Stocks Breach Key Level and China Sees Further Slowdown 8/15/23

0:01Indeed, it does. And right now on Fast Charting the market's next move, why investors should pay close attention to the technicals for Apple and Microsoft will go inside the key levels. for these tech titans. Plus, troubles in China. New data on the economic slowdown happening in Beijing and the ripples that could hit our shores in the months to come. New reporting from inside China is minutes away. And later, topping the tape on a ride-sharing favorite of our traders, the options action on target ahead of earnings. And can home builders keep booming or will rising rates drop the hammer on the sector?

0:40I'm Tyler Matheson. In tonight from Alyssa Lee. Glad to be with you. This is Fast Money Live from the NASDAQ Market site. We've got a full table tonight, I'm so happy to say. Last time I was here, nobody, it was just one bubble. But we knew you were going to be here. So we showed up for dinner. Thank you very much. That's nice. Tim Seymour is here. Karen Feinerman, Dan Nathan, Guy Adami. Thanks for joining me. Thanks for letting me play at your table. Glad to have you. We start with a late day breakdown in the market. Stocks accelerating their sell-off in the final half hour of trading. all three of the major indexes down more than a percent on the day, closing near their lows.

1:15The Dow snapping a three-day win streak. NASDAQ, S &P, now both lower in eight of the last 11 sessions. And take a look at this. The S &P breaking below a key level of support today, closing below its 50-day moving average, something it hasn't done since late March. And the tech titans also flashing some technical warning signs. Apple, Microsoft as well, have been clinging to their 100-day moving averages. Apple breaching it today for the first time since January. And Tim, you flagged these key levels for Apple and Microsoft. Why are they such telltales? Look, we know the sheer weight. We talk about that all the time.

1:53But the weight of these names really is the weight on the market. And as much as we've talked for weeks about the broadening of the market, whether it's industrials, whether it was transports, even some small caps, EM. EM makes fresh relative all-time lows. As someone that was getting kind of pulled up about EM, you've had a lot of different head fix. One week ago, we lost the semis below that 50-day. So I talked about semis. We all have talked about semis in terms of their leadership. You lost that leadership, and then you then had the Qs, which yesterday essentially gave up that 50-day, and today the S &P as well.

2:26So that's happening at a time when, if we're getting a breakdown in the biggest names in the market from significant levels, at a time when maybe we're getting a breakout yield. and we'll sprinkle in some China, we'll sprinkle in some Fitch, we'll sprinkle in some other things that people, it just wasn't part of the equation, Tyler, in terms of what we were talking about for this market. How important to you is the idea that these bellwether stocks, these bell cows of the market, are breaking below some technical support levels? Extraordinarily, but I think the audience should know, you got a late call for this.

2:58I mean, you're hanging out back in EC. That's right. That's the pro you are. What's that mountain with all the faith? It's called Rushmore. He's on. No, I mean. Melissa was called to jury duty. You know, indictments are everywhere these days. I'm telling you. Everywhere. Yes, they are. She luckily was freed, however, so she will be back tomorrow. Free Melissa. That's a hashtag. That's a hashtag. To answer your question, and obviously thanks for being here. And thank you for the iced coffee that you brought for me. They're extraordinarily important. Again, I've said it. I think it's true. Microsoft is one of the five most important companies on the planet.

3:31It doesn't mean the last run-up, the stock didn't get extraordinarily expensive. Given the earnings releases over the last few quarters, they've been good but not great by Microsoft standards. And Apple, a stock that everybody seems to think just goes higher, it actually does go lower as well. And now you've seen three disappointing quarter by Apple standards. It's a company that's now gotten itself very expensive on valuation, especially with interest rates moving higher. So it is important, these companies. And more importantly, the fact that Microsoft seemingly has put in a huge double top and Apple is now flirting with its prior all-time high.

4:04That's something to be concerned about. Yeah, wasn't it at an all-time high just a month ago, within the last month, right? Yeah, so the two of them specifically sold off after earnings. They've been down 10%. Another one we could throw in there is Tesla. And all three companies actually disappointed, you know, on some sort of metric that a lot of investors had not been really too worried about from a valuation standpoint in the run-up. I mean, Carter has been on the show, you know, a dozen times over the last few months talking about really this perfect 45-degree angle that those companies have had, at least their stocks have had from their lows, whether it was Apple early this year or Microsoft late last year.

