Rising Rates, Gold, Oil After Powell’s Comments… And Japan’s Currency Crunch 4/1/24

0:03Live from the Nasdaq market side in the heart of New York City's Times Square this is fast money. Here's what's on tap tonight. Rising tides, yields, oil, gold all up to start the new quarter and adding to their gains for the year. How markets are reading into these moves and what it could mean for the Fed this year. Plus, a currency crunch, the Japanese yen trading near 30-year lows against the dollar. What the move means and why one of our traders says we should be paying more attention to these swings. And later, digging in on DJT, the latest numbers on the former president's social media company.

0:32Just how much did it lose last year and what's it mean for valuations? I'm Melissa Lee. Come to you live from Studio B at the Nasdaq on the desk tonight. Karen Feinerman, Dan Nathan and Guy Adami. Powerful trio here. We start off with a big move in rates to start the second quarter. The 10-year Treasury yield rising 13 basis points in today's session now hovering around 4.3 percent, a two-week high. It was below 3.9 percent at the start of the year. But it wasn't just yields moving higher today. Gold hitting another record during the session, settling above$2 ,200, and WTI crude surging to nearly$84 a barrel, hitting its highest level since late October.

1:10The moves coming after Fed Chair Jerome Powell suggested over the weekend that the economy is still on strong footing, potentially giving the central bank more time to weigh data before cutting interest rates. So does this all tell investors to prepare themselves for a prolonged pause from the Fed? Maybe we won't get three. Maybe it's more like two or one or none, as James Gorman has said. I actually think that would probably be the most bullish thing that could happen because it would suggest, although inflation is still a problem, the economy is fine. It can withstand rates at these levels. And quite frankly, we've learned that the market can withstand rates at these levels.

1:44So I think people are wishing for rate cuts. And I've said, be careful what you wish for. With that said, though, the inflation genie, I think, is right back out of the bottle in the form of all the things you mentioned at the top of the show. And the fact that gold is rallying with the dollar going higher and yields moving the way they're moving is really interesting and, I think, significant, Melms. I agree with everything you said that I think it would be that he's not raising rates because things are good and they don't need to. I mean, it would seem like this isn't a great time to start cutting.

2:15You want that dry powder when you need that dry powder, right? We don't need it right now. So I'm surprised there's still three on the table. I agree with your opening. It could be two. It could be one. It wouldn't be so shocking. Three to me is more surprising than zero, I would think. Right. But to delve inside the mind of the markets, so to speak, aren't we rising? Aren't we doing so well because there are three on the table still? And if you took them away tomorrow and there's a headline saying Powell says no rate cuts this year, what would the markets do, do you think? I mean, I don't know.

2:49I mean, I go back to the fall. I mean, I really don't. When yields in the 10-year went from 4 % to 5 % in September, October to the highs in late October, right? So the higher for longer narrative was like that was the consensus there. Look at what the S &P 500 did. It went from, I don't know, it went from like 4 ,600 down to 4 ,150. I mean, think about where we are. We're at 50, 250. So when I tell you I don't know, I have no idea. And so if we're going to soon price out a June rate cut, okay, and then that kind of pushes it into the summer, and then we have two at that point or so, like, I just don't, I have no idea.

3:22But, like, the fact of the matter is if the Fed keeps ratcheting up their GDP expectations, If we get through Q1 earnings season and we don't have a meaningful downgrade to at least guidance going forward, then I guess at some point there should be a little fear put back in the stock market because we just haven't had a 2 % down day in the S &P 500 in like 285 days or something like that. It just seems like there's a lot of complacency right now. But I think a lot of investors are going to continue to ride this as long as they can, especially if they think the rally is broadening out a bit. Well, didn't we go from, I don't know, six to five to four to three?

3:55Yes, that's true. And things were all right. That didn't seem to put people off the market. Certainly, you know, some of the high flyer, big multiple names, those did well anyway. So I don't really understand why there's such a push for him to cut. When it's not clear, the G is back in the bottom. S &P 500 earnings consensus for 2024 is like$243. We're up about 21 times, okay? So that is like very high relative to the five and 10-year average. I think Faxed has it down at like 19 and 18 percent respectively on those averages, right? So if we get to Q1 earnings season and we do see Guy down, we have two very big names, Apple and Tesla.

