In short
Fast Money discusses rising interest rates (30-year near 5.6%, 10-year near 5.3%, short end near 5%), how rate volatility is spiking, and whether bonds are becoming more attractive than stocks. They debate if AI-driven tech strength is masking broader weakness (small caps, value, travel/leisure, banks/credit). They also cover major stock-specific moves: NVIDIA’s record buyback and AI agent safety tech; Boeing’s 737 MAX software glitch and delayed 737 MAX 10 certification; Netflix’s drop to two-month lows; Chipotle’s rally on promotions; and mortgage rates hitting ~7.5% affecting homebuilders.
Guests (backgrounds)
Michael Kontopoulos, head of multi-asset macro investing at Janus Henderson Investors; Gene Munster, managing partner at Deepwater Asset Management; Kathy Entwistle, managing director and private wealth advisor at Morgan Stanley.
Key claims
Corporate earnings/growth remain healthy despite rate shock; warning signs would be margin compression, slowing earnings/guidance, widening credit spreads, and yield-curve inversion. NVIDIA’s OpenShell and Sentry could reduce “agents gone rogue” concerns; buyback lowers share count ~3%. Netflix is “derated” but may be investable at trough valuation. Chipotle upside is tied to buy-one-get-one momentum; restaurants/travel look recession-priced. Kathy advises matching liabilities, favoring high-grade bonds/munis over high yield, and trimming small caps.
Notable examples
AI capex/hyperscalers; private credit AI-disruption concerns; rate-volatility at multi-year extremes; Boeing 737 MAX landing procedures glitch; Netflix micro-dramas; Chipotle BOGO promotions; mortgage rates ~7.5% pressuring homebuilders.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOInterest Rates and Market Impact
0:32 to 0:52
Discussion on the recent rise in interest rates and its effects on stocks.
“Mazda has been named Consumer Reports' safest new car brand.”
Interest Rates and Market Impact
1:46 to 3:05
Discussion on the recent rise in interest rates and its effects on stocks.
“On the desk tonight, Tim Seymour, Guy Dami, and Mike Coe.”
AI Influence on Economy
3:05 to 4:23
Exploration of how AI is shaping the economy amidst rising rates.
“Because, again, the part of the reason for the growth around both the economy and where we are in yields is because of the A.I.”
Historical Context of Rate Hikes
4:23 to 5:45
Comparison of current rate hikes to past economic scenarios and their impacts.
“Mike, I mean, there's nothing wrong then with an economy or a market that is dependent on an interest rate insensitive sector.”
Divergence in Market Performance
5:45 to 7:51
Analysis of how different sectors are responding to the changing interest rates.
“It's insensitive to rates, but not insensitive to the borrowing costs associated with it at some point, I think.”
Rate Sensitivity and Market Outlook
7:51 to 9:20
Discussion on the sensitivity of various market sectors to rising interest rates.
“real economy or in the stock market, is only going to grow bigger in terms of those areas, like the small caps, et cetera, versus AI.”
Volatility in Rates vs. Equities
9:20 to 11:21
Examining the volatility seen in bond markets compared to equities.
“I mean, to Tim's point, Mike, I mean, you have to ask the question, is AI and the strong tech trade sort of papering over the weakness that the rest of the market is telegraphing?”
Global Interest Rate Synchronization
11:21 to 14:00
Insights on the global trend of rising interest rates and its implications.
“There is another thing, though, that does compress volatility.”
Analyzing Current Market Dynamics
14:00 to 17:04
Discuss the implications of rising interest rates and global economic conditions.
“But closer could mean three months, could mean six months, could be 12 months from now.”
Punch Bowl Metaphor Discussion
17:05 to 17:38
Explore the punch bowl metaphor in the context of economic growth.
“They're really gross if you think about it.”
Show all 24 chapters
The New Regime of High Rates
17:39 to 18:38
Discuss the new economic regime of prolonged high interest rates and its ingredients.
“Well, we've talked about the regime of global rates and Japan pulling the U.S.”
NVIDIA's Innovations and Market Position
18:39 to 21:11
Examine NVIDIA's new AI technologies and market strategies.
“I would advocate that today's AI, when we think about advancement, you don't have to think about it separately from capability versus safety.”
NVIDIA's Competitive Landscape
21:12 to 24:20
Delve into the competitive pressures and valuation of NVIDIA stocks.
“And so, Melissa, I think they are in a unique position.”
Boeing's Recent Challenges
24:21 to 25:38
Analyze Boeing's stock reaction following reported software issues.
“returning capital, lowering that share count.”
Options Activity and Market Reactions
25:39 to 28:00
Review options market activities related to Boeing and investor sentiment.
“Coming up, Boeing descending the latest glitch hitting shares and what it could mean for the company's Max 10 plane certification.”
Boeing's Future and Market Reactions
28:00 to 29:50
Discussion on Boeing's stock overreaction and the overall industrial performance.
“And I'm glad they are putting them a little bit in the penalty box in the 737 MAX, which has had a lot of other reasons to be in the penalty box.”
Introduction to Next Topics
29:50 to 30:28
Preview of upcoming discussions on Netflix and market strategies.
“The problem with Netflix shares as the stock hits two-month lows.”
Netflix Stock Analysis
31:22 to 34:25
Discussion on the challenges and opportunities for Netflix's stock amidst declining engagement.
“Monday night football, plus pregame and postgame.”
Challenges in the Current Market
34:25 to 39:40
Kathy Entwistle discusses investment strategies in relation to rising interest rates and market dynamics.
“Welcome back to Fast Money Stocks starting the week in the red as interest rates ticked higher once again.”
Market Insights on Small Caps and Chipotle
39:40 to 42:00
Analysis of small caps, market pressures, and a discussion on Chipotle's stock performance.
“She's still here, but I'm speaking, I'm not bringing her back.”
