Stocks Close Out an 8th Week of Gains, But Will The Leaders Keep Their Momentum in the New Year 12/22/23

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. Biotech boom. Bristol Myers announcing a 14 billion dollar deal to buy Karuna Therapeutics, the deal giving this lagging sector a lift today. Will a rotation in the markets breathe new life into biotech? Plus, Nike's no good rotten day after the stock tumbling over 11 percent on the back of its earnings. Is this a Nike problem or another tell about the health of the consumer? And later, a Friday fast request live ahead of the final week of the year. We are taking your questions about what you should do with your money.

0:35Hit us up on X at CNBC Fast Money. I'm Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Steve Grasso, Courtney Garcia, and Guy Adami. And we start off with another historic run for the markets. The S &P staunching today's late day pullback to lock in its eighth straight week of gains, its longest winning streak since November 2017. The index now less than a percent from its closing high. The Dow was down slightly today, but still up since Monday. It and the NASDAQ also up eight weeks in a row. But while it's been a strong year for markets broadly, not everyone came along for the ride.

1:08Mega cap tech, semis, software stocks, homebuilders all seeing outsized gains this year. On the other hand, utilities, regional banks, energy stocks and staples all far underperformed the market. But are the laggards due for a comeback in the new year or will the same leadership continue in 2024? And we've seen hints of rotation in recent weeks. Guy, can that continue? It's going to be hard for the leadership this year, I think, to have the same type of year we've seen next year. So but I mean, these stocks have been unbelievable. Congrats to everybody that's been bullish. I'll say this. Energy, I think, is underappreciated in terms of what's going on, valuations and sort of the tailwinds.

1:45I think the space has Warren Buffett just was up to 28 percent in Oxy. I know that's Oxy specific, but he clearly sees something in the space. And you've seen some of these levered names actually making all time high. Marathon Petroleum, for example, and PSX. So I think the leadership is probably going to come from the similar names. But I think the forgotten names like energy are going to be OK. I think utilities could actually catch a bid because if rates are going to be falling, you'll wind up catching a bid where you're going to earn that income. Just judging whether money comes out of money markets and goes into the market or whether it goes into individual stocks.

2:19Those are two different things. Energy names really haven't caught a bid. So if you look at ExxonMobil, Chevron, even the companies they're taking over have been in a declining trend. So I would stay tech and I would go for yield. I guess a lot depends also, you know, about what you believe to the degree to which rates will actually decline next year. Some people will say 100 basis points easy. Other people will say no. Well, if rates go down as much as the market's pricing and Fed funds, I think we've got problems. I don't think it's good for equities. And I also none of us are suggesting that as the clock strikes 12 on New Year's Eve, that suddenly allocation begins into new sectors.

2:57But I do think that there are places that have really underperformed energy after two years of outperformance. So let me just join in on that. I think it's going to outperform. I think ceasefire and peace and all these things that we know could be risks to it. I look at where we see Brent well supported somewhere between 65 and 70. But more importantly, Guy referenced the uber cheap valuations within the sector. And again, relative to the S &P, not they're always cheap. I think health care is also a place where stock picking is going to work. It's underperformed as a group. I think, you know, real estate's a case where I don't really like real estate for next year, but this is the other side of it.

3:33Where is positioning? I think real estate is so unloved and so undervalued, and I think you're going to still get some decent places to be investing there. But right now, we finish the year with the same leadership still leading. So semiconductors outperforming the S &P by 47 percent, triple Qs or NASDAQ 100 outperforming the S &P by 30 percent, making relative new highs as we go into this last week of the year. I don't think that changes overnight, even though I don't want to be overweight in information technology. Yeah, and things really change end of October. You finally start to see all those interest rate sensitive companies are really outperforming.

4:09So think of things like real estate, which you mentioned, banks, which you mentioned, even things like small caps, which tend to take a lot more financing. As rates go lower, that's going to end up really being a boost to those kind of categories. I think that trend is likely going to continue next year. And you're saying, well, what if rates don't come down? And I do think that is something to look at, where rates really right now are basically where they were right before the financial crisis. And actually, things did tend to do well when rates have been at this time. So even if they don't come down, the fact they've already come down, I think, is going to be a good thing for the markets.