4:35I know we're going to probably talk about both of them later. I mean, some analysts are expecting right now consensus is for a year over year decline in earnings growth for Tesla. If that were to happen in Apple and then you start seeing that sort of deceleration in some other names, at some point the stock market or investors will pay attention to that. The other reason yields could be right, again, maybe the economy is great. The other reason we've talked about this is the fact that issuances are coming out in a major way, I think close to somewhere between$9 and$10 trillion by the end of this year.

5:05And not to suggest that people won't buy our debt. They absolutely will. But the markets can demand a higher rate of interest to do that. And I think to a certain extent you're seeing it now. And over the weekend you're reading more and more stories about debt to GDP and how at a certain level things sort of get on the wrong side that you can't recover from. and the fact that interest payments on this debt have reached a staggering number for this year. I think the bond market is taking that into consideration as well. That's not particularly bullish for the market, however, in my opinion. No.

5:33I mean, that's one of the reasons why we see gold rising as we do. When that haven, as Ben Evans wrote today, you know, he wrote basically, when you see one haven not acting properly, that's when gold really shines. And that's exactly what we've seen over the past, you know, month or so plus. In terms, though, of the historic valuation of the S &P 500, some could argue, though, that historic valuations are not applicable to where we are now because the composition of the S &P 500 is so different. Well, I make the argument, though, if you think about where we've been getting earnings growth over the last year and why we bucked this kind of earnings, you know what I mean, kind of malaise that you've seen across lots of other sectors is because of the mega cap names, the names that make up 30 percent of the S &P 500, that make up 50 percent of the NASDAQ 100.

6:17If you did not have the outperformance from an NVIDIA that's been growing 100 % a year, it's become the third largest market cap company in the S &P 500. If you don't have Microsoft doing what it's doing, by the way, trading at 35 times, many turns over its historical average. So right now we've had the earnings growth, but you've also had multiple expansion in a big, big way around a fundamental narrative. If that doesn't start to play out the way, you know, or if we pulled forward a lot of this performance, at some point you will have a correction in multiples, especially with yields where they are.

6:47Why are we so we should be happy. I'm always happy. Look at me. The markets are doing so well in the face of fewer rate cuts, getting priced in in the face of potentially zero rate cuts this year. And where are we still? Fifty two hundred on the S &P 500 and change. So, Guy, why so grim? Well, I know you're saying that somewhat tongue in cheek and you are somewhat wired like I am. But I'll tell you why. Two reasons, because when I started in this business, is one of the first things I learned is hope for the best, prepare for the worst. So that is sort of like a Wall Street mantra, at least when I started.

7:22The second point is when we started the show back in 07, 08 and 09 are still, I'm not suggesting we're there, but the fact that people came back and said, you never told us all the bad things were going on, you never warned us. So I vowed from that day on, if I saw things that were, to me at least, alarming, I was going to bring them up. Now, the market has flown in the face of that without question. Similarly, it did back in 06, 07 into 08. If you recall, there were a lot of warning signs then. So the answer to your question is things aren't as great as they appear. You know, you look at the employment numbers.

7:53Unemployment's still below 4%. But look at the last 10 out of 12 months, the revisions to the downside. You know, there are a lot of things to be concerned about in terms of the consumer. And consumer debt now$17.5 trillion. A lot of warning signs out there that the market right now at least is looking past. There are still things out there. always talk about the market is not a monolith, right? There are still definitely pockets of value out there that have sort of set out the rally. And so I think I was expected to see actually, even on a day like today, which is the beginning of a new quarter, oh, we'll start to see some broadening out.

8:26That didn't happen. The reverse of that happened, actually. You saw much bigger strength in, you know, Google metas of the world than the IWM or any of the mid caps. So I don't know. I don't know why that happened today. But I do think that a broadening market, which we do have, is generally better. Meantime, the 10-year Treasury is trading at almost exactly its average yield over the last 12 months. And the chartmaster thinks it is about to take the path lower from here. Carter Braxton Worth of Worth Charting joins us now. Carter. Well, yeah, I mean, here's the thing. I mean, if you were to we've had these twists and turns, of course, and there's been, oh my god it'll be seven cuts eight cuts now we're not going to have any or maybe they'll raise oh there's higher for longer at the end of the day rather than looking at yields from where they were 12 months ago to where they are now if one were just to look at the average uh midpoint in any given day over the past 12 months yields are exactly where they were 12 months ago so let's let's look at this one-year chart of 10-year u.s treasury yields now let's annotate it in the second iteration here, and you'll see this line, that if you were to take every single trading day and the midpoint of the range, of course, in any given day, there's a high, there's a low, and there's a close, whether it's a stock or a currency commodity, or of course, 10-year treasury yields.

