S&P Inches Toward Record, and Trading the Leaders and Laggards for 2023 12/19/23

0:28Good afternoon, everybody. Insta revival, even with the stock up nearly 200 percent, one firm thinks Meta is still a top pick for next year. That is our call of the day. And later, a studs and duds edition of Would You Rather. From entertainment to autos to retail to industrials, the traders will face off on this year's leaders and laggards and who will win in 2024. I'm Tyler Matheson in for Melissa Lee. Glad you could join us. Coming to you live from Studio B at the NASDAQ market site. On the desk tonight, Tim Seymour in an undisclosed location. Karen Feinerman sitting to my right. Dan Nathan and Guy Adami join us as well.

1:07And we start with the latest index that is inching toward a new record. The S &P rising nearly six-tenths of a percent today, closing less than a percentage point from its all-time high. The benchmark index is now up nearly 16 percent from its October lows and is almost 25 percent higher on the year. Meanwhile, the Dow closed its own record for a fifth day in a row. The small cap Russell 2000 led the charge, though, settling at its best level since August of 2022. The question now is, is it too late to get on board with this bull rally or is there more steam left in the engine? Guy, are investors expecting too much?

1:48Hello, sir, and thank you once again for the beverage that you gave to me. I'm delighted to have it. Are investors counting on too much from the Fed next year? That's a great question. I think the answer is yes, but you know what, Tyler? I would have said that 20 % ago or so in the S &P 500, and that would have been incorrect. The market is now up 16 % in 36 trading days, which is remarkable. We can talk about the move from lows to highs in the Russell. But what I look at, and I know Tim is probably looking at the same thing, relative straight index RSI is now north of 81. The last time it was this high was probably September of 2020, and that didn't order particularly well for the market at that time.

2:26It doesn't mean the market's going down in a straight line, but it does mean in terms of sentiment we are very overbought and levels we haven't seen in the last three or so years. You know, it's interesting, Tyler. If I go back to late 2021, the last time the Fed signaled a pivot, right? They had late November said they were going to start raising interest rates in the new year to combat inflation. Right. Well, here we are. We're in December of 2023. The stock market, as Guy just said, rallied 16 percent off of those lows in late October. I go back to 2021 again that December. Stock market rallied seven and a half percent.

2:57The S &P made a new high, I think, on the second trading day of the year in 2022 in the face of the Fed and what they were going to do. So you ask the question, are investors pricing in too much? You know, like I understand what I think is going to come back as a pullback, because I think ultimately when the Fed cuts, it's not going to be for those great reasons that a lot of people are imputing right now into the markets. But, you know, sometimes markets have a way of doing things that you don't expect them. That's why I bring back to two years ago and the reaction here. Right now, it feels like there is no end in sight to how far stocks can rally.

3:30We're going to have a headline probably in the not so distant future. New all time highs for the S &P 500. Your question, though, what do you do right there? Do you chase it? I'm not sure if you do that up 17, 18 percent. Yeah, it's a tough question. I mean, I feel like this what's happening right now is just a chase because many managers are behind, you know, behind whatever their benchmark might be. And so they feel like, all right, I have to be invested. And it's not about where things are trading or whether we're going to be in a recession, any of that. It's just how do I show at the end of the year what, you know, performance.

4:03And so this is sort of a I don't know. I don't know what kind of top it is, but some sort of top. But I don't know what to do about things. It's funny, you know, when your own stock's up like 18 percent in a short amount of time, you feel like, all right, well, that makes sense. When the other stocks that you don't own, you feel like, wow, this is really getting ahead of itself. Right. So there's some of both going on here. But I think I always say if you went home long, it's as if you bought it at the close. So I essentially bought everything at the close here. And I'm going to hang on to it for a while.

4:32I think that the Fed put is sort of in. I don't know that it's an at the money put. Right. It could be that the recession happens, we go down, and then the Fed's there. But for the moment, I'm staying long. The one thing I do really like, though, is the broadening out of the rally, right? We've been talking for a while about the Russell 2000. Small caps taking part. Exactly. I mean, today, a big outperformance by the Russell 2000. I like that. That looks healthy to me. Some of this, literally some charts that are straight up, that looks less healthy. Yeah, Russell 2000 at levels not since August of 2022.