Options Market Activity and Restaurant Stocks
42:00 to 43:58
Discussion on options market trends and valuation of restaurant stocks amidst current economic conditions.
“Mike, you saw some heavy activity in the options market.”
Mortgage Rates and Homebuilders
43:58 to 45:00
Exploration of rising mortgage rates and their impact on homebuilders and housing market dynamics.
“30-year fixed mortgage rates hitting a new milestone.”
Supply Shortages in Housing Market
45:00 to 46:01
Insights on housing supply shortages and the implications of rising mortgage rates on home sales.
“But I can make a call on Home Depot here.”
Final Trades and Market Opinions
46:01 to 47:32
Participants share their final trades and opinions on various stocks, including Netflix and McDonald's.
“Yeah, technically terrible, but fundamentally it's beginning to look appealing.”
Transcript
Automatic transcript. May contain errors.0:00At Edward Jones, we believe rich isn't about having life all figured out. It's opening yourself to all the possibilities. That's why your dedicated financial advisor provides long-term planning built around you, meeting you where you are, and helping you get closer to where you want to be. So no matter where you're starting from, you can move forward with confidence. The key to being rich is knowing what counts. Let's find your rich. Edward Jones, member SIPC. Mazda has been named Consumer Reports' safest new car brand. It starts with our approach. Every Mazda comes standard with proactive safety features, so you're more aware of what's around you, more focused on the road ahead, and ready before problems ever start.
0:49Mazda. More of what matters most to you. Go to mazdausa.com to learn more. Consumer Reports does not endorse or promote any product.
1:02Tim Seymour: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. A steady trek higher for yields, fresh two-decade highs in the long end, the short end pricing at even higher chances of another rate hike next month. How is this all impacting the consumer and investors? And are bonds now perhaps a better buy than stock? We'll debate that. And a blockbuster buyback, NVIDIA's latest share repurchase plan setting records and setting the stock to within a few of an all-time high. Can the gains keep coming for the semi-giant? Plus, Boeing shares get grounded.
1:34Tim Seymour:Netflix streams to two-month lows in a bid for burritos. Oh, boy. What is sending shares at Chipotle higher today? What's it mean for the rest of the restaurant trade? I'm Melissa Lee. I'm going to be live from CBOB at the NASDAQ. On the desk tonight, Tim Seymour, Guy Dami, and Mike Coe. Three Musketeers. Wow. Who needs more when you've got these three, right? We start off with the latest move higher in interest rates, to 30-year pushing up against 5.6 percent. The 10-year closing in on 5.3 percent. Short-term rates also heading higher, inching ever so close to 5 percent. The two-year has jumped more than 50 basis points just this month.
2:09Tim Seymour:Stocks, meantime, pulling back to start the week. NASDAQ and NASDAQ 100, which hit records last week, leading the losses. So are we finally about to see the warnings in the bond market come home to roost in equities? So today, at least, Tech was not sort of the defensive area against rates. Around the edges, maybe. But again, five and a quarter in a 10-year yield. I mean, the move, Tim talked about this last week. The moves we saw have been historic in terms of just the size and the duration which it got there. I mean, the move in the short-term buy market has to be alarming. But again, I would have thought that anything north of 5 % by this point in the year, here we are in October, the stock market would have been crescendoing lower.
2:49And I'm choosing to use that word, but it's not. I mean, it's hanging in there like a champ. Now, you see some concern around the edges clearly, but the broader market hangs in there like a champ.
2:59Karen Finerman:I think it looks great, hangs great, but I think there's a there's a there's a breaking point at some point. And what does break mean? Because, again, the part of the reason for the growth around both the economy and where we are in yields is because of the A.I. trade. The A.I. trade's not ending. There's going to be a trillion three or whatever number you want to put at this seems to be some consensus in terms of the capex we're going to see next year. Part of the question you have to ask yourself is if the cyclical side of the economy, which is at least some part of what's going on here, if it's all related to A.I., you can make it an argument that it is and that the the at least the inflationary shock of higher oil prices is all that.
3:38Karen Finerman:If you can kind of put those things to the side and say at some point we will at least get some relief or what's happening in A.I. land is something that I think you can at least put in the context of that. then you could allow rates to run higher. The problem is that you're going to at some point be staring at, and I think we're kind of there now, but that 2007 level, I mean, we may be setting up for much higher rates. We're going to check that. I heard you guys talking about some of those levels also in the overtime. The reality is that I think we have to be thinking about interest rates in the context of a 30-year time horizon.
4:14Karen Finerman:And I know, Guy, you love your 40-year charts. Well, no, I've mentioned that a few times. You've made fun of me a few times, but now all of a sudden, for some reason, the four years become de rigueur, as they say. Exactly.
4:25Tim Seymour:Mike, I mean, there's nothing wrong then with an economy or a market that is dependent on an interest rate insensitive sector. Then we should be sitting pretty here now. Well, you know, I have seen, as I know Tim and Guy have as well, several circumstances in the past where we had sharply rising short term rates. You know, the first one in my career really happened in the late 90s. We know how that ultimately turned out. But I think people might want to remind themselves what happened to two-year rates at that time. You know, I remember distinctly a series of short-term rate hikes. And, you know, we didn't see the two-year peak out until about mid-2000.
5:04But if you were just taking a look at how equities behaved, and, you know, we had a big sort of run in tech at that time, too, those will remember, that actually equities didn't peak until March of 2000. So you can have rising equities and you can have rising short-term rates concurrently. And as far as the long end goes, you know, we have sort of normalized an abnormal rate environment for the 10-year just in the post-GFC era. The only thing that really differs is that back then, of course, we had a balanced budget. Now we don't. And that's going to have an incredible drag on the fiscal situation due to these high interest rates that governments are going to have to finance with.