9:47But the average of all days over the past 12 months from the end of Q1 2023 to the end of Q1 2024 is 4.11 percent, where you financed or didn't finance, where you acted or didn't act. So looking at it this way, the great fear, and that has been the great fear, that rates are going higher and higher, they haven't. And whenever, and history bears this out, whenever you hear a mantra or a turn of phrase that gets coined and embraced and considered sort of gospel run the other way. One of the biggest phrases, you can Google search it, was higher for longer. That was at 5.02%. We are not at 5.02%. It has not been higher for longer.

10:36All right. Carter, thank you. Carter Braxton Worth, 4.11. Even if we stayed at 4.11, though, it would still be higher relative to where we had been for longer, potentially. But I get what Carter's saying. Listen, I understand what he's saying. He's looking through the lens of 100 percent. And he's been right more than he's been wrong. I'll say this, though. If you look at the TLT, for example, which is the inverse, but this has been going lower since 2020 or so. We've made a series of lower highs and lower lows. And quite frankly, even with this bounce in the TLT that we've seen recently with yields going from 5 percent to 3.8 or so, that is still intact.

11:14And if we were to take out sort of this 85 level on the downside in the TLT, which I know seems light years from where we are now, then you're going to have that next leg that I don't think anybody is planning for or expecting. You know, it's interesting. I don't know if you guys caught over the weekend this manufacturing data out of China, right? So think about this. If they just had the highest data that they had on the PMIs in a year, right, and suggest that they're out of contraction, if the Chinese economy starts to get humming, and if you think you're worried about crude oil that just went from 70 to 80 bucks, If you think you're worried about some of these other commodities that are like, you know, bottom left, upper right.

11:47And again, giving the Fed, I think, pause to kind of say, hey, listen, you guys got over your skis with those six expected rate cuts, because that will only kind of, you know, embolden the, you know, like the inflation kind of fears out there. What happens if we get to a point where China has a consecutive swing, you know, of the better data and we start seeing better demand and inflation readings start to pick up? then the Fed's quickly going to have to start to move to think about how do we start raising rates again. And at that point, if U.S. growth, if the long and variable lags of all this stuff finally hit and we finally get that recession, that could be a really tricky spot, I think, for risk assets.

12:25I love it when guests come on the set and just roll their eyes at Dan, because that's exactly what happened. That was amazing. Is that what you call a good segue, Mel? The guest we're speaking about is Julian Emanuel of Evercore. Hi, Julian sees the potential for a volatile April. He's the firm's senior managing director. Julian, great to have you. Whatever you roll, you don't think there's any possibility that the Fed's going to hike? No. Is that what you're right? No, it's not an eye roll over what Dan said. Just Dan in general? No. Are you kidding? He looks feckless. I know, he does. It's the consequence of even the market thinking there's a possibility of that.

13:01And look, I think part of the narrative that's going on now is there's a tendency to say, well, something worked this way, so it's going to work this way again. And look, frankly, the move from six expected cuts to three was something that we did not expect the market to take as well as it has taken it. But again, like this whole idea of 3 percent inflation back towards the 2 percent goal, this last mile is a little bit more difficult. And so, therefore, this idea of three cuts maybe going to two, we don't think the market's going to digest that as easily as it digested the kind of move from six to three.

13:41Because you're 10 percent higher. You're on 21 times earnings and expected growth of north of 11 percent for 2024, which is high by no landing scenarios. So we do think there's some volatility ahead. How does the inflationary sort of readings that we've had when it comes to various commodity prices, services being stickier, etc., how does that factor into your view of what the Fed might or might not do? Well, it made Easter a very expensive holiday this week, given that cocoa is over$10 ,000 a ton. The Fed has hinted that it's going to give us something that it has literally never given us. OK, you've had really one cycle where there was cutting into a soft landing being 1995.