5:04The NASDAQ 100, I think an all-time high. Tim, is it time for small caps? If you haven't gotten in, is there still good bargains there? Well, I don't know about bargains, but it's certainly about time. I mean, small caps have underperformed for so long and it's been such a significant underperformance that they were kind of due. I fit somewhere in the middle of the comments so far, meaning I can look at the broadening of the market and say, this is great. I'm also very happy to see the relative strength of the leadership also continue. And let's be clear. I mean, you know, Nasdaq's all time highs.

5:40We're about to get there on the S &P. But the leadership that's coming from the semiconductor space and the mega cap stocks is what I think you actually need. So the combination of both of them, I think, is great news for markets. You know, back to the Fed, we hit three ninety nine on on December Fed fund futures. That's one hundred thirty five basis points, one hundred forty basis points, one hundred fifty basis points away. The Fed does that next year in terms of cuts. something bad is going to happen, I think. Based upon the economy we have today, which is one that's reasonably strong, a labor market that's reasonably close to all-time lows in unemployment, where we know what's going on in manufacturing and leading indicators, not great.

6:18But there's other parts of the economy that are doing quite well. So this week to me and last week, but we had Savita from Bank of America on last night. Some of the keys to me is that the street and both the analyst community, but I think investors are getting comfortable with earnings growth in 24. And that's what you have to hang your hat on. I'm not saying we're going to get the 11 or 12 percent earnings growth that's forecasted. But that's the part of this that you need. And that's the part of this that after three quarters of an earnings recession, I think is where markets have to believe in 24.

6:52It's interesting. If we can put up a Russell chart in the form of the IWM, put up a five-year chart, our crack staff and EC can do that. And you'll see the levels that we've traded up to. I think we closed a little north of 200 today. The same top we made, I think, in August of 22. Go back to this January. If you want to extend that out a little bit, I think it'll become a lot clearer. I mean, we're at big resistance levels. And to Tim's point, the Russell made its all-time high in November of 2021. And although it's rallied off the lows, we're still not close to the levels that we saw way back when.

7:22So that's something to keep in mind. And I only bring that up because if you think, like I think, the unemployment rate is going to move up in a pretty precipitous way over the next six months or so. In my opinion, it's very hard to be bullish small cap stocks in this environment. Yeah, the other thing, I think we hit this earlier in the week. There was data. This is the shortest period that the IWM, the Russell 2000, went from a 52-week low to a 52-week high. And that's happened, I think, over the last kind of, you know, 30 trading days or something like that. We're seeing that in the S &P 500.

7:50There's no shortage of stocks. Like, I'm just a guy of Citibank right here up. And this stock was trading at 38 and a half on October 27th. It closed today at near$51. It's about to make a new 52-week high. And if you just think of that, I mean, that just reeks of a chase, right? And so do you want to buy something that's made that sort of move that was so out of favor not too long ago? And again, you know, we had the CEO of JP Morgan probably right before that stock was making, this is the Citibank, was making new 52-week saying be prepared for 5%, 6%, 7 % Fed funds for a while. So a lot of folks got a lot of things wrong in the last few months or so.

8:29And I guess my point is, after you have such a parabolic move, it doesn't make sense, given all the uncertainty, to probably chase stories like this that have moved that quickly. And the same goes for the Russell. What should I do with my money here? Is it time to shove it in, or are there sectors that you like, Karen? Well, I actually am long banks. I would push back on Dan's comments about Citibank a couple of, I guess it was only six or seven weeks ago, that it never should have been a 37, that that was where the anomaly was, not where it is right now. When you think about as a price to earnings and certainly as a price to tangible book, nothing comes close to Citi valuation.

9:06J.P. Morgan, that's one I'm comfortable owning here. I think there's, I like the IWM here, even though it's had a big run. Could it pull back? Yes. But I do think that there is still a lot of room between where the IWM historically has traded and where the S &P 500 is traded on a price to earnings basis. And over time, in the 25 years since the IWM has been around, it's outperformed. Lagged recently until the very last push that we've had. So I'm staying long, Matt. Tim, where would you be putting money now? Well, I think there's a couple of parts of the economy that we don't spend a ton of time talking about that are also working.