5:45Tim Seymour:That is a key difference. Another key difference, though, is that we have a sector which is, as I mentioned, insensitive to rates and also a sector which should, in theory, help other sectors with productivity and increasing productivity to help counter any inflationary pressure. It's insensitive to rates, but not insensitive to the borrowing costs associated with it at some point, I think. I mean, we're not there yet, but if you look at, again, some of these credit default swaps, obviously moving the wrong way on the back of that. And one of the reasons, look, I've been concerned for a while.
6:14The concern has been unfounded. Let's just put it out there. The rates have gone higher, but the market doesn't care. But when Treasury seems to care, and it was a couple months ago, a month and a half, two months ago, where, again, Treasury Secretary Besson made a point of saying, you know, he's the House. I'm paraphrasing, and he sees all the asymmetric moves out there. Ten-year yields are up by 50 basis points at that point. I think it was like four and three quarters when he sort of inserted themselves in the conversation. They could easily say rates are going higher because we have the strongest economy in the history of mankind.
6:43That's not what they're saying, though. So if they're concerned, I think we should be concerned as well.
6:48Karen Finerman:And we have some data this week that could allow us to have a fresh look at just how strong this economy is. The problem is, and we talk about this, underneath the surface of just the indices, the markets are doing a lot of interesting things. We're going to have this great conversation about Chipotle. But if you look at travel, leisure and certain parts of that world, they're getting destroyed. In other words, they're trading as if we're either going into recession, which the market at least would be pricing in advance, or that there is a much bigger headwind out there. And if you look at small caps or look at S &P value, small caps have underperformed the S &P by almost 11 percent since we peaked back in July.
7:22Karen Finerman:the value. So S &P value, people have been looking for those names. They were very, very defensive and stalwart the early part of the year. But major underperformance, major interest rate sensitivity. So the market is giving you that. But again, the tech trade is not.
7:38Tim Seymour:I mean, this is sort of a preview of when the Fed actually hikes interest rates. You know, higher rates are going to crush the areas of the economy that are more rate sensitive and not rate instance sensitive. So that divergence in performance, you know, whether it be in the real economy or in the stock market, is only going to grow bigger in terms of those areas, like the small caps, et cetera, versus AI. Especially if you still believe in cyclicality, which, you know, I don't think we've gotten to a point where it doesn't matter anymore. Banks are, listen, people are going to say, Guy, wait a second on the banks.
8:08Banks are going down for different reasons, AI related, some of the existential risk associated. Maybe that's the case is probably part of it, but it's not the entirety of it. So if banks are cyclical and they historically have been, look at the over the last couple of weeks, the performance has not been particularly good. Since August.
8:24Karen Finerman:Yeah, look at but look at the the center of the credits storm. I'm not well, I'm not implying there's a storm, although it's been pretty stormy around here lately. And by the way, here, yeah, like actual storm. Yeah, rain forever. Build an arc. But everybody's in New York, you know, Blackstone down 25 percent from kind of mid-August KKR, blue oil, anything that is attached to this part. So the banks we've talked about and the banks themselves seemingly have been trying to guide lower in terms of trading revenue and some of the things that were really incredibly robust. But it's the credit side of this that at some point it almost feels like markets are trading like something is going to happen.
9:01Karen Finerman:And as we say all the time, the velocity of the move is such that this type of a move in interest rates in a world where we really didn't have a lot of it, I would just say the exposure to interest rate sensitivity hasn't been that strong, but you can't have the kind of moves we've had without seeing some pain. So those stocks are really pricing that.
9:20Tim Seymour:Yeah. I mean, to Tim's point, Mike, I mean, you have to ask the question, is AI and the strong tech trade sort of papering over the weakness that the rest of the market is telegraphing? Well, it is. I also think it might actually be a little bit of the cause as well. If we think about where some of the concerns have been, so when we think about things like private credit. What was the concern about private credit? That there was a lot of exposure to software and services and that software and services was going to get disrupted by AI. So effectively, what you have is this situation where there's really some winners and there are some losers and you're seeing one offset the other.
9:56One of the points that Tim was just making, just talking about the rate volatility, that is one of the things that those of us who are looking at the volatility markets generally have been observing, which is that rate volatility is probably at a two-year extreme. And the options and derivatives priced on those are also at about a two-year extreme relative to the price of options and derivatives on equities and indices. So I think that's kind of an interesting situation. Whenever you start seeing any kind of a metric, it almost doesn't matter which one you choose, get to levels that are outside multi-year extremes, it's probably important to start paying attention.
10:33Tim Seymour:When you take a look at that, though, Mike, Like, doesn't it make sense that that S &P volatility is low, given the concentration in the market? And so are you saying that bond volatility should come down in order to sort of revert back to the mean? No, what I'm saying is that if you have a situation where the risk premia associated with insurance on equities is very low, but the risk premia associated with insurance in rates is very high, there's a lot of trouble underneath the surface that people who are looking at the equity markets don't see. You know, I often like to say that equity market participants like to look up and fixed income market participants tend to look down to see whether the ice is cracking beneath their feet.
11:13And that essentially is what I'm saying here, is that with respect to rate volatility, it is cracking. And that's something that's worth paying attention to. There is another thing, though, that does compress volatility. One is what we just talked about. There are winners and there are losers in equities. They offset. That's dispersion. And that actually helps because the indices themselves are diversified. It helps compress their volatility. But eventually what ends up happening is if you get into a risk off move, that dispersion goes away. Correlation rises and equity volatility follows. That's like a master class.
11:46It is.
11:47Tim Seymour:Well, that's why we call him the professor. Is that why they call him that? I mean, you call him Coco Beware, but, you know, others call him the professor. For more on the rate rise, let's bring in Michael Kontopoulos, head of multi-asset macro investing at Janice Henderson Investors. Michael, always great to get your take. So what should we make of this increase in rates in a relatively short amount of time? Should we be alarmed and should we think that perhaps, you know, the stock market or that the economy, that weaknesses in the economy are being papered over by strength in AI? You know, I think the strength is likely greater than just the strength in AI.