4:39Can I ask a question? Guy sitting over here smirking. No, I'm not smirking. I'm not smirking. It has me uncomfortable. Well, it's the holiday season. You're in beautiful red. Courtney's in green. Steve's got his lovely jacket on. What do you got going on over there? You have a pocket watch, too? Well, first of all, what are you going to a funeral? St. Paddy's Day. Let me throw it right back at you. Throw it back at me. I mean, come on, man. It's the holidays. It's time to be festive. I should be festive. You look like you do every single day. That's a fair point. I like Scrooge. But that's not his Naugahyde vest.

5:10I said it. The Naugahyde vest is missing, apparently. Yeah. Yeah. I think there's a time for Naugahyde, and I'm not sure it's this decade. So it was probably more in the 70s. The vest is nice, though. The best is nice. Everybody looks nice. Except Swizzle. But let's say the debate about Fed cuts continues into the first quarter of next year. In terms of positioning, where should we be for that first quarter of uncertainty? It seems like there is agreement that Fed rate cuts will happen, probably by the time we enter the second half of next year. But as for the beginning part, we're still in that debate whether or not it's going to be strong.

5:43Right. So obviously technology will benefit. Resource trades are going to do very well. There's no way, in my opinion, if they're going to cut rates the way the market seems to think, the dollar will be under pressure, and these resource names that have done pretty well will continue. Gold mining stocks have done remarkably well. I think they finally will play catch up to the underlying commodity, which, by the way, I think is going to still go higher. So I think resources, energy, and to a certain extent, gold miners, if you really want to whittle down. Well, you mentioned that dollar, and around 107, and you saw it in September and you saw it in November, or, you know, right around when rates peaked.

6:19Dollar's down 5.5 % from that level. And so there's no question to me this is an environment for gold. Miners, with gold doing 14.5 % from, let's see, from, yeah, early September. But gold miners have done about 26.5%. This guy says they've underperformed. I think it's a great place for copper. I think it's a great place for miners. I do think it's an environment where we're going to go into next year, and we're going to go into next year, And the job market's going to be the same job market we went out of the year with, which is it's going to be stubbornly supported. It doesn't mean that I best the lowest or lowest unemployment is behind us for sure.

6:58I think I think it's weakening. It's what the Fed wants. But all this is taking a lot longer to play out at a time when the street is calling for earnings growth. So if you're expecting the first quarter to be awful, I'm wondering what that event's going to be. So I do like the metals. But if you look at oil, if you look at the energy names, they are definitely correlated to the price of oil. And there's been a supply glut right now. So energy production in the U.S. is at all time record highs. I don't think they can perform well in that type of environment. Metal's OK. But but I also believe that this run has been the investor offsides.

7:34So where does that catch up? Probably middle of January, the market has a test, and then we ramp right back up into a bull market. So under what circumstances will Magnificent Seven, Big Cap Tech, whatever you want to call it, do well? If the economy is softening or if the economy is strong? Or both? Yeah, I mean, a lot of these companies are well-positioned. They have good balance sheets. I mean, they're continuing to sell. And as the consumer continues to be strong and they're continuing to sell products and services to them, that is a good thing. I just don't see them outperforming to the same kind of magnitude they have previously.

8:09And I think that's what you want to look at as an investor. I still want to own the Magnificent Seven. I'm absolutely not getting out of those things. But I don't want to overweight them and throw money out them after they've had such a run, especially if we do start to see rates come down. I don't think those are as well positioned to outperform as some of these other interest rate sensitive categories. Or is the passive money in it just too strong? The passive money is in it. And also what we're seeing right now is a function of you don't get fired as a money manager when markets go down and you lose money.

8:37You get fired when markets go higher and you're not in the market. And that's what's going on right now. And so if you didn't own NVIDIA and if you didn't own some stuff like Lilly, you know, but more importantly, if you didn't own at least the top of the weighting of the S &P, you're going to own it now. And I think you're going to go into 24 and say, I'm not going to be short this stuff too much, my bogey, unless you're really stubborn. And you say, you know what? I'm going to get them this year. Can't get in front of that train. Last week,$20 billion came into the spiders. That just goes to show you how much is in passive investing.

