S&P notches new 2023 high after jobs report, and are mergers coming for media names? 12/8/23

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast headache. Shares of RH crushed on the back of earnings and now there are reports inventories are building back at a lot of luxury retailers. Is the shopping spree in these names about to hit a wall? And later, Bitcoin's big week. The cryptocurrency jumping over 13 percent and it surges helping revive the animal spirits of the retail trading crowd. We'll go inside the numbers. That's later this hour. I'm Courtney Reagan in this evening for Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, we have Tim Seymour, Steve Grasso and Carter worth.

0:49We're going to start with what might just have been a Goldilocks jobs report. Major averages all rising after news. The U.S. payrolls grew slightly more than expected in November. The S &P notching a fresh 52 week high, closing at its best level since March of 2022. That index and the Dow both joining the Nasdaq in the green for the week. All three now up six weeks in a row. The employment report did send rates higher. The 10 year treasury jumping back above 4.2 percent mark, but also raised hopes that the U.S. economy will be able to pull off a soft landing. So is this the go-ahead markets need to rally into year end, or will next week's Fed decision throw another wrench in the rally?

1:28Tim, I'm going to start with you. What do you make of the number? Goldilocks, silver locks? Goldilocks is one of those terms you can use, and it did have something in it for everybody. I think good news was kind of good news here. The fact that the headline number came in probably a little higher than consensus, the fact that the participation rate brought down the unemployment rate. Those are the things that on the headline people are like, wow, really hot number. But at its core, this wasn't that hot of a number. And if you look at UAW workers coming back in, SAG workers coming back online, that's part of if you remove those numbers, this was 165 ,7167K on jobs added.

2:03I do think for a rates market that had had the move that we've all been talking about, We've been having the talk for the last 10 days is the opposite, really since that CPI number in mid-November, but the same talk we were having on the way up. I just think that markets were positioned for a weaker payroll number. The headline was pretty solid. What's it mean for equities? I mean, I think you have a dynamic here where certain parts of the market, which are interest rate sensitive, have continued to rally back. The fact that banks are rallying in kind of a lower rate environment and on a higher rate day tells you that I think the market has to understand that labor is not falling out of bed, though.

2:41And I think that's really what it comes down to. I think we have a window where inflation is actually falling faster than the economy. And that's great for stocks. So what do you think, Steve? Is the Fed doing its job? Yeah, I think the Fed is doing its job. The Fed's job, I'm not sure what the Fed's job is at this point. I think when the Fed eventually starts to cut, you're not going to hear a word about cutting until the day the headline comes that Powell cut. There's no sense of urgency for him to send the markets higher right now. As a matter of fact, he doesn't want the markets to go higher.

3:15He wants to talk the markets down. So he's going to be hawkish until the day he turns dovish. Right. So now if he turns dovish, we don't hear about it until the headline hits. The markets can't be set up for it. But the markets are already trading around him. Two's tens are already trading around him, right? We've seen it happen already. But to Tim's point, 169 is the right number. You pull out, and that's against a 180 prior month headline. As opposed to the 199 we saw because you're pulling out the numbers from the autoworkers and SAG. Exactly. So you have some strike influence there. The big thing was the unemployment rate.

3:50So that popped from 3.4 to 3.9. Now it's from 3.9 to 3.7. But all of that is sort of in the mix. It's all coming out in the wash. So to get to how you started the show, I think it is Goldilocks. And I think the Fed, we're going to have a little bit of a blackout period eventually. I think the less he talks, we're in one now. The less he talks, the better for the market. Have you ever read the story of Goldilocks to your children? Yeah, I tried to retell it from memory. I don't think I totally got it right the other day. Wow, okay. I can't do that. Sorry to distract you from a real conversation here.

4:26No, it's OK. Now I'm thinking about it. What did I get right and what did I get wrong? But, Carter, what do you think of the number here today? Was it Goldilocks? Have we now secured that soft landing? I mean, the beauty of a big data dump like that is you can take away anything you want. For instance, the cautious read would be, hey, retail negative 38 ,000 going into the most important season for retail or average hourly earnings coming in light. Look, you can interpret it so many ways. At least the market interpreted positively the S &P was up on the day. What about the rates? We were talking about the yield on the tenure at 4-2, Carter, when you're looking at the cross-section, what that means sort of across the board and looking at charts there today.