12:26You know, if you look at earnings growth in individual corporates, you know, it's accelerating. If you actually look at, you know, the hyperscalers' earnings growth, the earnings growth itself is declining, is actually coming into line with the rest of the market that's accelerating. And so, listen, the underlying economy, this is not to belittle the idea of the K-shaped economy. This is not to belittle the fact that there are many who are struggling with higher inflation and the cost of living. That is all true. But at the corporate level, corporations are quite healthy. And, you know, I think you're seeing a, you know, we've had a narrow market for the last few weeks.
13:04Yes, but you're seeing a bit of broadening. You're seeing internationals start to do pretty well relative to the United States over the last 12 to 18 months. That's all very, very healthy. So, listen, unemployment is the lowest in quite some time, if not ever. You have jobless claims, the lowest since the 1960s. Nominal is coming along at 7 % to 8%. That's a pretty healthy economy that transcends just AI spend. People will watch and say if it's a Fed rate hike cycle, Michael, they're going to hike us into a recession. I don't have a view one way or another. But my question is, what will be the warning signs if, in fact, that's happening on the equity side of things?
13:40Well, I think we're going to start to see, you know, you'll start to see more margin compression. You'll see, you know, earnings growth begin to slow. You'll see corporate spreads start to widen. You're already seeing that the majority of the AI issuance that has been had over the last, you know, six to 12 months is now underwater if you bought those at new issue. Listen, I think we are closer to the top of the market and closer to the end of this cycle. But closer could mean three months, could mean six months, could be 12 months from now. We're not entirely sure. If I knew the time, if it was going to be Tuesday at 3 o 'clock, I probably wouldn't be on TV with you all.
14:17But for right now, things are pretty strong. What I want to see is I want to see what corporate earnings are going to be doing. I want to see what guidance looks like. I want to see what margins, what's happening with margins. I want to see if the yield curve inverts. I think that's a big one. It's interesting, Guy. We haven't really had a normal cycle in quite some time. It is entirely normal for the Fed to be hiking rates and for rates to be going up and for equity markets to be doing well. That is more normal than the opposite.
14:45Karen Finerman:So, Mike, with that, we've also had a synchronized cycle of global interest rates moving higher together. And I guess I just wonder, should we feel a little bit better about that? And if this was 2012, we'd be very worried, as we were, about Southern Europe and what was going on with sovereign debt, at least in that part of the world. But seemingly, you can't sell it all. I mean, China's the only place that really is seeing their yields go lower and doesn't have the same issues that we have here. So as you look at both asset allocation and you look at this move, and I hear you being constructive on higher rates because of the cyclicality in the economy.
15:24Karen Finerman:Can this also be something that gives people some comfort, even if it's treading two decade highs everywhere? Yeah, I think there's sort of two sides to that coin, Tim. On the one hand, you know, we're not alone in this. Global growth is actually pretty, pretty strong. And and you're not sort of the only, you know, the only one at the party. And and that's that does give you some comfort. Yes. And there's all you know, you've got to go somewhere. You've got to put your capital somewhere. And there are a lot of options now, though, right? And that's sort of the other side of the coin is that there's a little bit more competition for capital.
16:00You can find yields all over the world. You can find strong earnings growth and equity stories now all over the world, not just in seven stocks, whether that's in emerging markets, whether that's in Europe, whether that's in Japan. I think there's really, really interesting places to invest throughout the world. From a yield perspective, it's a little bit tricky because you sort of keep anchoring higher and higher and higher across the globe. And that's going to make it even harder for U.S. yields to fall because it's not just a U.S. yield story. So as soon as U.S. yields fall, what's going to happen?
16:36You sell U.S. debt and buy the higher yielding asset elsewhere. And so what it's doing is it's creating upward pressure on everyone's, on every country's sovereign debt and making it harder for U.S. Treasury yields to decline. So there's a little bit of two sides to that coin. And honestly, it doesn't really matter as long as growth continues to remain strong and as long as the Fed or the market doesn't take the punch bowl from the party. All right.
17:04Tim Seymour:Michael, always great to speak with you. Thank you. Can I say something about punch bowls? They're really gross if you think about it. I mean, people standing over this thing with the ladle. And everybody touches the ladle. Everybody's touching everything. When was the last time you were near a punch bowl? I didn't go to punch bowls where I was supposed to. But I'm just saying.
17:21Karen Finerman:And were you the guy that's, did you spike the punch bowl? No, Tim, I wasn't that guy. But I will tell you, having gone to college with you, I knew some of your crew.
17:27Tim Seymour:Single serve punch seems to be a better way to go this day and age. Stay away from the punch. Anyway, what Michael seems to be saying is that we are in a new regime where rates will be higher for longer. I hate that phrase, but I shall use it.
17:40Karen Finerman:Well, we've talked about the regime of global rates and Japan pulling the U.S. higher for months. So I do think that that's the dynamic here. And I do think there are there are four ingredients to this that to remind have inflation, have oil price, have A.I. build out, have global cyclicality, have demand for long and paper by the A.I., the hyperscaler world of those things. Which which of those things do you think will abate here? I'm not sure a whole lot of that abates anytime soon. And it gets back to, you know, even if global cyclicality is mostly AI and there's a big debate about that. But there's a trillion three reasons next year is going to be very similar.
18:20Karen Finerman:And I don't you know, I wouldn't challenge that. All right.
18:23Tim Seymour:Meantime, Nvidia shares up more than a percent today, closing just three percent from its record high. The chip giant authorizing an additional one hundred fifty billion dollar share buyback. The largest increase in history. CEO Jensen Huang also joining Squawk Box this morning to discuss a new program to set safeguards for AI agents. I would advocate that today's AI, when we think about advancement, you don't have to think about it separately from capability versus safety. To me, it's the same thing. And so we want to accelerate the advancement of AI. And today we're putting forth this new technology, OpenShell and NVIDIA Sentry, that these two technologies make it possible for us to contain and to monitor.