9:08And they own, obviously, the S &P 500. I wouldn't get in front of that. All right. No, that's exactly right. I mean, passive investing, I mean, think about Apple. We talk about it all the time, the amount of ETFs and amount of funds the stock is in. And in the absence of any news, money is just going to flow in and they are the recipient and they're rewarded for it. The same works the other side, though. When passive becomes active, which we've seen before, that's when things get dicey. All right. Let's talk about a real lagging sector. Biotech, coronotherapeutic surging nearly 48 percent as Bristol Myers announces a deal to buy the schizophrenia drugmaker for$14 billion.

9:41The IBB getting a big pop on the back of today's news. Wall Street firm Jeffrey sees more deals ahead for the space in 2024. Michael Yee is a senior biotech analyst at the firm and joins us now. Michael, great to have you with us. We've been talking about some bigger dynamics in the market, which theoretically could benefit biotech. That is, you know, rotation into value, declining interest rates next year. Is that going to be enough? Because we thought that maybe there were times when M &A seemed to make sense, and yet it never benefited biotech. Well, it's great to be here. I think there are two positive tailwinds.

10:16The first is particularly for the small and mid-cap biotechs or the XBI, you guys pull up that chart. That has been a big dog for three years. We finally get a little move here over the past six weeks. And I think it's the early cycle of a forward-looking, easing rate environment. And I think that that is going to be a positive tailwind. And certainly one of the sectors that should be a beneficiary, if you think about long duration, interest rate sensitive areas, cash-boarding biotechs are one. The second positive tailwind, which we had a note out today, I think you mentioned it, we saw it right here today, is more M &A.

10:53You've got over$100 billion of cash sitting at Big Pharma. You've got Bristol deploying$14 today. Pfizer's got to do more, et cetera, et cetera. And with all these stocks beating down, I think you see valuations attractive. I think that's another positive tailwind going to 24th. What are some of the themes in terms of what is going to drive M &A? This was a neurosciences deal. neurosciences as one of the fastest growing areas within pharma in general. About 9 percent, I think, globally a year is the growth there. But also weight loss, I would imagine. What are some of the other things that we should be looking for?

11:27Absolutely. I think theme number one certainly is in the obesity and metabolic space. There were two$2 billion deals just in the past month, Roche and AstraZeneca buying some obesity early stage assets. I think you're going to see more of that. ScholarRock, S-R-R-K, is one of the ones. Take a look at that one that has room to run this year. I think in oncology, certainly still a big place to be Immunocore, IMCR. That was one we listed in our table as well. And I think you're right. CNS Neurology. Sarah Bell was taken out last week. Clothena, P-R-T-A, another one if the data in Alzheimer's are good.

12:07But if the Alzheimer's data is good coming up, I think that's one to watch as well. They got a partnership with Bristol. Which are the big pharmas that will be most pressured to do the deals? Obviously, the ones that are facing patent cliffs, and it seems like almost all of them are at this point. Well, I think there's two things to remember. One is, yes, the patent cliffs. And I think both Merck and Bristol, and certainly, again, I know Pfizer's done a deal, but Gilead, another one that I think we want to see doing more deals, is one. But let's not forget IRA. IRA is the first year here where price negotiations are going to start.

12:41We're going to hear about this in February. We do think biotech probably takes a little bit of a pause. I think it's a little bit overbought, but goes higher. And I think IRA is certainly going to be on the minds of people. We got price negotiation. We got prices coming down 20, 30 percent. They need to do more deals. There's a whole theme about why small and mid cap has to be taken out over the next year or two. Hey, Michael, it's Tim. Thanks for joining us. We know what GLP meant for the pharma space in 2023. What what is that what is that area of 24 that you think is going to be that new area that really is pushing up valuations and multiples?

