Stocks Drop and Climb Back On Tariffs… And The Impact On Pharma Description 02/03/25

0:00Live from the Nanzac markets, I'm in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Held hostage to the headlines, the latest won just minutes ago. Canada will be spared from tariffs for the next 30 days. We'll get the very latest from the White House and ask the desk how you are supposed to trade in this kind of environment. Plus, bottom of the bottle, booze stocks getting battered yet again. Tariffs, the latest hangover for a host of names that keep hitting new lows. And later, Palantir popping on the back of a big beep. We'll go off the charts on the dollars next move.

0:30And is a burrito blowout on the menu for Chipotle? That report out tomorrow. Our hot and spicy takes straight ahead. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Karen Feinemann, Dan Nathan, Guy Dami and Julie Beal. We start off with the very latest headlines from the trade war. Canadian Prime Minister Justin Trudeau tweeting that there will be a 30-day pause on U.S. tariffs as Canada says it will spend more on its border and add more personnel. This is just the latest twist and a day of reversals. The Dow round-tripped briefly into positive territory after President Trump agreed to pause 25 percent tariffs on Mexico for at least 30 days.

1:08The pauses could be first steps toward avoiding what the Wall Street Journal is dubbing the dumbest trade war in history, even as tariffs look like they will remain in place for China. Our Megan Costello joins us now with more on where we go from here. What a day, Megan. What a day, Melissa. That's absolutely right. At least two legs of this trade war are now on pause for at least a month. A message coming in from President Trump just seconds ago on Truth Social confirming that news that he has reached a deal with Canada to delay those tariffs. That comes after Canada promises to carry out this$1.3 billion border security plan.

1:41Trudeau also saying that he will appoint a fentanyl czar to take care of that at the border. Trump saying that it will be at least 30 days that those tariffs are on pause. That comes after he reached a similar deal earlier today with Mexico President Claudia Scheinbaum. She agreed to send 10 ,000 troops to the southern border to focus on fentanyl specifically. She also said that the U.S. made some promises to not send so many weapons across the border into Mexico. Also, at least 30 days on pause there. Negotiations ongoing, so we will play this game again a month from now. And the open question at this point, Melissa, is what's going to happen with China?

2:1510 percent tariffs on all Chinese imports, on top of any tariffs that are already in place, are set to take effect at midnight tonight. It's been a little quieter out of China than usual because of the Lunar New Year, but they have expressed some discontent here. They have vowed to retaliate. We know that the two leaders have not yet been in contact. But Trump said earlier today that he does expect to speak with Chinese officials within the next 24 hours or so. He mentioned some more to watch there. As of now, we do expect those tariffs to hit tonight. Melissa. Megan, thank you. Megan Casella from the White House.

2:46So in the face of this tariff turmoil, what do you do? Do you wait it out, trade around it? I mean, what we saw today was extreme whiplash when it came to the headlines. We thought there were tariffs and there's a 38-year reprieve with Mexico. Then again for Canada. Yeah. Well, we had Vinny and Porter and Danny Moses and Steve. You did a panel with them. And Vinny talked about, you know, make volatility great again in June of last year on this show. And, again, I think that's what you're going to see. And they're going to be in our business. We call them tape bombs. And get ready because the next 75 to 100 days, I think you're going to see more of them.

3:16And I don't know what you do other than embrace the fact that vol is probably going to be sort of on the other side of 18 and a half, 19 for the foreseeable future. So you're going to see whips like this. I'll say real quick again, though, I think today and all these down days, you see the vulnerability of a market that's trading it. I think excessive valuations and how sort of tenuous things can be. So just to piggyback on what you said about the VIX. So the VIX went from like 16 and change to 20, which if we were in an all out trade war, 20 would not be the number where we were. So I think there was a great deal of skepticism going into the day about, well, all right, this is where we're starting, but we'll see.

3:56There's likely going to be some movement. I don't think that would have been a surprise to most people. And I'm surprised it ended in one day. I don't know that it's fully over. That's not what they're saying. But I kind of don't quite understand the whole strategy. I think it's destabilizing to businesses to know there could be a trade war. There might not. Like if you're GM, what do you do? It's hard to run a business. You know, it's interesting about the strategy. I mean, if he had Trudeau come down to the White House, if he had Scheinbaum come up to the White House and they had this meeting and it looked really nice and official and they walked out to the podium and they said, we've just reached a really great deal, you know, that sort of thing.