Read the full transcript
19:04But it takes a lot of technology to make this possible.
19:08Tim Seymour:Joining us to discuss all things NVIDIA is Gene Munster, managing partner of Deepwater Asset Management. Gene, always good to speak with you. I mean, it is amazing that Jensen always seems to have a solution to the problem. Companies can't get financing or backing, and NVIDIA gives them the money. NVIDIA wants to make sure its partners have access to capital. They put together a consortium. They want us to see AI guardrails without government intervention, and they come out with OpenShell and Sentry. is this just how good nvidia is i think it speaks to the position they're in in part the first things that you mentioned are evidence that they've grown their business there's a 25 billion year run rate business four years ago they'll do 700 billion next year that affords them the ability to finance some of their customers what's happened today with this open agent safety effectively is them leveraging their hardware piece to do something that is novel and the novel equation, I bet they used AI to help solve this, is essentially how do you promote accelerated AI adoption while keeping agents from going rogue?
20:14And the novel piece is they have a software piece to it and they have a hardware piece. Now, I think this is kind of a test to NVIDIA doing the right thing here, is that the hardware part of it, this is basically a chip that sits between the data Center and Vera Rubin, if they get 100 % attach rate to that. So this is full adoption of every Vera Rubin that's sold. They sell some of this hardware to enable this new platform, the safety platform. That would add about 1 % to their overall business. So it's fractional. But where they benefit is less about that direct revenue. But if in fact, this does help ease some of the concerns around safety.
20:56And if the government can get behind this, the White House can get behind this and really promote that NVIDIA is doing something on the safety problem that can lower some of the tension around companies continuing to invest in this and can kind of do that acceleration that Jensen was talking about on Squawk Box. And so, Melissa, I think they are in a unique position. They're capitalizing on that position. And I think the market today was responding to the share buyback. Essentially, that's lowering the shares outstanding by about 3%. It didn't fully capture that today in the move, but the significance of this new platform, if in fact they're able to get it to work and get it fully adopted, I think this could really unlock what has been a huge headwind for the AI story over the past few weeks.
21:42Gene, I'm sitting in Dan's seat, so I'll play the role of Dan briefly and ask you, if you were to type into one of these agents, why does NVIDIA trade at a discount to the broad market? What answer would you get? Because it does, and given the metrics, it should not. Right. Well, I mean, it trades at a discount because that huge number going from $25 billion in revenue a few years ago to$700 billion, that's the law of large numbers. It's just really hard for investors to get comfortable that that's going to continue with that downward slope of growth rate. That's the reason why it trades at that compressed multiple.
22:18But my sense is that this company will continue to surprise over the next several years. We talk about the platform today. We think about the size of the AI brain. Remember that guidance that they gave back at the end of August, 70 % growth for calendar 27. The street was looking for 40 % when they gave that guidance initially. I think that really speaks to the issue here, to your point, is the law of large numbers. I think what you're going to see is the significance of what's happening, not only on the hardware side, but on the inference side. I think as humans, it's hard to fully comprehend how long this is going to go.
22:53I think it's going to go much longer. And even though the multiple of NVIDIA will probably continue to go down, I think the stock will continue to rise.
23:01Karen Finerman:Hey, Gene, because I'm sitting in Karen's chair, I'm going to ask you a question that's probably built around value and valuation different than guys. And because I'm Tim, I think Apple has been a buy for a long time, mostly because I think there's an element about their capital markets dynamic that's made them a safe play for a lot of big institutions. And the early phase of Apple giving a lot of money back, all that same free. And on a relative market cap perspective, Apple was as free cash flow generative as NVIDIA is here. But phase one of that for Apple, where they really stepped into the buybacks and the capital markets dynamics, they issued long debt at low rates.
23:39Karen Finerman:The market rewarded them. And it wasn't just later on when Apple just looked like it was kind of going sideways and not a lot of growth there. And so what about a div that the yield wasn't so great? Bringing this back in, isn't this reason enough to re-rate NVIDIA? Not because people own it for the div, but because it becomes a slightly different type of an investment for bigger institutions. Well, I don't know if it would generate a re-rating. When I think about a re-rating, I think like a narrative change. I think what happened to Google a year and a half ago, what's happened to Apple over the past year, the stock's up 35%.
24:14I think the NASDAQ's up like 18 % over that period. That, to me, is a re-rating. But to your point is, I do think that this speaks to how aggressive they want to be at returning capital, lowering that share count. They did$85 billion back in May, and now this is$150 billion. You put those two together, you're talking about lowering the shares outstanding by 4%. So these are like base hits. So I do think that that is noteworthy, but there still has to tackle that challenge of the law of large numbers.
24:46Tim Seymour:Gene, thanks. Good to see you, Gene Munster, Deepwater. Mike, do you think NVIDIA is fairly valued? Should it be here? Yeah, I think so. I mean, first of all, let's imagine instead that right now, next year's adjusted net income estimates are only marginally smaller than this fiscal year's, or basically the trailing revenue numbers are. And the reason those numbers are so close is really because the margins are so great. And I think that's really one of the things that you could also argue, in addition to the law of large numbers, is that over the course of time, the best cure for high prices is high prices, which is to say that there may ultimately emerge.
25:29We don't know who that is yet. A business that could potentially compete with NVIDIA, it's hard to imagine what that would be, but that's what typically happens. Even so, the multiple is reasonably priced and bakes a lot of that in.
25:43Tim Seymour:Coming up, Boeing descending the latest glitch hitting shares and what it could mean for the company's Max 10 plane certification. Plus, the binging beatdown intensifies with Netflix shares hitting two-month lows, why investors aren't tuning in, and where our traders see this stock heading next. Don't go anywhere. That's when he's back in two.