5:09Anything jump out at you? I mean, the sell-off on the dollar, the concomitant sell-off in crude oil, a substantial sell-off, of course, 95 to 65. And then this important six-week give back in yields above 5 % to basically 4%. All of those things, I think, of course, are signaling something is slowing on Main Street. And the only thing that doesn't seem to care about that, of course, is the equity market. We shall see. Steve, what do you think? We're at 4.2 on the 10-year. You think we're still going below 4? So I was in the camp of the rates falling precipitously when we got to 5%. Obviously, the headwind for the markets are rates ticking above 5.

5:50That was the peak. When the rates come in, dollar came in, oil came in. So they came in to about 4.5 or so, had a little bit of a reversion back. But I think the rates front, I think we're going to see lower for longer, not higher for longer. And I actually think that rates will break 4%. And I still think that's a tailwind for the market. I tell you what, I actually think that the same things that put rates close to 5 percent largely are still out there. And that's a massive amount of refunding. That's less central bank buying. Look at JGB yields over the last couple of days. And I know our audience doesn't really spend a lot of time looking at Japan and their monetary policy.

6:27But to the extent that the BOJ is no longer targeting their yield curve, and they've essentially in the last two or three days really reaffirmed what we've been talking about, I think higher yields in Japan are actually going to pull up higher yields here. I think the structural dynamics of just who's in the market at this point. I also just think that positioning went from so bearish in terms of, in other words, moving to higher yields after everyone had been on the other side of the boat. I think we're just at a place here. I think we're pretty range bound. It wouldn't surprise me to get back up to 450 on the 10-year.

6:55Look, the economy that was printing 3.8 or 3.9 in the third quarter, and we all know that that's really backward looking. And the coincidence stuff says we are slowing. But the market, excuse me, the economy is not falling out of bed. And that to me is why you're getting some of the breadth in the market that you're getting. It's not as much as I think a lot of us would like to see. But I think you have a dynamic here where I don't, Steve's right, Fez is not going to tell you anything next week. They're not going to do anything next week. But it doesn't mean that the economy is falling out of bed.

7:26And to me, that's the exact sequencing and the dynamic we've had for the last year and a half. Because, as we said last night and we said the night before, no recession is now consensus. Now, that's scary in its own way. But I just think that the reality of the market responding to economic conditions that are about to fall off a cliff is not going to happen. And it's also worth noting that most of the jobs came from health care and came from government. So that doesn't really feel cyclical to me. Is that a fundamental change that we're seeing in the jobs market? So there's a lot of stuff that we can really dig into on that jobs number.

8:05But Tim started off the show talking about the strikes. I think that was the biggest event with this number. That's the biggest caveat, the biggest variable that we're not going to have the next time around. Got it. Well, we've got the perfect guy to dig into those numbers. Let's ask CNBC senior economics reporter Steve Leisman right now. So, Steve, how do you read today's data? What does it mean the Fed might do or might not do next next week, more importantly, next year? And we were talking about where the job growth was just now in the report. Yeah, I tried to coin this term, Courtney, silver locks, but people didn't like it.

8:38They thought it meant more about what your hair would look like. But I'm not I'm not quite giving it a gold, I guess. Yeah, not yours. No, no, no. Just it wouldn't be mine. Don't quit your day job, Steve. You know, it's a good it's a good point. I was doing pretty good with the night job, Tim, as you know. But anyway. By the way, I've seen Steve's night job, and his night job is as good as anybody out there. So stay with that. Thanks, buddy. I appreciate that. But let me get to the jobs report. We'll get to the music later maybe. But here's the thing. I think that there were some things in there that caused the bond market to feel like, you know what?