13:14Is there anything? Is it Alzheimer's? Is it more GLP? Your thoughts? Yeah. Look, I think GLP and obesity is a once in a generation type thing. I mean, guys, if it was all obesity now, maybe you talk about hep C, which was just about 10 years ago and probably statins a decade before that. So these are the big classes. And I think what's important is that these cycles don't end in a year. You know, you talked about how 2023 was GLP. I don't think that ends in a year. I think you still see that as an important driver for Lilly, which is continuing to be a winner. I think people want to continue to own stuff like that.

13:51Astra, Roche, others. Amgen, let me call out my favorite large cap stock because they're in a phase two for a big obesity drug with data in 2024. That's a monthly, not a weekly, like Lilly. So check that one out. And I think you're going to see this play out over the next year or two. Neurology, I think, still continues to be. Alzheimer's going to take some time to open up. But that is a huge untapped area. We're continuing to see M &A there. That is a huge global epidemic that needs to be addressed. Yeah, I mean, the calendar in terms of data readouts for trials related to GLP-1s for treatments of various diseases, it's really nonstop next year.

14:28But in terms of Amgen, that key data is going to be due out in the second half of the year. So when do you want to start owning it? That's great. Look, it's funny because everybody on Wall Street knows if you've been following Amgen, and they've been saying that their big data for the once a month injectable is at the end of 24. So everybody comes to me and says, Mike, why do I have to buy this stock today? Well, if everybody knows it's end of 24, then maybe it's by summer. So or if it's the stock to own for 24 and large cap biotech because of this obesity angle, then maybe people just start buying at the beginning of the year.

15:02So I'm a buyer on the dips if we do have a pullback here at the beginning of the year for biotech. But I think that's one to watch because I don't think the obesity story ends this year. Michael, great to have you. Thank you so much. Thanks, Michael Yee of Jeffries. That was your play, right? Yes. Amgen hasn't moved the way that the others in that space have moved. And to what Michael said, we're talking about a once a month injectable. That's probably a game changer. And as we move towards that, it's probably going to even be better than that. I'd rather have the name that hasn't moved yet, and Amgen's one of them.

15:33If you look at IQV, which I think is the eighth largest holding, if we have a chart, little double bottom, seemingly getting some traction. Vertex is the largest holding in the IBB. That stock has been parabolic. So you're trying to find stocks, I think, that haven't had to move yet. Steve mentioned Amgen. I'll throw IQV in the mix. Michael, in his note, mentions the severe underweighting towards biotech. Courtney, where are you on biotech? I do think that is likely going to be another category that will benefit from lower interest rates, especially is going to have more M &A. I think you do want to look at companies where the patent expiry is going to be a big deal for a lot of these companies.

16:09So even if they are scooping up other other firms, it needs to more than offset what they're losing. I think that's really what you need to keep in mind. Yeah. And we've we've talked a lot about Pfizer. I've certainly talked about it. Talk about a patent cliff and pipelines that people are very concerned about. Bristol Myers is rewarded today for doing something there. They're they're right in that camp. And you have to be careful about value traps in health care. I mean, trades at seven and a half times next year. Is that a reason to go buy Bristol? Well, analysts think that this is part of them giving the excitement around pipeline that gets them into 2030.

16:39That's still a little ways out. So this is where we are. Biotech, great point, Courtney. It is a place where longer-duration assets are being bid up, high multiple anything. In the case of some of these companies in the IBB, these are massive companies with big balance sheets. I don't think you're taking a lot of risk in terms of that, and you're probably going to be finally rewarding those balance sheets. Up next, running on empty, Nike dropping into negative territory for the year after hitting the market with a weak outlook and$2 billion in cost cuts. Is this just a Nike problem or a broader warning about the consumer?

17:10We'll debate that. Plus, is China set to launch a new Internet crackdown in Beijing, proposing restrictions on online gaming? The news crushing names like Tencent. Could this be the start of new pain for the Chinese tech sector? We'll stick around to find out. This is Fast Money with Melissa Lee right here on CNBC.