26:11Karen Finerman:Who says Americans don't build big things anymore? Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's venture global. That's unstoppable energy.
26:40With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discover.com slash 5 for details. There is so much NFL on ESPN right now. Monday Night Football, plus pregame and postgame. NFL Live, NFL Primetime. Everything you need to stay on top of every game, every week. Unbelievable. And now NFL Network is on the ESPN app.
27:25More football, more coverage, more ways to watch. Football's on, all season long, on ESPN and streaming on the ESPN app.
27:39Tim Seymour:Welcome back to Fast Money. Boeing shares hitting more turbulence, down 7 % after the company reported a software glitch on some of its 737 MAX aircraft, potentially affecting landing procedures. The FAA also saying that certification of the 737 MAX 10 will be delayed because of that glitch. Shares hitting their lowest close since November, down 7 % today. Tim?
28:01Karen Finerman:Well, they have to say that. And I'm glad they are putting them a little bit in the penalty box in the 737 MAX, which has had a lot of other reasons to be in the penalty box. As someone that owns Boeing, I think this is an overreaction. And again, I think if I look at the free cash flow generation and where this company was and where this company came out of, which was not only its own internal crisis, but COVID. And I think it's a story that's still really attractive. You have to be patient here, folks. But industrials as a group are massively underperforming. And I just think that's part of today.
28:33Tim Seymour:Santoli in overtime was saying that these levels are like nine year ago levels. I mean, that's how long the stock has just been sort of stranded. I mean, you have to be really patient on this one. Mike Coe, what did you see in the options pits? Yeah, we saw a lot of activity. And kind of to Tim's point, I think that there is a general sense that this was an overreaction. The three most active contracts were all calls expiring at the end of this week. It looks like buyers of the 190, 195 call spread, 190, 200 call spread. So effectively, people are looking. And also, there was some short 207.5s.
29:06And that basically is options traders betting that a lot of what it gave up today could actually be recovered by week's end. Go back to 2020. And this is the lower end of a very significant range over the last six years, sort of 160 on the downside. I don't know, 255, 260 on the upside. So yes, Mike is right. the other mic in so much it's the same place it's been. But we've had some significant moves over the last five or six years. So I would submit, look, software glitch, I get it. Penalty box, I get it. It's been trending this way for a while. But they seemingly have figured some of the more important, I shouldn't say more important things, some of the other issues out that put them in the penalty box in the first place.
29:48Tim Seymour:There's a lot more fast money to come. Here's what's coming up next. Streaming downhill. The problem with Netflix shares as the stock hits two-month lows. Do the traders see a turnaround in-store? We'll get some answers. Plus, quieting your portfolio in a noisy market where a top money manager is putting cash to work as higher rates weigh on equities. You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.
30:29Karen Finerman:Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. that's unstoppable energy
30:58with the Discover Cashback card it's payback time when you earn cash back on everyday purchases activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases that's 5 % cash back at different places each quarter like grocery stores, on gas and at restaurants it pays to Discover terms apply see discover.com slash 5 for details. There is so much NFL on ESPN right now. Monday night football, plus pregame and postgame. NFL live, NFL primetime. Everything you need to stay on top of every game, every week. Unbelievable. And now NFL Network is on the ESPN app. More football, more coverage, more ways to watch.
31:47Football's on, all season long, on ESPN and streaming on the ESPN app.
31:57Tim Seymour:Welcome back to Fast Money. Netflix closing below$70 a share for the first time in two months. Shares of the streaming giant have been almost cut in half since their all-time high back in June of last year. Is there any reason to get bullish on the stock now? Tim, you flagged this. Sixth handle here.
32:12Karen Finerman:I think the engagement and the lowering engagement, what's been happening in the trend here is well in the price. So the question ultimately is, how do you change that? And I'm not sure. But I do think it's a case where we've dealt with the multiple at Netflix. It's certainly derated. We're at a place here where this is still the place to really, I think, see the kind of growth, especially international and because they had that kind of penetration. So I don't know. I think you can own it here. I think the market on a day like today is people. It's not strong hands owning Netflix right here.
32:45Tim Seymour:They are trying to do things like micro dramas, for instance. Well, kudos again to Tom Rogers, who in June of last year, when the stock was at an all time high, saw something in the quarter that concerned them. And the stock is down approximately 50 percent since that point. And they are trying to do things, which I think is part of the problem, because they're trying to do things when historically they didn't really have to try that hard. And that's when the market rewarded them. If you can get around it, the reason to own it, in my opinion, is this trough valuation that Tim talked about. It's not like they're competitors coming into the space.
33:18It's still Netflix world. They're just being penalized, I guess, for the other side of growth. What's a micro drama? Can we talk about that for a second? It's like a three or four episodes.
33:27Tim Seymour:It's scripted, like one to three minute kind of drama. One to three minutes? One to three minutes? Yeah, micro. I thought it meant just the amount of episodes. So you're wrong on that. No, it's like a very short, like to compete with. I mean, think about what young people. We have micro dramas on this desk all the time. We had one early. I like commercial breaks. Our micro dramas on Fast Money. So maybe if we filmed those, we could sell them to Netflix. No one would describe to Netflix. And I think we could make those four to five minutes. Easily, Tim. In your mind. But then they're not micro anymore.
33:55In your mind.
33:56Tim Seymour:They're medium. Coming up, a noisy market call for a quiet approach. How a top money manager is navigating high interest rates and where she's putting cash to work. Details on Fast Money Returns.
34:11Missed a moment of fast? Catch us anytime on the go. Follow the Fast Money podcast. We're back right after this.