9:16Maybe this was not perfection. And I feel pretty good about starting off the week with this reporting on this bond rally and pointing out that the kind of cuts that were built in for next year, as quickly as they seem to come, as soon as we priced in and as much as we priced in, you really needed the data to behave in a perfect way for that to happen. And that was unrealistic to expect that to happen. So you had a longer work week. You had that decline of the unemployment rate. Wages were still towards the high side in terms of their growth. Yeah, the economy's cooling. It's not cooling very fast.

9:49But it's good enough, I think, for Powell at least next week to push back, depending, of course, on what happens on Tuesday with the CPI report, which is going to be very critical. But I don't think Powell's going to be sort of on his heels with a weak jobs report. If you'd imagine this thing would say, for example, below 100 ,000, if the unemployment rate had risen above 4%, Powell would have been on his heels defending, not saying we're going to cut or win. He doesn't have that problem beginning next week because of how, at least I read the data today. So, Steve, when you look at the strikes, and you already mentioned it, when you look at the strikes, do they affect the average, the wages as well?

10:31Obviously, they ticked up, but as a whole, when you compare where they came from, they're still moving in the right direction, which is lower. So is that blip? How much do these strikes ending reflect just not only the headline, but the innards, if you will, when you trickle down to a lot of finer points? They will over time. I don't think they're going to be an upward shift in wages because of these, but it'll come in. And by the way, I took off forty seven thousand from that top because I had 17 on the motion picture side and I had something like 30 or so from the from the auto side. So maybe that was a little bit overstated, but that's the number that I've been using.

11:13And there will be, by the way, additions next month as well. But yeah, the wages is going to be an issue. I think that Powell is going to watch that. And in general, you've got the retail sales also next week. That's going to be, I think, potentially influential in terms of setting the growth standard for what's happening in this month and whether or not the holiday season continues to be at least got off on a strong foot for November. Steve, if we didn't have 500 basis points to know that we're going to have to pay for in some way, and we know about lag times, I would make an argument that really all that's happening is we've worked through supply chain dynamics.

11:47We've had a reopening dynamic. Energy prices have come down. So Eastern Europe and some of that dynamic. What does that mean then if you think about the economy that has been resilient and that maybe there wasn't as much inflation as we all thought there was? And I'm not going to say transitory was right. But I'm going to say that he had extraordinary conditions that now it seems a lot easier to say they were extraordinary conditions. I think, Tim, there's been an awful lot of politics in people's assessments of the economy. For example, everybody said that the whole retail or consumer boom was based upon the idea of the subsidies and the extra cash.

12:28Pardon me. There was no talk at all about the idea that a lot of people were working and a lot of people taking home paychecks. So that's been, I think, when you talk about the resilience of the economy, I think that's been a key part of it. The idea that a lot of people are working, they've had reasonably decent wage gains, and now you have inflation coming down, which means that real wage growth and real spending can do a little bit better, but not in an inflationary way. So, yeah, you have this supply chain issue. The Fed is also going to be, or has already, I think, played a role in slowing the economy.

13:00And that's going to be a bigger story, I think, for next year. I think it's a big story inside of the finances of a lot of companies right now, which is those companies that need to refinance, especially startup companies, and can't do it. There's going to be either M &A, some form of a takeout or a fire sale or a bankruptcy. That's going to hit, I think, a little bit next year or a lot next year. And Powell has to pivot, I think, in order to get somewhat in front of that. Maybe not in a hard way, but I think he's going to have to pick out. I disagree a little bit with Steve, although I think he's got a good argument as to when Powell and the Fed say they're going to be cutting.

13:38But I think they're going to telegraph that and tell us, look, we're going to take a line out of the statement that's going to say we're no longer thinking about hiking. That'll come out. And then the Fed will say, well, I think that's something we can think about in the meetings ahead. We're starting to contemplate that. Steve, before I let you go, didn't the expectations for that first rate cut fell a little today, about 45 percent? Yeah. Pardon me, I'm dealing with a cold here on the back end of it. We all are. Yes, they had been as high as 50, 60, 65 percent. Now they're down to 45 percent.

