:17I think health care is going to work. We may talk about that in a little bit. Emerging markets this week outperformed the S &P. You talk about a world where, again, the dollar is a little bit weaker, rates are a little more benign, the Fed's less aggressive. And parts of the world not necessarily have to be China, even though, no, you're investing in the EEM that 40 percent of that's China. But but there there is a global story out there. I would make an argument that there's definitely an international story that's investable. And I think that was this week part of what worked. I would go. Well, first of all, you're going to see that whiplash effect when you look at the Russell 2000.

10:46So people are going to chase for beta. But the Russell 2000, 40 percent of those companies are unprofitable. So they'll chase them for a week or so, and then they're going to go right back into the MAG-7. Unfortunately for the marketplace, you're not going to get that broadening base of things rallying. For more on where rates could go from here and a bonus look at Apple after earnings, let's bring in the chart master, Carter Braxton, worth of worth charting. Carter, what did we accomplish with this move in rates this week in terms of the long-term trend? Sure. Well, quite a week. I mean, here's the thing.

11:19I mean, just speaking quickly about the strength in the market, it's their strength. It's benign. Their strength is special. Clearly, this is special. It's aggressive six plus percent in about six sessions. But is it too aggressive or said differently? Is it impulsive, rash and petrous, knee jerk? It has that feeling. I think Julie was referring to some of those words in a more elegant way. But, you know, as 1 p.m. today, a big, large infrastructure, REIT PM, said to me, recession assured by the S &P. And he was being facetious, of course. But rates, let's look at some charts. The drop in yield from 5 % to 4.5.

12:00That channel, which is very clear, it's six months in duration. Rates go from 3.5 to 5. And now they've dipped back to the lower band of the channel. Do we stop here? I don't think so. The second chart, there is an unfilled gap. We came back from Labor Day. Bonds sank on the 5th. It was Tuesday, the 5th of September. And we left an unfilled gap at 4.2. I think rates are going there. And the question, of course, does that mean stocks go even higher? I'm in the camp ultimately that stocks go lower as well as rates. Stocks go lower as well as rates. And that's what you said prior to this week's move.

12:36And yet we had rates go lower and stocks go higher. So why do you think it recorrelates? Right. So if it was like an if-then statement, geometry seems to me. If every time rates went down, stocks went up, then it would be easy to mark money in the stock market. It doesn't work like that. And so what we know is the dollar is rolling. Oil has rolled. All things that weren't supposed to happen. And now rates are rolling. And ultimately, I think stocks join the party. But we should see. 4.2 percent is where you see the 10-year yield going. Stocks go lower along with it. And how about Apple? Because you came on our show, you said sell Apple, which is very unpopular.

13:19And then before the earnings dropped yesterday afternoon, you also said sell Apple. You went in there and you reiterated that call. Where are we now on this? Yeah, it didn't really do much, so I'm not sure that was a valuable call. But let's look at a couple charts. The first are, well, it's just there's Apple. It's a pair of twos. It's working its way into these converging trend lines. Does it break out from that formation? Does it break down? It's really what a pair of twos is. But it's really more importantly about its relative performance, it's a bad pick. Let's look at three relative charts.

13:51The first, a relative chart is just a ratio chart. It's one thing divided by another, which reveals how the numerator is doing relative to the denominator. Apple's chart, its relative chart to the tech sector, the XLK you see right there, is terrible. Let's look at it relative to Microsoft. It's terrible. Let's look at it relative to Amazon. Same thing. If those were individual securities, you'd say, what is that stock there? It's rolling over. Well, it is rolling over. Apple's relative performance of the market peaked more than a year ago. It has been a bad pick. All right. So you stick by yourself.

14:28Yep. All right. Carter, good to see you. Thank you. Carter Braxton Worth of Worth Charting. Show of hands. Who agrees with Carter that it's a sell? Apple is a sell right here, right now. Raise your hand, please. Well, yeah, they can go to 162. All right, Guy and Tim. Tim? Yeah, I mean, look at the top. Again, if I'm Carter and I couldn't even walk half a footstep in his shoes, but 176, 177 was the top end of that upper channel. I don't like the price action. I guess more importantly, though, I just don't like the need to jump into Apple here. And based upon the trends, some of that guide, the consumer that is yet to really weaken, I'm going to get Apple lower.

15:09Yeah. Julie? Yeah, I think it doesn't make sense to be adding aggressively here. I think you can be a long-term holder in Apple as a core holding. But I agree. I think they have near-term headwinds that are probably going to be pretty difficult. We still don't understand exactly what's going on in China for this business. And I think that is the key to understanding the longer-term outlook. Apple's up 37 % year to date. Apple shook off that post-market sell-off yesterday. So I agree with Julie. You don't have to be aggressively buying it, but you could hold Apple. But if you're a believer in the MAG-7, which it sounds like you are going into your end, is this the top, I mean, because it's lagging relative to its MAG-7 peers, is this the one to be in?

15:52I think it's a safe bet to be in Apple. And I would hold it until it breaks the 200-day moving average, which is 171.5, let's call it. I think you're safe to be in a safe bet for the market. I think one of the things we could be seeing is not something that's going to happen overnight. But I think the weighting of those seven stocks as, you know, 25 to 30 percent of the S &P, wherever we've peaked, have we peaked? I think we've peaked. I don't think we're going to see that again, I think. And that's why the equal weighted S &P and the move it's had is both, I think, a function of market technicals and some change in passive versus equal weighted.