34:25Tim Seymour:Welcome back to Fast Money Stocks starting the week in the red as interest rates ticked higher once again. The Dow falling nearly 350 points, S &P down more than three quarters of a percent. Nasdaq and Nasdaq 100 both dropping about a percent. Database service provider MongoDB dropping 18 % today after the news that the company's CEO is stepping down to join Meta as its chief enterprise platform officer. Don't miss an interview with the company's interim CEO. That's tomorrow, 10 a.m. on Squawk on the Street. Meanwhile, shares of biotech company Kodiak Science is nearly tripling today after the company announced its experimental eye treatments met primary goals in a phase three study.
35:00Tim Seymour:the results paving the way for an FDA approval filing later this year, with the medication potentially hitting the market in 2027. Summit Therapeutics surging after hours, AstraZeneca announcing a$2 billion investment in the biotech, and shares of RTX slightly higher after news the Pentagon has awarded its Raytheon division a$20 billion missile contract. Well, our next guest is bracing for more market challenges in Q4. Kathy Entwistle is managing director and private wealth advisor at Morgan Stanley. Kathy, welcome. Thanks for having me. What kind of challenges are we talking about? Oh, we're talking about challenges in the market generally, what to invest in.
35:37Is it growth? Is it value? Is it small cap, large cap? And then also interest rates. How is that affecting individuals, you know, purses, pocketbooks, bank accounts? And how do they not only invest in the credit markets or, you know, debt, but also what does that do to their bottom line as well?
35:55Tim Seymour:So we were chatting in the break, and I asked you what is the number one inbound question you get from clients. And you said, you know, clients who may have come upon some fresh money, they want to know where to put it to work. And I think that's very telling because we have a market that looks on the surface pretty strong. We've got rising rates and we've got very competitive sort of other options outside of equities like CDs or even bonds for the yield. What would you tell investors? I generally tell our investors, our clients, that you've got to match up your liabilities. So if you have money that you need over the short term to match it up or and then also for the long term to invest it that way.
36:34However, you know, right now it's a little trickier. And if people do have cash on the sidelines, I think there might be some opportunities that will come our way. We've got earnings coming in soon. They've held really strong. We don't know what that outcome will be this time around with the pressure of the Fed raising rates. there's a lot of pressure on different parts of the market. We're looking at that, too. So we're still investing, but we're being more thoughtful and more cautious about it. Everything is not going to win in this market like it might have done in the last 12 plus months.
37:07Karen Finerman:Kathy, one of the things that I'm sure gives your clients comfort is that you've seen multiple cycles. And I'm looking at your notes and you talk a little bit about some of your experience in the bond market in the 80s. And how do you feel that we are? Is this time different? I mean, this is a rate shock across the curve, but certainly on the long end. And I'm sure you're getting those calls. Kathy, have you seen this before? What's going on? What are you doing? Yeah, I think, too, a lot of people have been complacent over the last few years because we're so used to everything being fixed. So when I go back to different times in the market, especially on the fixed income side, higher rates cause more pressure on companies and also on individuals.
37:50from the corporate side, high yield, you're not getting paid for that right now. And we've been in markets where we have seen defaults and bankruptcies. People don't remember that. People don't remember Puerto Rico. People don't remember all these different time periods where pressure is added and there's results that aren't as positive as we're looking for. So I'd rather clients think a little bit more on the conservative side and invest in high-grade corporate bonds or high-grade municipals and stay away from the high yield. Don't chase, you know, that coupon. We spent a lot of time talking about yields obviously going higher, small caps going lower, which suggests that yields are going higher, maybe not for economic reasons.
38:32I know that hasn't been a huge move, but they're clearly rolling over. Thoughts on small caps? Yeah, actually, we have been pulling back a little bit more on small caps. If you think about it, they have a harder time getting access to capital and borrowing and running their business, and they do tend to feel the cracks sooner. So with that in mind, and also the idea that the Fed may raise rates again in December and maybe again in March, which is now Morgan Stanley's position, I think that we have to be a little bit more cautious. So we've been peeling a little bit away there.
39:02Tim Seymour:And at the same time, the biggest sector in the market, fortunately maybe, is an interest rate insensitive sector. So do you just keep plowing money into there? We're talking about growth in the markets. Yeah, and AI. Yeah, we really, yeah, we still like, we think that the companies that use AI to start, you know, creating cash flow and revenue and putting it to work are the ones that are really going to benefit. And there's still a huge opportunity there. So, you know, cautious, but also thoughtful, for sure. We want clients to participate and not miss some great earnings rally either. Kathy, good to see you.
39:38Thank you. Thank you. We're a fan of Kathy. She's still here, but I'm speaking, I'm not bringing her back.
39:44Tim Seymour:No, I know. The small caps, you know, the peeling back on the small caps, I think, is interesting. Again, economically sensitive. But, you know, if the economy was strong as the bond market suggested, you would see a different performance. And they're largely banks, small and mid-cap banks, which I think is a little bit concerning as well. Yeah. Mike? Yeah. I mean, one of the things we've seen also is that, you know, we were talking about equity insurance before. and equity insurance on the Russell 2000 is higher certainly than it is on the S &P 500 and the Russell 1000, indicative of the things that Cathy is talking about.
40:21And, you know, anecdotally, I also hear this from small and mid-sized business owners. They're complaining that, you know, there's a sort of macro problems, and they're the ones that are bearing the brunt of it because they are the ones that have to deal with the higher capital costs. So I agree with her that this is where the pressure is being born.
40:38Tim Seymour:Coming up, a spicy take on Chipotle. Shares getting a boost as analysts take a bite. But after its burrito breakdown this year, can the stock rally back? We'll debate that when Fast Money returns.
40:57Tim Seymour:Welcome back to Fast Money. Wells Fargo adding some hot sauce on the Chipotle trade. The burrito chain named as a top idea with analysts citing momentum driven by buy one, get one free promotions. Chipotle shares jumping as much as 7 percent at their highs. The stock, though, is still down about 14 percent so far this year.
