Stocks Close Out A Big First Quarter… And The True Cost Of Diabetes Drugs 3/28/24

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Rally on. Stocks closing out a strong quarter with the S &P gaining 10 percent since the start of the year. It's not 22 record closes in that time. But as we get ready to kick off the new quarter on Monday, can we expect the momentum to continue? We've got some answers. Plus, the true price of production. A new study finding the cost to manufacture the wildly popular diabetes drug Ozempic is far lower than what patients are charged. We dig into the numbers and what it could mean for the future of these treatments.

0:33And later, a short call gives MicroStrategy some macro losses. Estee Lauder shares get a makeover and head toward their highs of the year. And the chart master thinks it might be time to buy the banks. He's laying out his case later this hour. I'm Melissa Lee. Coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Carter Wirth, and Steve Grosso. We begin with the big Q1 kickoff for markets. The S &P surging more than 10%, locking its best start to a year since 2019. The Dow notching its strongest first quarter since 2021. All three major indices now on five-month winning streaks as well.

1:07Nearly all S &P sectors finishing the quarter in the green with communication services, energy, tech, and financials all up double digits. And it wasn't just equities. Oil, gold, rates, and the dollar all climbing in Q1. So can all or any of these assets keep rising in this new quarter? I mean, it's a little counterintuitive for everything to be going higher at the same time, Tim. Well, it was risk on, but you had a lot of cross currents because a stronger dollar and higher yield should have been somewhat negative for equities. You saw a lot of the end of the world. We're worried about policy.

1:39We're worried about political upheaval kind of proxy plays, whether that was gold, Bitcoin, uranium also had big quarters. And it was the first time that the Nasdaq had underperformed the S &P on a quarterly basis. Not by a lot, but it did underperform the S &P for the first time since 4Q22. I mean, it's notable that this was a very strong quarter for stocks. And most people that are market participants actually felt like this was a really exciting quarter because it was banks. It was industrials. It was transports. It was energy. It was health care. It was all those sectors that we said coming into the year had a chance to do something.

2:11We just didn't know that NVIDIA was also going to do 90 percent. You almost would have thought those things happen if NVIDIA doesn't do its 90 percent. But there was something in it for everybody. Yeah. Carter, what did you make of this action? I mean, the truth, I guess everyone's so happy with the cost of capital, right? Isn't it get down to that? We see what happens when the 10-year goes above 5. People get very unhappy. When it starts to get to 3.80, they're going to cut six times. There's a recession coming. It turns out that it's a Goldilocks moment for rates, right? We're stuck at this 4, 4, 4, 3, whatever it might be.

2:43And the market continues to expand the multiple, even though the earnings have improved. The question is, how much more can you really expand the multiple at 25 times? I don't suspect a lot more. Do you think we could? Well, earnings could grow more than it could. That is a possibility as well, right? And I don't know whether the somewhat hot inflationary data is indicative of that likelihood or that it becomes more difficult. I would sort of, oh, he looks like he really wants to say something. Oh, I can. I can. Well, one thing, I mean, it's not just tech. And you were talking about that. I mean, think about two stocks that have nothing to do with anything AI, Caterpillar and American Express.

3:19They're both up 60 percent from their October low. The S &P is up 29 percent, meaning it has broadened out. But that also is the problem. Sixty percent advance for America Express and Caterpillar in five months. Are they not full rich? So what else? We know the pendulum swing too far. So I would I sort of think we're more in the fair value ish range on a lot of things, particularly as we broadened out relatively recently. Right. We've still seen, I mean, the IWM has had a nice little run here, but it's still so far below, so far below the S &P, so far below a lot of other things. So I think the broadening is good.

4:01Grasso, what do you think? Because you can make the case, one could make the case that if the Fed cuts rates, it's good for the markets. If the Fed keeps rates pat, that's also good for the markets. Yeah, and I believe I'm in the first camp that I think the Fed is going to cut rates more than we think. So I think that's going to help the market. So if the dollar goes down, that's going to help markets go up. That's going to help Bitcoin go up. That's going to help gold go up. That's going to help oil go up. If earnings really start increasing, to Karen's point, I think you're going to see the overall market increase.