4:38And, you know, just the magnitude of market cap that had been gained and the valuation in which it was trading at relative to other parts of the market. Like this is really important. We've had this conversation a little bit. You take out these seven stocks that make up 25, 26 percent of the S &P 500. You know, they're trading at multiples that they have not been that comfortably trading at above 30 times, at least Microsoft and Apple. The rest of the market, the cyclical stuff, the energy stuff, that stuff was trading well below a market multiple. So they were pricing in recession, whereas a lot of these other larger names were not.

5:10That froth is coming out of it. And I think a lot of it had to do with the fact that, you know, we have this excitement around AI, this really strong secular shift that is going to play out for years, if not decades, that sort of thing. But a lot of the enthusiasm was encapsulated in a very short period of time in trillions of dollars in market cap in a small group of names. And I think that's what's coming undone right now. So, Karen, we talk about the technical things that are manifesting themselves, but Tim mentioned a couple of other things. You've got China. You've got Fitch. You've got all kinds of other little worries.

5:41You've got Fed in here somehow. Where do we put these technical measures in that broader context of other things that are making the market maybe over the last three weeks a little jumpy? Well, one of the other things, I think, is interest rates, which you guys touched on. So we look at the 10-year. Going up. This morning hit a little over four and a quarter. I think it closed at like 421. So I think it's sort of just coming back to math, which is the higher the risk-free rate, right, the lower the multiple for stocks. So I think that's what's happening here. And we see it more in the really high flyers, names, you know, with huge multiples.

6:18So the QQQ is getting hit more. The IGV getting hit more. And then I like some of those other names of lower PEs. Yeah. But that's not working right now either. Why are interest rates going up the way they are? Well, we had a guest on Andy Kahn a couple weeks ago who talked about just the sheer volume of supply to come to the markets is making, you know, you've got to pay more. You've got to pay more to attract the buyers. Yes, and so we're seeing a big move in the 10-year, a big move in the 30-year. And the near end sort of staying about the same issue. Tim? We're a financial show. No one wants to hear about politics on this show.

6:53I'll say this. the indictments, but more broadly, the backdrop of Fitch and deficits and what the Fed has to do, but what the government needs to do, the refunding schedule. But if the ratings agencies are telling us that at least they're watching politics in this country as a guy that followed EM for years, I mean, we never worried about politics in this country. It was never about the circus in D.C. The circus in D.C. has probably gotten a little more extraordinary in the last few years. But I just bring it back to these are all ingredients in why I think rates are moving higher, why they can at least move higher in, you know, in in unison with each other.

7:30There's a lot of different reasons why we see rates move higher. Equities haven't had a chance to catch their breath and really assess. I mean, look, there was a lot of people that started this year that thought we'd see a 10 year south of 3 percent. And, you know, we could very well finish this year with the 10 year north of 5 percent. So I just think for equities, the implications are bigger. And right now, there is macro going on that's affected. Thoughts? Ten-year at north of 5 % by the end of this year, I think Tim would agree, would not be good for equities. And Bill Ackman, a couple weeks ago, made a bet against the bond market.

8:01He actually, at least in the short term, top-ticked it. That day, it traded up to 4.25. A week or so later, we're back in the 390s. Here we are. Rates are not going higher because the economy is magically getting better. Rates are going higher for the wrong reasons. And it's not just here in the United States. Japan very quietly. Rates are moving against them right now. And we'll talk about China later in the show. They seem to have issues as well. So you have this sort of global bond markets seemingly unraveling at the wrong time and is not supportive of equity prices. Yeah, and it comes back to, I think, inflation, right?

8:34So if you think about everything that's going on in China, we're getting all these deflationary readings. You know, at the end of the day, if all of the stuff that we learned during the pandemic, post-pandemic, all of the supply chain issues, everything that we learned about Russia's invasion of Ukraine and what that means for energy. And we had Halima Croft on last night. We're talking about a little bit of this as a form of national security. It's all inflationary. So your question was rates, you know, they've come farther than a lot of people thought. And I think we have to be prepared for them to stay higher for longer unless, again, we find ourselves in a situation like in March where we have, you know, you know, a regional banking crisis or maybe there's a crisis.