4:33I think those are the sorts of things that CEOs would have a lot of confidence in, especially when you think about with our allies. Now, on the flip side, with our adversaries like China, it's a totally different game, right? We've had tariffs on them. They are punitive. We know that they are adversaries. We have an economic war with them as it relates to this kind of battle for, you know, AI supremacy and all that sort of stuff. And we should continue with those regulations, with those curbs, with a whole host of other things. And when you think about, you know, I know there's a lot of issues about them stealing our IP.

5:04That's been going on for decades and the like. And obviously some of this espionage. So China is actually 10 percent. If it stays there, that's fine. You know, when you think about it, because we will get concessions. It's the stuff with the adversaries. That's the sort of stuff. If you are an auto CEO here, if you are an energy company CEO here, this is the sort of stuff that really hurts your planning. Right. I mean, to that point, to Dan's point, to all of you guys' points, I mean, we're talking about our allies here. We're talking about in trade when it comes to Mexico and Canada. And that's what's so destabilizing.

5:35When it's China, you completely get it. You know that it's coming. You know it's going to happen. But with Mexico and Canada, it doesn't make any sense after so many decades of just sort of open borders and our ability to move things back and forth in manufacturing and goods. Julie, what do you do here? Because we've got 30 days theoretically now. And I don't know what the off ramp is because there hasn't been any there haven't been any metrics. It's not like we want to reduce fentanyl shipments by X percent or X number of tons or whatever. Some people say that because there aren't any metrics, that is the off ramp.

6:09You can call it off at any time. Others are saying, you know, that there is no off ramp because there are no metrics. Yeah, absolutely. I think it's, you know, hard to really keep track of everything. But this reminds me of the advice I've gotten from many pediatricians, you know, when your child curses, which mine does, is to underreact. Right. And I think that's really the benefit to investors right now is don't just do something, sit there. Because the fact is, is there's just not enough visibility or clarity and things can reverse super quickly. So trying to position yourself perfectly for one specific outcome is not going to be the thing to do.

6:47Now, if you're a long-term investor, a lot of times we're going to probably get opportunities to buy good companies at better valuation. So I'm excited to have a little more volatility because I think most of our companies can manage through this over the long term. Are there companies, are there sectors that you'd be looking for? We've seen some of the reactions. We've gotten a glimpse of what the impact could be in terms of the stocks. A glimpse, an idea. We saw it in the automakers. We saw it in some of the home builders. I mean, dollar stores, et cetera. I mean, are there any entry points in your view here?

7:20If it goes low or if there's more volatility, this is interesting. You're trying to find, yes, sectors that might be impervious or some that have sold off enough where it could get interesting. I mean, some of these, look, I mean, aerospace defense stocks, for a litany of different reasons, have been under considerable pressure since the election. I think at some point, probably not now, there's an area. But names that seemingly are outside of the purview of this, to me at least, Software names, I think, are winning in this environment for a myriad of different reasons, most of which, what we heard last Monday from DeepSeek and some of these other things, I think the ultimate winner becomes software.

7:52I think they sort of fly under the radar. Yeah. How about you, Karen? Nothing went down enough to really, you know, as you say, I mean, levels are high already going into this. So, yeah, nothing went down enough that I bought very little today. Yeah. Does this sort of underscore the notion that there should be a premium accorded to some sectors? and maybe it's software, maybe it's a name like Meta, which was up today, that are not subject to the whims of this trade war. I mean, Meta is one of these ones that everyone loves. There's too many people who love it. It just seems like a very concentrated trade.

8:24I know you love it, and it's just gone up in a straight line, you know,$100. And I just don't think that's particularly a natural reaction to the quarter and the guidance that they gave. And I get an evaluation, and I get what they've been doing in AI and how it works for their business, and it's one of the first use cases that makes a lot of sense. But it does kind of speak to the fact that the AI bubble has not even kind of taken, other than NVIDIA and Microsoft of late, but Microsoft's stuck in the range it has been. You know, look at Amazon. You know, look at Google and obviously Meta. They're trading at all-time highs.

8:55So, you know, you've seen a rotation out of some of these names where there's been some deceleration. The numbers have not continued to go up. But we're going to get a good – I don't know if we're doing that later in the show. I didn't read the rundown. But, like, we're going to get a good look of the Amazon and the Google and what they have to say about CapEx. And, you know, and there's some issues potentially there. You know, if you think about it, they both have cloud businesses. They've both been investing in and around this. They've both been tripping over each other to invest in, like, Anthropic, that sort of thing.