41:16Karen Finerman:Do you think we tell more Chipotle jokes or like more puns around burritos and Chipotle and spicy? I mean, it gets a lot. It actually had a whole cilantro conversation in the break, which is a micro drama. Micro trauma.
41:32Tim Seymour:It was reality instead of scripted. There also I also read some. Now, I don't listen to a 40 billion dollar company. I guess in today's world, anything's possible. But there are people writing, is CMG a takeout candidate as well? Which I don't know. That is quasi interesting. So we'll see. There are a number of reasons where I sort of like this call. Obviously, it's had a huge move to the downside. At least valuation wise, you can wrap your head around it, despite the fact that the metrics have been rolling over. So, yeah, if you're going to play stock market here, this is not a bad level to get on the long side.
42:01Tim Seymour:Mike, you saw some heavy activity in the options market. Yeah, more than five times the average daily call volume. The 33 strike calls were particularly active. And this is about as cheap as the company has been other than, you know, the pullback that we saw in 2008. It also seems to be working its way right back to a 20-year trend line if you're looking at a logarithmic chart. So I think in terms of valuation, you know, it definitely is starting to look appealing here.
42:26Karen Finerman:I would be very cautious in hospitality, especially in the restaurant space and even in some parts of the travel space. I actually think airlines trade well. You're not surprised near me. Delta trades really well. But when I look at anything from Domino's or any of the pizza plays but a Shake Shack, I mean, it's been brutal. And I think it's saying a lot. They trade, as I said at the top of the show, as if there's a recession or about to be one. I don't think you need to be a hero on these. Some of these are very cheap, actually. They're legitimately cheap. But I just don't think you need to own here.
43:01Tim Seymour:Yeah, two-year lows on McDonald's. Which is amazing. And if we were talking about this, this was not a micro drama we did. We talked about it earlier. But if you were to overlay a Home Depot and McDonald's, it's the same chart over the last nine months. Obviously, much different businesses, which I think speaks to the consumer who is, I think, threatened a little bit to Tim's point. And quickly, it's not coincidental that the peak of Shake Shack was during my tenure as an employee at Shake Shack. When you say tenure, you mean like the two hours that you worked there? I say tenure.
43:33Karen Finerman:And when you say peak of Shake Shack, what do you mean? I'm talking about the stock price. Yeah. I mean, were you wearing a hairnet? No, no, you pointed that out a number of times. I don't think you were. We have the video to prove it.
43:44Tim Seymour:No hairnet.
43:44Karen Finerman:It's disturbing.
43:46Tim Seymour:Maybe that's me. Coming up, a new milestone in mortgage rates of details when Fast Money returns.
43:58Tim Seymour:Welcome back to Fast Money. 30-year fixed mortgage rates hitting a new milestone. According to Mortgage News Daily, rates are now at 7.5%. That is the highest level since April 30th, 2024. That's when the fix was 7.51%. So we are just, you know, one basis point away from hitting that level. Fallout, of course, in the homebuilders. We mentioned Home Depot earlier, but it's amazing to me that you're not seeing homebuilders and, you know, those three or four stocks we talk about, you know, a few times a week, roll over in a more meaningful way. I mean, this is not an environment, I don't think, that sort of lends itself to being bullish on the homebuilders.
44:37I still think there's downside here. Why do you think that is?
44:40Karen Finerman:Well, the interest rate sensitivity around Home Depot, especially with HELOCs. I mean, people have been taking money and drawing it as an ATM and putting it in their house, but they're going into Home Depot and Lowe's. And I think that's part of it. The question you have to ask is, are we staying at seven and a half? Are we staying at seven and three quarters? Or at some point, is this the top? And I'm not sure. I'm not ready to make that call. But I can make a call on Home Depot here. I can make a call at this valuation. I can make a call on their pro business, which has been very resilient in high margin.
45:08Karen Finerman:So I think long term investors are looking at these opportunities. And I think Home Depot is one where I've been starting to nibble over the last few weeks.
45:16Tim Seymour:Yeah. Mike, do you see any opportunities in sort of the XHB sort of basket stocks? You know, I think one of the areas of potential support for the home builders is simply the fact that we continue to have a meaningful shortage of supply and housing. And when rates go higher, that locks more people into their houses, which essentially means that that puts additional pressure on existing home sales. And so if there's anything that can keep the homebuilders up, and it's probably going to cause them to have to shift meaningfully down like they're, you know, what kind of audience they're targeting for.
45:46So they're going to have to bring those prices down a little bit more sort of builders grade materials and things like that. But, I mean, there continues to be a shortage of housing and someone's got to meet that. And it's not going to be existing home sales if mortgage rates are heading towards eight. All right.
46:01Tim Seymour:Up next, final trades.
46:16Tim Seymour:Time for the final trade. Professor Mike Coe. Yeah, technically terrible, but fundamentally it's beginning to look appealing. So I'm looking at Netflix. November, one by two foot spreads will start to get you into the stock around 60. Tambo.
46:28Karen Finerman:They call it Stormy Monday, Guy. Yeah, Tuesday's just as bad. Just as bad. But I don't think it is for McDonald's. So I've been slowly starting to nibble on this one, too. Mickey D's not going up tomorrow, but it's going up. That's an homage, Mel, as you know, to the Allman Brothers. By the way, David Sutherland watching right now. Hey, Vid, how are you? You better you bet on Summit Therapeutics.
46:50Tim Seymour:Thank you for watching Fast. Matt Money with Jim Cramer starts right now.
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From the publisher
Stocks taking a leg lower to start the week as interest rates continue to tick higher. What a top market strategist sees in store for the Fed’s next move, and the sectors of the market that could show strength in a high yield environment. Plus Boeing’s software glitch hits shares, Netflix’s bingeing bummer continues, and quieting a noisy market; how a top money manager is silencing a hectic market, and where she’s putting money to work.
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