9:10Listen, the higher rates go and there's a lot of smart folks talking about this. Doug Cass is one who's been writing about it lately. I mean, listen, We thought those mark-to-market issues, those kind of held to maturity sort of issues, were not going to be a big thing for a lot of the money-centered banks. That might be the case. We might start to see that in the back half of the year, especially if rates continue to go higher and these bond portfolios go lower and we have deterioration of credit. And we're seeing a lot of these things. Why did the banks get hit so hard today? Well, if you put all the stuff that's going on in China together a little bit, you're thinking about who has exposures.

9:43These are things we've done in the energy patch back in 14, 15 and 16 who had exposure there when crude oil was trading at 25 bucks and we were seeing bankruptcy. So to me, I think we're going to have a nice opportunity to put a lot of the themes of 2023 together, probably in the next couple of months or so, as we were waiting for what the knock on effects of the different themes. I know we got to get on to our next guest, but I'll just simply say, you know, the consumer was where we thought the world was going to fall apart. Right. We thought the labor market was going to fall out of bed. We thought 550 Fed bases.

10:10That's not what's happening. The labor market's very resilient. And, in fact, the pressures we're seeing are from places where people, frankly, weren't expecting them. It was very good. Retail sales were solid to that. Retail sales were very good. Very good. This is a perfect segue for our next guest to talk more about the markets and the impact of big tech and interest rates here. Let's bring in Peter Bookvar, chief investment officer at Bleakley Financial Group, CNBC contributor. Peter, I'm sure you just listened to this conversation, and you must be licking your chops, because you say the thing to watch here is the move in interest rates, the 10-year especially.

10:42Explain. Well, what's interesting is the market over the last couple of months, I think, was getting comfortable that inflation's moderating and the Fed's almost done. And then all of a sudden, we get smacked with this rise in long-term interest rates that I don't think anybody or not many anticipated. And God made the right point before that they're rising for the wrong reasons. They're not rising because there's been this sudden acceleration in economic growth around the world. They're rising for the BOJ making a move, the last major central bank to finally join the tightening party. And you guys discussed about all the supply.

11:20At the same time, the Fed is essentially selling treasuries. Banks are no longer buying foreign central banks or net sellers. And the market's saying, well, the clearing price for where the 10-year should go with all these moving parts is higher. And I think that was really sort of the surprise over the last couple of weeks. So you say, you know, the market doesn't seem to understand the point that Tim and Guy just sort of made, which is the idea that rates may go higher, they may stay higher for longer, and Karen as well making the point that that is not good for equities. Yeah, and this is now all parts of the yield curve.

11:59You know, there was one thing to see the rise in the short end because of what the Fed was doing. And like I said, I think everyone got complacent thinking that, oh, I don't want to miss the Fed has done trade. And all of a sudden realizing, OK, yeah, well, maybe the Fed's almost done. But the 10-year is now trading at 420. And that's a problem. And the 30-year mortgage rate, which is priced off the 10-year, according to bank rate, is at the highest level since 2000. 23 years ago, you have to go back the last time we had a mortgage rate that was this high. Yeah, it really is amazing. It's one of the reasons why, I guess, builder sentiment went down the way it did earlier today, if I'm calling correctly.

12:39Let's talk a little bit about where we began, and that was with the technical support sort of eroding on two of the bell cows of the market, Microsoft and Apple. What is your take there? So these companies, if we remember, we go back to Q1, and we had sort of very pedestrian growth rates. Microsoft reported single-digit revenue growth. Apple reported a decline in revenue growth. Meta, Alphabet, very pedestrian single-digit revenue growth numbers. And that was cleared of everybody's minds with all the AI excitement. And the beauty about earnings season is that it's always a nice reality check. And what we've seen with this past earnings season, Q2, was that these growth rates are still rather pedestrian.

13:29So as great as these companies are, there's still this love affair with them. But their growth rates, they're not growth companies anymore. They're decent growers, but all of a sudden started to trade at very hefty growth-like multiples. And like I said, earnings was a reality check that earnings growth is just OK, nothing great. And I think the decline we saw in Microsoft and Apple with those two being the biggest, with even after the correction, the combined market cap of the two companies being$5 trillion, that I think that was really noteworthy was the pullback post-earnings for them. All right, Peter, thanks very much.