9:23So if you think about the reasons why Microsoft sold off, because there's been a decel in the growth of their cloud business, I think those things are, you know, something you want to pay attention for this week. Yeah. Julie? I mean, I think there really are no sectors that are completely immune from a trade war, right? Because if it leads to much more significant inflation, that's going to have a negative impact for everyone in terms of interest rates, valuations, and mostly just consumer confidence and the ability to continue to go out there and spend. So I don't think any sector is going to be immune from any kind of a trade war.

9:56And I think that is reflected in the tenacity, the fear that we see in this market around this trade war. I think that's why we have, you know, an editorial from The Wall Street Journal calling, you know, the president's first major action, you know, something that's dumb. Like, it's pretty clear. For more on what is next for the markets, let's bring in the chart master, Carter Braxton Wirth. Carter, you're looking at the S &P as well as the U.S. dollar. So what are the charts telling you? Well, sure. Before we get to them, we have an all-data chart for the U.S. dollar, an all-data chart for the S &P.

10:27So sometimes very short time frames are important. And then we thought we'd look at very long time frames. But what we know is that today, it's a fair thing to interpret it both as quite bearish, and yet others, well, it shook it off, didn't it? And a lot of stocks did quite well, important stocks like a Meta or a Google or an Amazon versus others. And so we'll see, jump ball here. My own honcho bias is that we're churning and it's stalling and there's risk-reward that's poor, but let's get to it. So here is an all data chart of the S &P 500 since inception in 1928. And you can see, of course, those dates.

11:11One could say, well, isn't this, you know, just sort of fear mongering? I have no comment other than we sent it out to clients today and last night. And the idea is that we're at an interesting juncture. And so the bull would say we're going to move up and out of this well-defined internal trend line. And it's the beginning of yet the new bull market. And others would say, no, this is a very difficult level. But to equate it, analogy is a weak form of argument. There are no analogs to 1929 or 2000, other than if you do some valuation work, there are those that are making the case that we are as full or as expensive as we were at any time in history.

11:54My own hunch is to reduce exposure. But to the dollar, obviously, that's a, yeah, go ahead, please. No, no, no, for the U.S. dollar. Yeah. So here's an all-data chart of the U.S. dollar. And what we know is that, obviously, that peak is 1985. That's the Plaza Accord. Now, if you looked at the trade-weighted U.S. dollar index, it's making all-time highs. But there are three ways to annotate it. This is one of three. Let's look at another. Same chart, 50-year all-day to chart. And then final iteration would be this way. Those all point to higher levels to my eye. One might draw the lines differently, but that's what I see.

12:36Okay. Carter, thank you. Carter Braxton Worth of Worth Charting. Interesting. The chart work seems to coincide with what a lot of strategists are saying. David Costin over at Goldman Sachs saying 5 % pullback on the S &P. and the tariff impact just in terms of dollar, not in terms of the impact on consumer confidence, not in terms of the impact on financial conditions, but just mathematically speaking, those tariffs could mean a 2 % to 3 % reduction in S &P 500 earnings for this year. Yeah, that's the key, right? I mean, it's all predicated on earnings and earnings growth. And I think, listen, coming into this year, I think the market was expecting 14.5 % or so earnings growth.

13:10I never thought we'd get anywhere close. But to your point, if these were sort of being protracted, you know, you're knocking that down, I think a couple handles, a couple standard deviations lower on top of a market that's probably already expensive on back of that. So it is concerning without question. And quickly, the price action, Karen made a great point. She always makes great points. But on Thursday when Apple reported the stock was trading 234, she said wait for the conference call. That happened. She was right. The stock traded up to 247. But obviously the aftermath, the trading activity in terms of the way it's been trading has not been good.

13:43Microsoft throwing that mix, even if you want to throw Tesla in that mix, and then go back to NVIDIA, and we flag that the day after earnings, that engulfing pattern. These were all technical reasons. Now you're throwing some fundamentals on top, might get this thing moving a little bit. It's always interesting when you hear a pullback of 5 % in S &P that's been making new highs for like two years. And it wouldn't be hard to get that. We had one just a month ago or so. But I think about, again, the conversation we just had about uncertainty. I think about expectations as far as earnings growth.