4:38and I think people have not really factored in how strong the rate cuts are going to be. I think everyone got on the wrong side of the bow. Everyone got, with the data, everyone is starting to get, was starting to get a little bit too hawkish. But the key is you can't see the cracks in the economy in order to start cutting. Then it's too late. You have to do it before. So I think they're actually behind probably the cutting cycle by about, I don't know, four months or so. So I think they should have been cutting already. I think it's going to be a little bit of momentum going into year end. Not so crazy.

5:19So when Carter said, are they full? I think we could see 5 ,500 in the S &P. But you actually are you, Tim? And you made this point last night that if the Fed stands pat, that's actually the best thing for the markets. The economy is pretty good and we're holding up. We don't need rate cuts. Can we define something? Standing pat, where does that come from? I mean, is that just a poker thing? That's something that you look into during the commercial break. I'm sorry, I'm going to come back to that information because I know everybody at home has been thinking the same thing. I do think that a Fed that does nothing, and I think the Fed borders on doing more of nothing than doing a lot, I certainly pray for that.

5:51I think it's a dynamic that means that the economy is stronger, that we've seen some resilience. We've certainly seen certain parts of the economy do very well. We've dissected where the consumer may be kind of on the leading edge. But what's fascinating about this quarter, and Carter's as good of a guy to talk about certain sectors and leadership and where you've had laggards. But if you had told me, I know there's that game, that Apple, Tesla, Nike and Lululemon were going to all be down more than 10 percent in the first quarter. I would have said, sounds like discretionary is falling apart.

6:20Sounds like the labor market is falling apart. Sounds like the consumer is really dying here. And in fact, that's not what happened. Right. I mean, other things have moved to the fore, right? So housing continues to be strong, or the autos. And so it's this sort of movable feast. And yet somehow, of course, we are in this, and there's no way around this, right? We are this steep, uncorrected, almost six-month advance with the aggregate up 30 and stocks like America Express and Caterpillar up 60, both trading right now higher than where analysts that cover those stocks, 40, 50 analysts each, think the stocks will be 12 months ahead.

6:57That's funny mentals. I get it. But you guys do that. You do all funny mentals. I'm trying to fit in. You mentioned, though, Cat and AXP. I mean, for Cat and AXP specifically, do those charts look very vulnerable? Yes. You're making the case that these are charts that advance too much and they will fall apart, and therefore they will... Well, fall apart. Not necessarily that word. But, I mean, does one commit new capital to an old line, mature, not even growth companies, right? these are cyclical companies, that are up 60 % in five months trading at price levels that are higher than Wall Street's 12-month price target?

7:30I would say no. Okay, well, I would maybe make the case they shouldn't have been trading where they were before. Before. Okay, forget before. But here and now, do we buy them or sell them? Cat probably sell AXP maybe closer to a buy. I don't know. Okay. Those were the two that you said? Yeah, yeah. Because they both happen to be double the S &P from the same period. But just so you said, would you put new money? Is there always new money coming into the market, though? There has to be somewhere, right? Always. It has to go somewhere. Well, let me take the side of the funny mentalists. What are we calling funny mentalists?

8:03Please. Is that GM was trading south of four times earnings before it went on a 73 % move from that inflection point at the end of October. Citibank was trading at.045 price to tangible book value before it went on a 63 % or 64 % move. By the way, both really outperforming peers in their relative groups, saying that there was something wrong. Now, as a guy that's been long GM for a long time, I've been wrong a long time on good old global motors. But there is a dynamic where I think you get back to price. And I think we also we see this with airlines. We needed the economy to really normalize.

8:34It's one thing to in 21 and 22 to talk about normalization. But now we've really normalized. And I think there are some places left to do that. Our next guest is interested in stocks that benefit from rate cuts. Tony Dwyer is the chief market strategist at Canaccord Genuity. It's great to see you here on set, Tony. It's great to be here, Mel. It's great to see you guys. So here's the first question, though. Rate cuts happen in a backdrop of the economy weakening, or is it because, I mean, what happens? So it is weakening in the employment data. And I think something that one of the most aggressive topics that I talk to clients about is how bad the incoming data is.