14:06Let's knock around a couple of things Peter just mentioned there, particularly, Guy, the idea that these two great companies, I mean, by any standard, Apple and Microsoft are great American global companies, but they may not be growth companies. No. I mean, when Apple was a growth company 10 years or seven or eight years, it was trading at a value company valuation. Now that it's a value company, it trades. It's really ridiculous. And the same thing can be said for Microsoft. I mean, either one of them is probably either side of 30 times next year's numbers. And in this environment, that's expensive, especially if rates are going to continue to go higher.

14:44They're great companies. They just got very expensive very quickly. So if you own these companies, do you sell them or do you just not add to your positions? Well, if you've been listening to me, you sold them a long time ago, so that was the wrong advice. But, you know, the best time the Planet Tree was 20 years ago. The next best time is today. I think there's further downside. For example, Microsoft. That's deep. I mean, I should stop right there. That was good. Show's over the show. Let's go right to Jim, who's standing by. Can we roll that back? No, I think 290-ish is a 50 % retracement of the recent all-time high in Microsoft and the low we made, you know, earlier this year.

15:19It also happens, I mentioned, huge double tops. So that's a level, I think, as scary as it may look when it gets there, that's actually when you want to start buying this thing. All right. Any final thoughts? Well, I simply think, you know, there's been a lot of doom and gloom talked about on this show tonight. I think I would put this in some perspective. I mean, at 160, I think you've had a nice pullback in Apple. I think all of these things were due to pull back. I think the market's had one of the greatest. Apple's up 54 % to its highs from the start of the year. That's part of why we're having this conversation.

15:47These moves are so extraordinary. The fact of the matter is today's retail sales numbers showed that non-discretionary items were the ones that people were buying a lot of. But things like Apple, honestly, a lot of phones were pulled forward, a lot of electronics. All right. We've got some new details on the J.P. Morgan and Jeffrey Epstein case. Eamon Jabbers has the details. Hi, Eamon. Hey there, Tyler. Yeah, we're learning these new details today about just how late into the life of sex offender Jeffrey Epstein, his referral relationship with J.P. Morgan continued, and just how plugged in Epstein was to the government of the U.S.

16:20Virgin Islands. In a legal filing by the U.S. Virgin Islands, a document reveals that Epstein's assistant emailed J.P. Morgan in February of 2019, many years after the bank had decided not to do business with Epstein, and offered to introduce the bank to Katherine Rumler, a former White House counsel to President Barack Obama. A spokesman for Rumler's current employer, Goldman Sachs, declined to comment today. A document also shows a similar 2007 introduction by Epstein to Nick Ribas, a longtime Donald Trump casino executive. A call to a phone number associated with Ribas was not answered this afternoon.

16:55And in a filing by J.P. Morgan, a newly disclosed email shows that the legally embattled former governor, John Dijon, asked Epstein for a loan of$215 ,000. I really appreciate your willingness to help, Dijon wrote in that email to Epstein. Now, CNBC has not been able to obtain a comment from DeJong this afternoon. And a separate document indicates that an Epstein employee was able to obtain a seal from the U.S. Customs Department that would allow him to access secure areas at the airport in the U.S. Virgin Islands and, quote, escort passengers through U.S. Customs and Border Protection. Tyler, so you're getting a sense here of how this relationship on the island evolved and how his relationship with financial executives and higher-ups evolved as well over time.

17:38Back over to you. The tentacles keep presenting themselves one way or another. Eamon, thank you very much. And coming up, banks feeling the blues after a Fitch downgrade warning. But that didn't stop one of our traders from scooping up shares of one of the big players. The name, the trader, the details next. Plus, some bright spots in today's reddish sea. Why the moves in Comcast and Lyft are catching our traders' eyes and how you should play those names. When Fast Money returns, we'll be back in two minutes.

18:12All right, welcome back to Fast Money, everybody. The banking industry on edge today. After news, some of the nation's biggest and highest rated banks are at risk of being downgraded. In a note earlier this summer, Fitch ratings cut its assessment of the banking sector and said another downgrade could force the agency to reevaluate its standing on more than 70 names, including top-rated ones like JPMorgan Chase and Bank of America. Karen, you bought some J.P. Morgan. You're not worried. Well, I'm always worried about something. And I was long going into today. But, yeah, I thought this thing, this Fitch thing was sort of overdone to the downside.