17:36Welcome back to Fast Money. shares of Nike tumbling nearly 12 percent after the athletic apparel giant slashed its outlook and announced a three-year,$2 billion cost-cutting plan. CFO Matt Friend on the earnings call said overseas headwinds and a slowdown in digital traffic are part of the reason the company needs this, quote-unquote, disciplined cost management. A host of other names in the sports space getting hit today, Foot Locker, Adidas, Dix, Academy, and Hibbit Sports. So is this a Nike problem or a broader warning sign about the consumer. Tim, what's your take on the earnings? It's both.

18:08There's no question it's both. And I'm underway consumer discretionary for next year, for sure. Nike's best of breed. But there's, I mean, you wear these Hoka shoes. Yeah, I do. Hokus. Yeah, Hokus. I mean, like, there's actually, there actually are brands out there that are stealing the thunder. And it's not just, you know, what's going on at Lulu and whatnot. So there is competition outside of the Jordan space. There's concern Nike's really not innovating. There's concern of ubiquity in the lower price levels of the Jordans. As a guy who went out and bought his kids some for Christmas, I was happy to spoil that.

18:39Good job. Do you think he's watching? Every night. You know what, Connor? You are watching and you confront me with this when I get home. I'm buying you two pairs, okay? Oh, I hope Connor's watching. I'm buying you two pairs. But I think what we're seeing from the street right now is a combination. Again, when I'm looking at downgrades today off of those Nike numbers, they're blaming the company, but they're absolutely blaming the trends and they're downgrading the whole space. This is a handful of shops, and I think it's right. Yeah. China was also very weak yesterday, which could point to trouble for some other retailers.

19:09Yeah, and that's specifically where Nike is pointing out their weaknesses in Europe and in China, which I think is something to look at. And I do think it is broadly on the consumer. There is some concern they're going to be weaker next year, but I think it's really a changing of shifts of how they're spending. And after COVID, everybody started spending on experiences rather than goods. And we thought, OK, this is going to normalize after COVID ends. That is not normalized. That is still a trend that's happening. And I think you're likely going to continue to see that happen. So I don't think it's broadly bad for the consumer.

19:39Likely for consumer discretionary, it might be. But I wouldn't write off the consumer. I mean, wages are cooling, but inflation is cooling faster. So people's wages are actually still being able to sustain, which is good. And inflation is coming down more broadly. So theoretically, you do have more money in your pocket because you're not spending on gasoline and eggs and these other things. You know, but, you know, Tim has mentioned this many times. Nike, regardless of all their growth, it's still a North American story in terms of where their revenues are. And that was disappointing. We touched on it last night.

20:05I think the good news, if there's good news here, is in terms of where the stock is and where it's been historically. This was$175 stock a couple of years, November of 2021. Not that that matters necessarily, but they've had a premier multiple for a long time. That multiple is actually getting to levels where you can wrap your head around it a little bit. We talked last night somewhere between 105 and 108. I don't think it would happen today, but here we are. So the question is not where you're selling Nike. I think it's where you're trying to get back in on the long side. And they're just, Tim started out saying just their brand.

20:35They have the biggest brand. They don't even have a nearby competitor. But it is such a global brand that that's what drags them down. So even though Guy points out that North America is the key to the story, China is the directionality of the story. So all China has to do is get a little bit better, and it's going to be a lot better for Nike. The problem is when we're trading with this type of momentum in the name, it went from 80 to 120-something. So if you want to retrace that 50 percent, maybe it's around guys' level. You look for around$100 to$105 where people start to – the algorithms will kick in to try to buy the stock on technicals.

21:12Are you looking to get back in? I'm looking to own it lower. I think the first place you start looking at guys brought some key levels on the charts. But I think it's somewhere around the 95 area. And maybe you don't get there. Remember, this is a stock that moved 40 percent off of that October 1 level after an earnings period that really was very strong. So I think you're going to get a lower. I think the whole space and discretionary. Got to be careful. All right. There's a lot more fast money to come. Here's what's coming up next. Inside China's latest crackdown, investors are sounding the alarm.

21:43as the gaming industry becomes President Xi's latest target. We'll dive into what it means for your money with a top expert next. Plus, we're answering your burning questions to kick off the holiday weekend. Chipotle, cloud stocks, and quantum computing. You asked, we'll answer. Right after this, you're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.