9:12So I'm going to take you a little bit in the weeds here. There's something called the initiation survey rate. It's when I reach out to you and say, how many people do you fire? How many people do you hire? I'm the BLS. You're the company. Before the pandemic, 70 percent of the companies would get back to the Bureau of Labor statistics and say, we laid off this many people or we hired this many people. Last in January, it was 27 percent. So we're getting employment data. We got one hundred and sixty seven thousand job negative revision in the last payroll employment report. And it's not that they're manipulating the data.

9:44The conspiracy theorists go bananas with this stuff. It's really that they don't have a good collection mechanism. So the revisions are significant, and most of them have been negative now. So I think that some of the Lululemon, some of the consumer hits that have happened— if you looked at Lululemon a month ago, you know, it's up and to the right. You know, it's parabolic. It's like everything else. And if you look at the Russell 2000 a week ago last Wednesday, it's down for the year. So I think it's just a little bit of perspective on the economy slowing and what it might mean for rates and the consumer.

10:17So what benefits in that environment where the economy is weakening and we do have rate cuts? Well, our focus now is those rate cuts are what you need. You need to kill the zombie, right? And the zombie is an economy that you're waiting for it because of the inversion of the yield curve and the higher interest rates to slow down enough to go into recession. until something happens with the Fed and lower rates. It's going to be very hard to disprove that you can eventually go into a recession because you normally have. Our view is that the vast all of the earnings growth from 2023 was the MAG-7.

10:51According to our earnings wizard, LSEG, it literally was a negative number for earnings growth last year, X the MAG-7. It's same for this quarter. It'd be a negative number. As we go into the end of the year and into next year, it's much more even. So that's where we're calling for the broadening of the market. It's coming from a broadening of the earnings growth participation. It's not just the MAG-7. So if you get lower inflation and lower interest rates and start to get scared about the unemployment rate going up, that sets the stage for that real early cycle recovery we can get in those areas that benefit from lower rates.

11:29So what if you get a little lower employment, but really not a lot of relief on the cuts? Let's say you get one. Does that change your outlook? It would. Where I'll be wrong is if rates stay here or actually go up. I find it very hard to believe that that's going to happen. Karen, like if you think about when rates were going up, it was the end of the higher inflation where they did four rate hikes of 75 basis points in a clip to slow it down. The trajectory of the core PCE, which we get tomorrow, is exactly the opposite right now. So if it goes down a little bit more and it stays on this trajectory, you get a continued move up in the unemployment rate.

12:10You get a continued move down in the inflation rate. Karen, I can't imagine they're going to go 25 basis points after going from zero to 550. They're going to go, oh, 25 is enough. We're good. Zero. So zero, that's. Yeah. Yeah. So call it two to five. You know, we're that five and a quarter is the upper end. Maybe it comes to four. That's enough to really kickstart. That happens with weaker employment. That happens with weaker spending. And that's it. I'm not saying they have to go back to zero, but they have to be more aggressive to re-positive, re-invert whatever they do to get the curve back to normal.

12:44So we've gone from higher for longer, right? That was the mantra. And, of course, the exact opposite happened. Rates dropped from five to three, eight. Then at three, eight, consensus was there'll be six cuts, seven cuts. That's all off the table. Now it's one, maybe none. What if there is, just as you're implying, nothing? They just stay pat and don't stand pat. It was a political term back in 1896 referring to patents, but it's still a poker term. We should keep moving. Remember, they were only going to do three hikes. Right, three hikes. So three hikes and then three cuts. Let's say they actually just somehow keep juggling the ball and do nothing.

13:15Do you think that is Goldilocks or that's a problem? I think that creates a bigger recession. Bigger recession. I think the Fed needs to get, I'm kind of on Steve's camp, The Fed needs to get aggressive here. Remember, when inflation was moving up and spiking like it's moving down now, they were telling us they were only going to do three hikes. We're good after three hikes. That's the peak rate. Not so much. So if you get weaker employment, the whole picture here for the economy is we're at full employment. Manufacturing has been in a recession for the better part of two years. Non-res construction is turning over.