9:42And we had that U.S. Steel news last night. But you look at integrated miners. So I'm talking about BHP. I'm talking about Rio Tinto and then the ones that are specialized more into copper and gold like Freeport. Freeport's had an outsized move to the market since that CPI number in mid-November. So, again, easing on inflation is very, very good for the resources community. Whether you have the kind of demand, and I think oil suffers more from demand concerns, but a weaker dollar, a dollar that's now down almost 5 % from that peak that we had when rates peaked around November 1st, I think it's great for the resources community.

10:15I think there are structural issues for wanting to own copper. And I think the integrated miners also are well kind of situated. We've seen international markets also. That's a dollar dynamic. Multinationals benefiting from that dollar weakness as well. Japan was up 1.5%. I think Japan continues to go higher. Latin America, which has some emerging market dynamics that are actually very beneficial here, especially at a time even when China is not strong. Brazil is strong also on the resources front. So and I think there are places to I think gold as back to miners, gold's about to get to a fresh push through to to multi years, all time highs.

10:52And gold's been waiting for this moment. Gold miners have underperformed yet a big move by the GDX today. I think you're going to continue to get that. But again, I would I would get back to some of the things that Karen was saying. We had nasty, nasty bear markets in a lot of real economy stuff going into this period. So I love the fact that the market's broadening. I think some of these companies are pretty cheap and I think there's an opportunity from trade higher. If we were not getting the outperformance of the leadership, though, I'd be concerned. And while we have both markets go higher.

11:21All right. And we're going to talk more about the miners in a little bit. But meantime, we've got an earnings alert. FedEx tumbling on an earnings miss. The company also lowering revenue guidance for fiscal 2024. Frank Holland here to take us inside the numbers. Hi, Frank. Well, hey there, Tyler. I mean, you hit the nail on the head. The lowering of that full year guidance is just another factor weighing on FedEx. The company got, you know, a flat full year from a prior forecast of lower single-digit growth. Also, a big miss on margin for the Express business. Air deliveries where FedEx gets just about half of its revenue.

11:52And Express, it just continues to see lower demand and lower pricing power. Ground the bright spot here. Revenue growth beat on margins. The company won business from UPS during the Teamster negotiations. The freight business, that's an LTL trucking business, it benefited from more pricing power. Rates up about 4%. FedEx also benefiting from the bankruptcy of Yellow. Overall mixed, also questions about how sustainable those gains from UPS and Yellow really are. So FedEx said it achieved$1.8 billion in permanent savings from its drive cost-cutting plan on the call starting at 5.30 Eastern. Investors will be listening closely for progress and also how the integration of those three business units is going.

12:30That process expected to be completed in June of 2024. Tyler, back over to you. All right, Frank, thank you very much. Let's trade FedEx. Karen, what do you think? Well, so I had been in FedEx and switched to UPS. FedEx was, they were in the middle of a very nice turnaround, right? The stock is starting to sort of get some love. It went from trading at a low double digits multiple to something sort of 15, $16-ish or so. I'm kind of surprised with the magnitude of the sell-off in the after hours. They missed by, I don't know,$0.20, and yet they were down, I don't know, what is that,$23 or so, give or take?

13:06Yeah. That's a very big multiple on a, yeah, it was a miss for sure. But it just sort of harkens back to, or do you harken or do you harken back? I'm not sure if that's. I think you harken back. All right. So to, wow, when FedEx would have a couple of good quarters and then a bad quarter, and then put out guidance and then not really make it. And so I think you're getting a little bit of multiple compression here because maybe the credibility, maybe it's back to maybe being in the penalty box a little bit. UPS, which I own down in the, you know, some of the same reasons, it probably will have a tougher quarter.

13:36Dan? Yeah, I mean, listen, stock rally 25 % into the print, right? So when you say they missed on, you know, like a few percentage points and the guidance wasn't better than expected, I mean, there was a lot in the stock at that point. And Karen's talking about a stock trading about 15 times growing at high teens. You know what I mean? that is a cheap stock. But I guess things are getting priced to perfection relative to themselves, sometimes relative to their peers after you have these sorts of runs. And I actually think this sort of price action we're going to see a lot of as we get into January.