16:28And I just think it's something we should all be watching. This isn't going to happen overnight, but that's a trend. And the trend is Apple's, I think, best days are behind it. Wow. And The Magnificent Seven's best days are behind it. For sure. Peak Mag 7. Did you ever see that movie? Seriously, that's Friday. Magnificent Seven. 1960. I think it was 1960. Great song by The Clash, too. I know you love The Clash. The Clash is one of the most overrated bands of all time. You should go to Blockbuster and rent it for the weekend. I'll get the beta. Just really quick. So the only problem I have with that, I agree with everything Tim said, but the problem is the dynamics have changed.

16:58We're in a passive investing world now, so I don't know what changes to make that dynamic change. Coming up, gold mining stocks surging today, far outpacing the broader market, but the group is only flat for the year. It's a time to play catch-up. We'll go mining for answers. Plus, you can bet it was a great day for DraftKings, and one of our traders is wagering the company might have just put out its best earnings report ever. Fast Money is back right after this.

17:27Welcome back to Fast Money. Miners continuing to melt up in today's session. The GDX gold miners ETF gaining more than 4 % to finish the week in the green, not to its third straight day of gains. The underlying commodity settling just shy of$2 ,000 in today's session. Gold now up more than 8 % in just the last month. Tim, you're just saying today, silver and gold. Silver and gold, even before Burl Ives will start singing to Guy around Christmas. And I think gold and more gold in an environment with falling rates, a falling dollar, slower growth, inflation under control. This is the environment.

18:00I also, Guy talks all the time, and I'll let him talk about, you know, why the central bank setup for gold is important. What the miners are not doing is keeping pace with the move in gold. And if you look, and this is where Carter talks about these ratio charts, this is a great thing to do. Look at the relationship between gold, the metal, and the GDX, which is the gold miners ETF. And you can see, I think gold miners have lagged. I think there's different reasons for it. Sometimes, obviously, in a higher risk, higher volatility market, miners, resource stocks don't trade too well, right? So on some level, gold stocks are higher risk.

18:30But the move up in gold goes straight to the bottom line for a handful of these guys. Goldfields has been outperforming in South Africa. Barrick, Newmont, you know, these are some of your big dogs. It's interesting. And, Tim, I think what happens with the miners, people say, I don't believe the price of gold. I'm not going to get sucked in in the miners. until they start believing the price of gold. Then it starts to play catch-up. So given where gold is and it's going, in my opinion, the GDX, which closed 29.5, should be trading 36 minimum. And then we can have a conversation. And I think this gold move, listen, gold was higher in the wake of yields going higher.

19:02Yields are going lower. The dollar's coming off. Gold should move in this environment. So I'm with Tim on the GDX. What is the central bank's setup here? Oh, my God. Last year was a record amount of gold. This year, just the same amount, basically, over the last two years. It has not manifested in itself in the price. They are not the sellers of last resort. They are continuing to hoard it. And again, when investment funds and hedge funds get into this and they're going to try to get into it sideways, the market's not big enough to take any amount of dollars that I think are going to flood into the market.

19:30Julie? You know, I don't have anything wise to say about commodity markets. We avoid them like the plague because it's just too difficult to predict the movements and, you know, any of the resource plays. They're really capital intensive and cyclical. So for long-term investors, it's a no. But I think the technicals are pretty compelling. I agree. So I don't understand the underperformance of the GDX. I don't understand the underperformance of the miners. Usually it's three to one in their favor. It's obviously the reverse now. But when you look at the geopolitical around the world, yes, to Guy's point, a lot of central banks are buying.

20:05But if you look at the area, specifically Russia, they've been selling because they haven't had access to money. So gold could move even higher if they decide to take their foot off the gas in that area. There's a lot more Fast Money to come. Here's what's coming up next.

20:24The heavyweights of weight loss battle it out for a spot in your portfolio. A top money manager reveals her top obesity drug stock and why the two industry kingpins aren't equal. But first, someone on the desk is calling it one of the best earnings reports ever. Stay tuned to find out why they're wagering on even more gains ahead for a top betting stock. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

21:06Welcome back to Fast Money. Shares of DraftKings topping the tape after posting an earnings beat after the belly yesterday. The stock jumping 16 % for its best day since last November. DraftKings had revenues increased by 57 % from a year ago, and it expanded its customer base by 40%. Tim, you are the one who said this may be the best earnings report out there. And I have no position. And at one point, I did have a position. And I tell you, I felt like I got a gift on the move back over 30, traded that out of it maybe six to eight weeks ago. But here's what I love about these numbers. The numbers really are, first of all, they are continuing to build a moat around their business.

21:42They are in the pole position in the online sports betting world. No matter what, and this is why I always was a fan of this space, and I invest in other sectors that kind of have this story, top-line addressable market growth. We know what's going on with gambling in our country, whether you like it or not. We also know that these companies were beating each other up and spending everything they could to get market share. Well, we've seen rationalization. The fact that they're talking about profitability and where they're talking about it, and I think the street's going to come through. I'm looking at a J.P.

22:11Morgan report. They have them at$1.25 billion in EBITDA by 26. And they have them as a 7 % free cash flow yield by 26. And I realize that's a long time away. I'm less worried about the consumer here on some level in a recession and what they're going to be spending. But who knows? Bottom line is the industry fundamentals are starting to look really interesting here. And this company, those were their best numbers. Yeah, and even as the competition is really increasing, I mean, Penn is trying to write. Penn has ESPN bet now, so they're trying to ramp up in this area. This is the fourth straight quarter of market share gains for DraftKings, Steve.