13:47So really quick, because I know we don't have a lot of time left, but I heard you say zombie about our refer to our economy in zombie terms. And yet we also have a dynamic also out there for markets where financial conditions are out of control, out of control, without Fed. None of this seems to make sense. And yet you think the Fed hasn't moved fast enough. And I think they lit the market on fire last week. Oh, they absolutely lit the market on fire by staying with three. Remember, they revised the growth and inflation up, but stayed with three cuts. He also said we're at the peak of the cycle in terms of rates.

14:20That was not gray. So I'm not saying that we go into a service-based recession and the market collapses. There is no history I can find with this kind of momentum that calls for market collapse. At this point, when you're this overbought and this extreme to the upside, you just want to wait for a better opportunity. In our view, that comes with this worsening employment data that cuts rates. You worry about the economy. That's when I want to go in. Not levered long after the kind of moving stocks we've been talking about. Tony, thanks. Good to see you. It's great to see all of you. Steve, he agrees with you in terms of the cuts?

14:56Yeah, so I think they're going to cut. Most likely, they'll surprise everyone and cut in May. They'll go in July and they'll go in September. They'll skip those months in between. And I think that'll catch the market. and that'll light a fire underneath the market. And it doesn't matter. November is a moot point. November, the meeting is right at the election date. So that's out. Forget about that one. And you don't know how much they're going to cut at each meeting. So you're going to have that extra push from money coming in from money markets going back into the equity markets because forget about valuation.

15:36People are going to start to chase. We've seen meme stocks. That's what happens. You think they go 50 at a meeting? I think it's possible that they can go 50 at a meeting, yes. And I think it's possible that they cut more than anyone thought. As Carter said, they went from 7 to 3, but we don't know how much they're actually going to cut in those three. All right. By the way, we are off for Good Friday tomorrow, but be sure to tune in to CNBC.com for live coverage of the key PCE inflation data. We'll be online with full coverage starting at 8.15 a.m. Morgan Brennan, Steve Leesman, Rick Santelli will bring you the numbers, the news, the analysis, 8.15 a.m.

16:12tomorrow on CNBC.com. Meantime, Tesla shares taking another hit today after Deutsche Bank cut its forecast for Q1 vehicle production. Analysts now looking for about 414 ,000 units produced, down from 427 before as demand from China weakened in March. Tesla stock is down nearly 30 percent year to date. The forecast cut comes after Morgan Stanley's Adam Jonas lowered his delivery estimate by about 9 percent just yesterday. Tesla expected to report its Q1 numbers early next week. We've actually had a drumbeat of analysts reducing those forecasts going into this number next week. With all due respect, there's been a bit of a herd mentality in terms of the analyst community on this, and at times right in both directions.

16:51So it's interesting. It's the growth company with the growth multiple that maybe isn't growing. It's the company that, to play offense, decided to cut margins, cut prices, and be more aggressive, and yet we're not sure. And so it gets back to multiple for me. It gets back to, you know, I just think, again, if you look over the last two and a half years, you know, GM to Tesla, it's actually a pretty fair trade. And we all know that Tesla's some of the drivers for Tesla as a stock were technical things on some level. I mean, they really were. It was S &P inclusion. It was splits. Obviously, this company is so far ahead of their peers in EV, but we've had this kind of global.

17:30All right. We got that first round of EV buyers out of the way. We all know, by the way, GM had interesting EV numbers yesterday that rallied the stock. So let's be clear. EV is still very much something to be thinking about. But yeah, Tesla, you know, down 26 percent Q1. Steve, are you doubting Tesla at this point? I think Tesla's had a lot thrown at them, but they also have a lot of levers that they can pull as well. And, you know, when you look at what's happened to them, look at what's happened to the other EV car makers. Look at what's happened to Fisker. Look at what's happened to Lucid.

18:03Look at what's happened to Rivian to a large extent. But it's just basically right now your options for buying an EV are Tesla and Rivian. So yes, and I know there's the Chinese EV makers as well, but let's just talk about those. Tesla's still head and shoulders above everybody in the EV world. The problem is, is if the American car makers pivot and go hybrid like Toyota, that's a problem for Tesla. I mean, the assumption, though, is that these competitors go away and that the demand is still as strong. But if the demand also goes away, then that's still a problem for Tesla. Where's the chart at this point?