14:07The higher we go, I think the smaller the sort of disappointments are, the higher the expectations, the more likely are just to kind of hit the sell button, ask questions later a little bit. And, you know, so this could be a bit of a precursor. I know we got Nike tomorrow. Let's see what they do. That's had a big run, too. So I'm really interested to see how a lot of these stocks in this sort of euphoric environment trade on disappointments. Yeah, my son is in a class, and one of his stock picks was Nike, and he had to write a report about it last night, which meant I had to write a report about it.

14:34That's not how it works. Let's hope his teacher is not a Fast Money fan. Oh, Mr. Weber! Mr. Weber! Senior year, we can give the kid a break, right? Yeah, it's good. Guy thoughts on FedEx. If you're going to miss, don't miss an express. As Frank mentioned, that's half their business, right? But the miss, forget about revenue because we can nitpick. It's in margins, which were half of what the street was expecting. Operating margins came in 1.7%. The street was at 3.6%. There's a disconnect there, clearly. Yeah, ground was fine. Freight was fine. But that's not where you're going to make up these things.

15:07So to answer Karen's question, why are they whacking the stock like it is? Because when you miss with your biggest business unit with margins being cut in half, that's concerning. Where do you buy the stock? Well, I think it's trading 258 here. I'm going back and trying to find a level. I mean, as it turns out, the math suggests 250 is a level. And we'll see. I thought this stock could actually challenge the prior high into earnings. Where did it get up to? 285? So it didn't get that close. Now you have to figure out what's the right value for it. 250 probably makes sense. All right. Let's move on.

15:38Coming up from the year of efficiency to best year ever. That's what 2023 is turning into for Meta's stock. And that's got some analysts making a New Year's resolution on this name, what they see for the social climber next. Plus, a cheap chip check. Could semi-standout NVIDIA actually bring you more bang for your buck against its competitors? We're going to surround the chip trade when Fast Money returns in two minutes. You're watching Fast Money here on CNBC. We'll be right back.

16:16Welcome back to Fast Money, everybody. UBS naming Meta a top pick for 2024. The stock has nearly tripled this year and is trading just a hair below its September 21 all-time high. At the start of the year, CEO Mark Zuckerberg promised that this year would be Meta's, quote, year of efficiency. Now the stock is on track for its best year ever. UBS calling Meta one of its top buys in the mega-cap Internet space, saying the stock could rise another 20 percent from here. Karen, this is a holding of yours. Yes, this, mostly through appreciation, is my largest position. I think that it's not expensive here at all.

16:54I still like the story. I think it's still holding together. Even though it was the year of efficiency, they also were spending a lot of money, though. And I think we could see a little more efficiency next year in maybe some more revenue generation as opposed to cuts. I think that the ad market is strong. The valuation here is really not stretched. It just seems like it is because it was trading. This was trading at one time at 10 or 11 times earnings with a ton of cash. I mean, insane levels so that it's back here. It should be. The business is bigger than it was at its peak. I'm hanging on to it.

17:29But at some point, just as it grows, you've got to hedge some or sell some upside calls. Everybody talks about NVIDIA, but this stock has done fabulously. It's underappreciated, I think, for the year. Even though it's a huge year. Yes, I think so. Right. It's back to where it should have been. Tim, thoughts? I'm long it and I like everyone. I can't argue that there's not an interesting valuation. I will say that the dynamics around their AI exposure. In other words, are these one of the companies that truly is letting AI work for them? I think so, especially gets into reels and some of their kind of their core businesses.

18:04So I think Facebook meta, whatever we're calling it, is doing great in a world also where we don't have pressure on advertisers and the cyclicality around the media space. that we had at the end of 21. Remember, they sold Meta first. It wasn't just about concerns on where we were going in the netherverse, really, is what it was. But ultimately, it was about people being concerned about ad spend. That's going to happen again if all the doom and gloom on the economy that people are talking about comes about. In the meantime, this is one of those names that's breaking out. It's one of those charts.