14:27And the fact is that happened when core PCE was already close to two percent. So it's really kind of one of those a belief that you're going to get that last mile. And we can already look ahead a week and a half from now. Now, it makes the CPI data unbelievably important because the narrative is now at the point where, particularly given that momentum stocks have stalled out in the month of March, that's the kind of thing that's a threat to the broader market. So let me ask you something. If CPI continues to run a little hotter now than we had hoped and the Fed does nothing, aren't they, in fact, decreasing real rates?

15:11So there's the conundrum, right? You walk this fine line between movements and real rates. And again, we have to understand that based on the last seven or eight years, real rates are high. But based on the last 20, they aren't necessarily that high. And remember, I think part of the shock of the last number of months is like, wow, we can actually make money in stocks with interest rates north of 5%. It happened throughout the 1990s. I would suggest this sort of the opposite thing is the problem. is that if the Fed keeps indicating that it looks like two or three cuts, you get the 10-year yield moving sharply higher to discount a longer trajectory of inflation.

15:53And that's what bothers stocks more than whether it's three cuts or two cuts. Julian, your target for the S &P, I think, is$47.50 this year. What gets us there? Look, the environment that we're in now, Now, we've seen a lot of what I would call head-scratching activity on the part of the investing public. FOMO, irrational exuberance, call it whatever you want. But when you're making bets in the options market that the price of a$2 trillion market cap stock is going to double over the next four days, there's something going on there. And so from our point of view, what you really, this is a time where, again, this is not an end of the bull market call.

16:37Pardon me. That was no pun. intended, is it's a normal correction of a market that likely goes higher but needs some time to catch up. And that's only going to be a function of if you get disappointing data, because we really are priced for great earnings, great interest rate trajectory, and inflation not being as sticky as it's proven the last couple months. So Julian, you're rolling your eyes at me. You've got a 47.50 target on this thing. I'm helping you get there, buddy. I'm giving you one of the paths to it. No, all right. So let's just talk about that. So that's a 10 percent move. And we know that in most every year in the S &P 500, there's at least a 10 percent sort of correction.

17:14If you were just to have that sort of move and it looked a little bit like last July to October. Now, we did have yields going higher during that time period. But let's just say it's just a reset. It's a bit of like taking a bit of the froth out. Would you get more constructive if a lot of the data did not get much hotter or much weaker either way. 150%. Basically, this is one of these times, again, and you nailed it, the average non-recession year pullback is 13%. We were spoiled last year. From our point of view, if you get what we expect to come in terms of a market pullback without the probability of a recession becoming more apparent, you absolutely want to get much more positive on the market.

17:57And it's been proven for years on end that that's when you want to buy, not when you want to sell. All right. Just quickly, April, what is it about April, you think, that makes it traditionally or historically more volatile? So if you go back to sort of 2000, you've had trading tops and trading bottoms in the March-April time frame. And what tends to happen is that whatever the momentum is coming into those kind of turns, it flips. Perhaps what's more pertinent this year is the fact that we've been carried so much psychologically, if nothing else, by those momentum names. We now we're not the Mag seven.

18:36We're the Mag four, the Mag one or Mag two right now. And that's where the vulnerability lies. All right, Julian, great to see you. Thank you, Julian Emanuel. Forty seven fifty lines up, I think, right now with where the two in a day moving average is for you playing our home game out there. and we are a couple standard deviations away. And typically the market is mean reversion. But I'll say this quickly. That March 8th, that Friday, March 8th, when we saw all those reversals in single stocks, that has not been violated. Things have gone sideways, slightly higher, slightly lower. But go back and look at that day, the technical setup on the back of that day.

19:09And I still think we'll come back in a month or so and say, ah, that was something, Melms. Coming up, a managed care meltdown going on right in the after hour. Shares of Elevance, UnitedHealth and others plunging after a move out of the centers of Medicare and Medicaid. The headlines from the agency, what it means for these stocks. Plus, Tesla stock coming off a rough first quarter. Now investors are bracing for potential electric slide when delivery numbers cross the wires. What to expect from that data, don't go anywhere. Much more Fast Money in two. This is Fast Money with Melissa Lee, right here on CNBC.

19:50The Centers for Medicare and Medicaid finalizing their rates for Medicare Advantage and Part D programs in 2025, in line with the government's initial proposal but coming in below Wall Street's expectations. The decision dealing a blow to managed care stocks, which are dropping sharply in the extended hours. For more, we're joined on the Fast Line by Mizuho Healthcare Sector Strategist, Jared Holds. Jared, great to have you with us. Thanks, Melissa. Appreciate it. In layperson's term, what does this mean for these stocks? Well, the three was expecting a boost from the preliminary rate of about 3.7 percent or so.