18:44I mean, there's so many ways. One could say, listen, if a stock can go from 11 to 400, it must be doing something right. Right. But that same stock also lost 75 percent of its value. And right now is the same price it was three years ago. It's the nature of momentum, right? You're you're on the right side of momentum or in the wrong side here. Now, it's the easy maybe thing to say, but it's a pair of twos. Why do it? Why be long? Why be short? Sometimes your best trades, the ones you never do. All right. Coming up, Sam Bankman jailed. PFTX founder sentenced to 25 years in prison for his role in the crypto exchange's downfall.

19:16We'll take a closer look at what the prosecutor called one of the largest financial frauds in history. That's next. Plus, Discount Healthcare will dive into the technicals on Johnson & Johnson, learn why one of our traders says there's value hiding this name. All that and much more right after this. This is Fast Money with Melissa Lee, right here on CNBC.

19:45Welcome back to Fast Money. FTX founder Sam Bankman freed sentence to 25 years today for the securities fraud conspiracy that brought down his crypto exchange. The court also ordering him to forfeit$11 billion to help repay victims. Let's bring in Kate Rooney for the details. Kate, historic verdict here. Yeah, it was, Melissa. That sentence caps off what U.S. prosecutors say was one of the biggest financial frauds in U.S. history. Today, Sam Bankman-Fried took the stand. He was in a beige prison jumpsuit, pleading for the judge's leniency with a much more contrite, apologetic tone than what we heard when he was cross-examined back in the fall during his criminal trial.

20:22He said his actions, quote, haunt him every day. The judge admonished the 32-year-old, pointed to the enormous harm he did, the brazenness of his actions, his exceptional flexibility, as the judge put it, with the truth and his apparent lack of any real remorse. Also said he committed perjury on the stand, which played into the sentencing. Bankman-Fried was found guilty in November on seven counts of fraud and conspiracy. His defense team does plan to appeal. And a lot of the sentencing today talked about customer losses. That was key. The larger the losses, often the longer the sentence. The defense had tried to argue that the losses were zero since much of it will eventually be recouped based on how the bankruptcy process is going.

21:03The judge didn't buy that, though, used the analogy of a thief who then went to Vegas and then gambled what he stole. If he got it back, it doesn't negate the crime. And that was a key moment. Customers could eventually get the dollar value of their accounts back. That was at the time FTX collapsed, but they're not going to get their cryptocurrency, meaning some may have missed out on Bitcoin's 300 percent rise since then, Mel. Back to you. Kate, thank you. Kate Rooney, who's been covering this trial since the very beginning. But to think about this as the biggest financial fraud in history, we had remarkable ones.

21:35We sure have. And to think that this one was the biggest is true. Well, some of the things that always characterize a fraud are kind of a go-go period where there's not a whole lot of due diligence involved. There's a lot of clubby investing that went on here and there were some people that didn't do their work. But I think it was also a period of really extraordinary, you know, kind of risk on and a place certainly in crypto and digital land where a lot of people, I think, were very careless about who they invested in. The fact is that this was a guy that really part of this sentence, it almost sounds like someone that showed zero remorse.

22:07And, you know, that's part of it. Biggest fraud, but very short term. The real big one was the guy, because you never want to promise too much. Keep it going. Madoff kept them going for decades. That's a whole different game. Yeah, yeah. Let's stick with crypto here. Shares of MicroStrategy tumbling more than 11 % today after Kerisdale Capital issued a short call on the company. Analysts saying the stock's premium is, quote unquote, unjustifiable and that things have gotten carried away. Analysts, though, are long on Bitcoin. MicroStrategy is still up 170 % this year, even with today's sell-off.

22:39It hit its highest level since 2000 just yesterday. We've talked about this in the context of MicroStrategy since the Bitcoin ETFs have been released. And that is why would you want to buy MicroStrategy and also buy the software business, even if it's geared towards Bitcoin now? Why do you want to buy that instead of just Bitcoin itself when that's such an easy bet now? Right. Well, that's that is the whole basis of the short call. Yeah. It's really this, you know, if you want to make the bet, make the direct bet and see if those two things collapse. We saw it in GBTC, which was just a terrible instrument, but the only one you could really do.