14:15OK, great. Just wanted to confirm that. Steve, thank you very much. Have a good weekend. Pleasure. All right, let's trade this, Carter. I have not forgotten about you. I know you're still there. based on what you heard today from Steve, from the jobs report? Anything standing out to you that you want to make a change? You want to make a trade? You want to shift your thinking going into next week? Well, sure. I mean, look, there's so many ways. The market is basically a four-month round trip to nowhere. We were streaking higher in July. Consensus was, this is it. The game is on. We will go to new highs.

14:45Guess what happened? We plunged. We dropped almost 12%. And what we've done today is we've turned exactly to that July high. In fact, it was a Thursday, it was July 27th, and it was 4607, and today we closed at 4604. We got a little bit above at 4609, but there are two ways to interpret that. A great recovery back to a difficult level and now backing and filling, or four months of nothing and the year is ticking away. What really is unknown, at least I'll speak for myself, I have no clue. Do we come in in January, independent of what happens here in December, and do we go into a powerful continuation of this rally, or does it all bets off and everyone starts harvesting, taking profits in January, which has happened in the past, is quite weak.

15:25I'm in the latter camp, but we shall see. Well, Carter, what we have here, of course, let's talk about the small cap, staging a major comeback into year-end. The Russell 2000 up nearly 10 % in the last month, beating out the Dow, the S &P 500 and the NASDAQ. But, of course, you, the chart master, you say that this holiday rally could be about to fall flat. So what do you see? Take it away. Yeah, it's been very volatile, and I think you actually bet against volatility in small cap. Let's go right to the charts and try to figure it out together. What we know is in sequencing terms, we've been doing this sort of vacillation for 18 months.

15:58The Russell 2000 plunged more than the S &P, dropping 34 % from its peak versus the S &P at 27. And we've basically been range bound ever since. Another way to look at this exact same chart would be to look at the rallies. We've had four distinct rallies, intermediate advances greater than 15%, and three distinct sell-offs greater than 15%. And my thinking here is actually after all this volatility, it's going to be low volatility. And one is right to actually strangle it, if you could, selling premium on both sides and waiting. And you'll see it here in the longer term chart. This is a weekly bar chart picking up, of course, the plunge low of COVID, the massive recovery in 20 and 21.

16:38But we're stuck between these converging trend lines. The bull says we break out. The bear says we falter. I think it's just going to stay here is my hunch. Let's look at some comparative charts. Maybe that's another way to do it. This is a three-year comparative chart, the Russell 2000, of course, lagging in orange to the S &P 500. Look at a five-year, and then in turn, look at a 10-year. And so the question is, is this an opportunity to catch that spread? Here maybe is the greatest issue or problem or data point of all. Final table, the entire market cap of all 2000 stocks, it's actually 1 ,967 right now, is exactly the same as Microsoft.

17:19Of course, Apple is even more at$3 trillion. Does it even matter? It's really a beta trade. So if you're bullish, you want to be long this smaller cap area of the market for a December rally, if you think that's what's coming. If you're not, you do not want to be long this area of the market. Really interesting stuff, Carter. Steve, I'm going to turn to you because he's bringing up the comparison with Microsoft to the entire valuation of these small cap names. I mean, what would you do? How do you see this trade? Well, the market, this is the biggest outperformance that we've seen with mega cap stocks over the Russell in forever in the history of the two dynamics.

17:53People want to buy profitable companies. The Russell 2000, 30 some odd percent are unprofitable. We've seen since the collapse of the regional banks, we've seen people run to free cash flow, mega cap stocks, apples of the world, the Microsofts of the world. If you go to the Russell 3000, over 40 percent are unprofitable. This is not the time. Maybe you're going to get this gap narrowing going into year end. But I think the longer term is people want to buy profitability. I just quickly say that I think we can go through July because we have less inflation. We have less rates. Look what happened today.

18:28The DAX in Germany, international stocks, all time highs. So places that have no tech exposure, there's no mag seven in Germany. I just think the dynamics here, which which include an equal weighted, which has outperformed the S &P since that November 14th, CPI by almost 6%. It's really the same as what the small caps have done. That's what's different. And again, that's why I look at a 15 % move in the NASDAQ in six weeks, and that scares me. A VIX near 12, that scares me. Next year scares me, but I'm not scared yet. And I think that that's what we need to think about in the price action we have today.