20:28A lot of the commentary from the industry suggested that in this final rate, which came out this evening after the close, that we were going to see 100 basis points, perhaps a little bit more in relief or in addition to that 3.7 percent. That does not seem to be the case here. And, you know, as we've discussed so many times, healthcare utilization is running extremely hot now, and these rates are probably not going to cover enough of that for the managed care companies going forward. It's more of a near-term situation. I mean, you know, the rates get reset every year, but at least as we go into fiscal year 2025, I think all of these companies are going to be have their backs against the wall to a degree.

21:17It's Karen. Thanks for being on on short notice. So how does this change your view of these companies? I mean, they're all down anywhere from four to eight or nine percent. How do you think about them long term? Hey, Karen. I don't think that much changes. These are these stocks have been out of favor for the past couple of quarters now. mainly driven by the fact that the procedure volume environment has been so robust. I think what we were kind of hoping for was that a rate increase or a rate change in the positive direction for managed care was going to make the stocks more ownable. And I think what this does in terms of changing my view and how I think a lot of investors are going to look at it is that the lack of a rate change makes these stocks less ownable, less interesting, especially versus other companies in the sector with more momentum to start with.

22:16So now these are kind of anti-momentum or counter-consensus stocks coming into tonight. They're probably going to remain so. And so you're just not going to see, I don't think you're going to see a major bounce tomorrow. Guidance on utilization rates for the first quarter and for 2024 as a whole remain high. There was a certain assumption that the utilization rates that were seen in the last reported quarter would remain that high. Could that be sort of the potential upside for the Sox? Is there any evidence that perhaps utilization rates aren't as high? Yeah, I mean, that is the question. I mean, we're all trying to, you know, gather data points from the industry to kind of give us a better sense of whether utilization rates are going to, you know, stay at current rates, whether they're going to drop, whether they're going to even get stronger from here.

23:05You know, there have been a lot of medical meetings, a lot of broker conferences over the past couple of months. And a lot of those data points kind of suggest that we're going to stay at these elevated volumes for a while. So maybe that's the first quarter of this year, the second quarter into the second half of the year. I mean, at some point, I would think that we kind of normalize just because we have not seen this level of strength in a long time. But it's so difficult to predict. A lot of it is based on just behavioral. Some of it's based on the economy and the job market. And obviously, all of those variables are tough to predict in isolation.

23:41I would just think that based on what we think we know, we're going to see this utilization environment continue at least through the early summer. All right. Jared, thanks so much for joining us by phone. We do appreciate your analysis. Last minute, Jared Holtz of Mizuho. Karen, you own Elevance. I do. Yeah. And I take some comfort, which I should take none in that it's down the least. But four percent. I'm not not delighted with that. And you know what? Everything you're saying about do you want to own these actually probably not. And just a mistake I made, you know, owned it much lower, which is an irrelevant piece of information.

24:17I should probably just sell it. Humana quickly. I mean, that's been the leader to the downside. So real quick, Melms, if we can go back to September of 2018, at the time the stock was making an all-time high around 330 or so, then we cascaded lower. The levels we're at right now are actually lower now, but this is huge support level, so it's got to hold. And quickly for UNH, I mean, the double top now is firmly in place, 452, which I think was a low, I want to say in June or so of 2022, critical that it holds that level. There's a lot more Fast Money to come. Here's what's coming up next. The ABCs of dividends.

24:55Why one top analyst says Alphabet could be ready to start paying back shareholders. And what it could mean for the stock. Next. Plus, yakking on the yen. Japan's currency at a pivotal juncture. And central bankers are eyeing the moves. Could there be an intervention ahead? You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.

25:25Welcome back to Fast Money. Tesla continuing its rocky start to the year, dropping as much as 3 % at its lows of the day. This is investors await the EV makers' Q1 delivery numbers. CBC's Phil Lebeau joins us now to dive into the estimates which have been coming down of late, Phil. They have been, Melissa. And the question now is, will Tesla post a year-over-year decline in deliveries? We haven't seen that in quite some time, at least four or five years since we've seen that from Tesla. Here's the latest consensus from FactSet. 457 ,000. I have to be clear here. That was the consensus last updated by FactSet on Friday.