18:48When I talked about high flyer names, this is the kind of name I want to know, low flyer, low multiple. And I think that, you know, they asked J.B. Diamond what he thought about the Fitch downgrade of the U.S. government. And he said, well, the market is going to decide what the downgrade is or not. And I think the same is true for, you know, J.P. Morgan credit in the bank space. I think it's, you know, the absolute place to go. So to the extent that this was about the downgrade, I want to own it here. Are there others in that class of large banks who might be at risk of downgrade? Well, I think to Dan's point about who has some halt to maturity issues, J.P.

19:25Morgan, no. Bank of America, relative to where J.P. Morgan is, they didn't do nearly as good a job. So I would think if one were to get down, maybe they all get downgraded. I don't know, but I do think the market sort of will decide where they're able to issue debt. But Bank America would be my – that's why I switch out of Bank America into JP. Yeah, we've been highlighting the relative underperformance of Bank America all year long to JP and some of the other large money center banks. But, you know, when you think about this, you know, there was a report today and you saw the great retail sales on one side.

19:54But on the flip side, you're starting to see default rates, you know what I mean, on things that, you know, that people need to get loans, right, on cars and this sort of thing. They're going up. They're getting back. Delinquencies are going up to pre-pandemic levels. So we always is some of the good data that we have. We always get some of the bad data. And then you kind of layer in the fact that we're going to have what is it, a trillion dollars in student loan that needs to get repaid again. You know what I mean? And so, you know, households are going to have to start budgeting for this sort of stuff again.

20:21So this week, as we digest some of what these retailers have to say to us, I think it might be really instructive back to school and into the holiday season and get a better sense. Isn't debt repayment thing going to be a big influence? It's going to take a lot of play out. It's going to take a lot of play out, I think. I mean, it's a great headline, and you add it to all the headlines in terms of the weight on the consumer. But, you know, the ability to not do anything with your student loans for a while before someone comes after you means this is going to play out a lot longer than people thought.

20:49Yeah. All right. We've got an earnings alert on Cava. The shares are jumping after the Mediterranean restaurant chain posted a profit in its first earnings report since going public. Kate Rogers has some details. Kate? Hi, Tyler. Well, you said it. Kava posting a profit of 21 cents in its first quarter as a public company on revenues of $173 million. That's$10 million higher than the analysts had estimated for the quarter. EPS also beat as analysts were projecting a two-cent loss for Kava. Its same store sales soared up 18.3%. The company's average unit volumes also rose from$2.4 million in the prior year quarter to$2.6 million in this quarter.

21:26Guidance for the full year also strong. It expects same-store sales growth for the full year of between 13 % and 15%, also projecting adjusted EBITDA of$62 million to$67 million. CEO Brett Shulman sounding very upbeat about the long-term pipeline of talent at Kava and the digital loyalty it's building out with customers. He also told Barron's he is seeing a very, quote, resilient consumer. Much more to come from the call, but the stock up around 9 % on this report. Back over to you. That's a nice move, Tim. It's been a growth story. It's been in terms of units and also same-store sales. So they're getting it from both sides.

22:01The profitability is something that caught people off guard. And I'll just say this about the fast, casual, and the restaurant segment. Those retail sales numbers were good, but they weren't great for a lot of discretionary stuff. But restaurants and bars are kicking it still. And that's part of the reason why you're seeing some of these numbers. No one expected profitability here. So I don't know if you chase it, but it's impressive what they're doing. All righty. There's a lot more fast to come. Here's what's coming up next. Comcast climbs, well lift lifts Two green arrows and a red day on Wall Street The levels to watch in both names next Plus a surprise rate cut in China As more data points to an even bleaker growth picture for the country What the slowdown could mean for your money ahead You're watching Fast Money Live from the NASDAQ market site in Times Square We're back right after this

23:00All right, everybody. Welcome back to Fast Money. Comcast shares closing at a 52-week high. The stock of CNBC's parent company now trading at levels not seen since April of 2022. The Comcast gains today come as Nielsen reported that for the first time ever, Linear TV accounted for less than half of U.S. viewing in the month of July. Guy, you got some thoughts on Comcast? I do. I mean, if you look at the move, and you just said it, there are levels you haven't seen in quite some time. We've just made a textbook 50 % retracement of effectively the all-time high in the stock and the recent low. Decent volume day-to-day.