19:02Fair enough. Well, coming up, one stock in need of some major restoration. Shares of RH plummeting on the back of earnings. How a potential housing market freeze is giving investors the shivers. A deep dive into retail next. Plus, looking for New Year's resolution, how about shorting Tesla? That's the call from one analyst who's unplugging from the EV maker in 2024 while he's expecting a bumpy ride for the stock when Fast Money returns. We're back in two.

19:32welcome back to fast money we have a buzzkill on rh the high-end furniture retailer plunging after last night's earnings report the company missing revenue expectations and narrowing its full year revenue guidance and that's not the only warning sign for the luxury trade a wall street journal report today saying brands like prada burberry and dior are bursting with unsold inventory as the high-end consumer pulls back from peak spending levels brands are getting creative with how they offload this inventory, making use of everything from outlet stores to unofficial resellers. I understand some are also trying to buy back their merchandise from some of their wholesale partners.

20:07Just a lot going on here. I mean, Tim, what do you make of the move in RH and then sort of the subsequent information we got from the Wall Street Journal, what we already know about the general resilience of the consumer, but perhaps more weakness at the high end? Well, RH, who was standing in the pocket and as it was collapsing around him and saying, we're going to hold firm with prices, that's a football metaphor, which you know because you're Not everyone is so tuned into the gridiron. But in RH's case, what we also heard on this call is that the margin turn for these guys is actually getting pushed out and that they are going to have huge clearance in 4Q.

20:39And then they said some things about the housing market, which I thought was fascinating. We continue to expect the existing housing market to remain frozen until interest rates and or home prices fall meaningfully. You know, I mean, they're speaking about their part of the housing market. They're speaking about the spending on goods. And it's kind of what Steve Leeson was saying. I mean, people actually spent on stuff because they had jobs and they wanted to do it. Yeah, there was some pent up and some nesting. Look, I do think there's a bigger issue for luxury. I think RH has a bigger issue because of the industry that they're in.

21:09And this was a stock that was inexpensive last year at$22 a share. They're going to make, you know,$8 a share this year. They're going to go to$20 to$8. And next year, they're probably at$9,$950. And that's what was spurring downgrades today. So this is a stock that I actually want to own. I have owned it. I've traded it. And I think I'm going to get it a little bit lower here. That's really interesting. You know, Home Depot obviously plays in a different part of the housing market with the consumer. But they've been talking about how this is a year of moderation. That's what they expected after all of that boom in spending during the pandemic.

21:41I'm wondering if any of that is happening here for RH. And actually, it seems like a lot of their commentary has been cautious. And they've been sounding concerned for some time without actually seeing that concern pay off in their results. But it did hear this quarter. And they also said they have to see a collapse. That's my word, not theirs, but they have to see a collapse in housing pricing. Right. And to where you started off the lead here in interest rates. So we saw them tick up to that 8 percent mark. That was the death nail for a stock like this. But if you look at Williams Sonoma, that's the opposite of this.

22:13It's up 70 percent year to date. I wouldn't say that they're a bargain or a discounter. So it depends on where you're plotted along along that level. I think rates are coming down. So I think the light is at the end of the tunnel for a name like RH. It backed up to a 50 percent retracement. So it stopped right where it should have stopped. And it's probably not a bad entry in the name right now. But you have to believe that rates are going lower, not higher. That's interesting. So you think it could be attractive. You're also thinking. Look, I like the company. I like I like the stock. I just think it's going to take longer now to see that turn.

22:49And I think there was I think one of the analysts even referred to there was some arrogance with with how they approached and they've been opening some new kind of flagship stores and whatnot. I think margins are going to be under a little pressure. Fair enough. Well, there's a lot more fast to come. Here's what's coming up next. A new year's resolution with some electricity. Why one analyst says to short Tesla into the new year. The details on why he sees a tough road ahead for the EV maker next. Plus, media mergers on the horizon, the potential takeovers and team-ups coming for the space, and who's best positioned to come out on top.

23:23You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.