18:36It's not Apple. Really, it's Amazon. It's Meta, and it's Google within mega cap tech that I actually think continue to go higher. It's traded extraordinarily well. It's got to get through those August 2021 highs or whatever the hell the all-time high, 375 or something. And I point this out just to point it out. And maybe it's scheduled. I don't know. I guess I can go to my Google machine and look. But since the beginning of November, Mark Zuckerberg has sold almost$300 million worth of Facebook stock, which is just something to take into consideration. Earnings-wise, 20 times is not expensive at all, despite the run, as Karen mentioned, the report at the end of January.

19:13Just pointing it out just to point it out. And look at that last chart was very interesting. If we could flip back to that last chart where it began the year, if we can go back, you can see the mountainous rise. Well, there you go. Is that? Yeah, there's the year to date up. Well, what is that? That's a two year. That's a two year. New graphics package is tremendous. Yeah. Look at look at where it was at the start of 2023 and where it is today from. I don't know. That's 100 to 320. 200 percent this year. 190 percent. There we go. All right, got it. There we go. I can read these charts. Stick with me, okay?

19:47Hopefully your son's teacher can read them as well because he's watching right now. Somebody called him. Believe me. Somebody called him. All right, now to another big winner. Coinbase up 5 % today. Compass Point hiking its price target on that stock and reiterating its buy rating. Coinbase jumping 120 % in just the last two months. CNBC's Kate Rooney is here. What's driving this monster move higher, Kate? Hey, Tyler. So the Coinbase fever, it's been partially thanks to Bitcoin's rally. Those two tend to really trade in tandem. Also, this drop in interest rates helping unprofitable growth stocks and then optimism about a Bitcoin ETF being approved.

20:24I spoke to Coinbase CEO Brian Armstrong earlier about that. He pushed back on the bears out there who think an ETF could take trading activity away from Coinbase and push people who want to trade that ETF over to the brokerage firm, say Robinhood or one of the established names. Here's what he said about that. We want the massive pools of capital out there that are in endowments and institutions, pension funds. They should all be able to participate in this new asset class. And so I think mostly it will be a compliment. We'll see large new pools of capital coming to crypto. I think that's part of why we've seen Bitcoin prices be up 90 percent year to date in anticipation of this.

21:01And there's also going to be a huge retail and institutional segment. They don't just want to own an ETF for Bitcoin. They want to actually own other crypto assets. We also talked about Coinbase adjusting to falling interest rates. About a third of Coinbase's top line in the third quarter came from Interest Revenue Armstrong, telling me that they are prepared. Coinbase has multiple revenue streams now. It's not just interest income or trading. Tyler, back to you. All right, Kate, thank you very much. Let's trade this name, Coinbase. Dan? Tough one here. I mean, listen, you know, there were no shortages of negative reasons not to own Coinbase.

21:33Like, if you want to own Bitcoin, you can own Bitcoin, right? Why own the one that has pricing pressure and regulatory and all that sort of stuff? Why don't just own the asset? Yeah. And so to see this company perform the way it has, to see the balance sheet that they have, I mean, it's great. I'm not so sure we're going to see when there's ETFs that exist and how many retail are really interested in paying the high fees and crossing bid ask and owning them in a crypto wallet versus basically just owning an ETF that looks like an equity and putting it in their IRA or something like that. So that story is yet to be told.

22:07But, you know, the stock up like that doesn't make a whole heck of a lot of sense to chase it here. I guess I'd rather chase Bitcoin if you believe in that move. All right. Year to date, up 300 and some percent. Tim, your thoughts? I'm long Coinbase and I've been long it, you know, over the last few months. My view is not only on the Bitcoin move and the correlations. I think the regulatory dynamics are probably upside. And I won't speculate where the lawyers and the regulators are. But the fact is that you are getting more institutional adoption and a lot more people on board. Ultimately, that's great for the asset class.

22:43If Coinbase is the on-ramp to the digital world, at least one of them. And let's be clear, in 1.0, they were the on-ramp. Then that means that the entire asset class is well bid. Agree. Easy. Clearly, ETF, Bitcoin ETFs, will will people will not need to own directly, but they will own other digital assets. And that's where there's higher margins. And I think new frontier. So clearly, they are one of the clear ways to play that. And if you remove regulatory and Bitcoin trades higher, Coinbase is going higher. All right, Tim, thank you very much. I just want to report from the home front. Oh, the email has arrived.