14:11You know, normally you would see, you know, S &P earnings growth expectations come down a little bit into the year, that sort of thing. And they haven't. They stayed pat. But if you look at Carter's work on the dollar, if you think about where yields are and they don't really move, they're stuck at four and a half percent or so. You look at CME Fed Funds futures and you say to yourself, well, you know, we're going to be here for a while. And you say to yourself, with this tariff uncertainty, there's actually a lot of good reasons why earnings growth should be less, which could cause easily a 5 % decline off a market that's trading at 22 times.

14:42So, again, I don't think that's such a bold call. It makes sense, but it's kind of consensus. I agree. I mean, it's hard for management to feel comfortable about what's going to happen next quarter. So a lot of times we care about what happened in the quarter. And to the extent the dollar moved, maybe we'll dismiss it. Often it's somewhat dismissed. Constant currency, how do they do? But the idea of planning for the future, it gets much harder. So I think you have to be more conservative. For more on the extreme moves in the currency markets, because we did see a lot of that over the weekend and today, let's bring in Jens Norvig, Exante Data's founder and CEO.

15:15He also is the co-founder and CEO of Market Reader, a Wall Street analysis platform. Jens, always great to see you. It's been a roller coaster in the currency markets. We've just seen such extreme swings. And so I'm wondering how your clients are trading this and what you're expecting for the U.S. dollar. It's really one of those situations, right, where we get a new headline literally every hour. And we've had incredible moves Thursday, incredible moves Friday, and extraordinary moves here on Monday's trading. And now, with the latest headlines, we've actually had the moves more than fully reversed for the Mexican peso, the Canadian dollar, right?

15:58because there's this delay in the tariffs that's been announced during the day. And the market is now kind of jumping onto this idea that there's going to be a delay, that even the China tariffs that are supposed to come into effect at midnight, there's an expectation in the market that there will also be a delay for those, even though there has been no announcement specific to that. So it's an extremely erratic market move, probably some of the most erratic trading I have seen. my career. And I think it's really important to not overtrade the headlines and think about what is the direction we're actually going?

16:35What does the administration really want to do? Is it a negotiating tactic or is it a policy they really want to implement? And I think there's a big difference between what they're trying to do in relation to Mexico and what they're trying to do in relation to China. Two totally different things. Before we get to that, Jens, I'm just curious in terms of the wild swings we've seen, how much of that is just positioning into the tariffs or what, you know, perceived tariffs and how much is that sort of increasing the volatility here? Yeah, so I've been working with institutional investors throughout the whole weekend, right, to plan for the trading session here on Monday.

17:11And I think a lot of people were just embedding new kind of scenarios for, OK, where are different currencies going to go if these tariffs actually come into effect, right? And we've never known with certainty and we still don't know. But that's the sort of new mapping out of the new equilibrium that all the institutional investors are doing. And the big question is just, are these tariffs going to stick or is it just negotiating, like a negotiating tactic? Jens, you know, the currencies to me drive everything, but the people watching this show are typically equity traders, investors. So in your opinion, and back on August 5th, it was the dollar-yen move that got things moving.

17:50What should we be watching? Like, what's the one thing that you wake up and say, where is dollar fill in the blank? Yeah, so so so right now, I think we have some kind of proper information about what's going on with Canada and Mexico. But we have no information about whether the tariffs will happen or not happen with China. So I think literally where dollar China is trading at midnight tonight will be crucial. right? Because that's when the tariff will start to officially be collected. And that's going to be the key stress point that we're going to have a reality check effectively whether we can relax as much as we've relaxed over the last few hours.

18:30As opposed to looking at the crosses that directly pertain to the countries targeted by tariff CNs, are there other currencies that we should be watching too for ancillary effects? For instance, you know, tariffs on China means, you know, U.S. Brazil feels an impact, U.S. Argentina pays. I mean, what are some of the ancillary effects? Actually, today we had some really unusual moves today, right, that we had tariffs announced in relation to Canada, Mexico, China, and the euro was actually extremely weak today. Like, there was more surprise that Trump started to talk about potential for EU-related tariffs during the weekend.

19:12And the euro got really scared about that. So you can see that big dip in the chart there. That was really a fear that EU tariffs could be coming soon. So that's probably the one to watch, right? People are really on edge whether he could follow through on those specific threats. And he's been talking about it repeatedly that he's not happy with what the eurozone is doing and the EU is doing in relation to car trade, auto trade. So that's why there's a huge amount of focus on that. Yeah, he just said, I think on Friday, that he's looking to do something significant when it comes to the EU. So I guess that's why people are on tender hooks on that trade.

19:50Jens, how are you recommending now traders position themselves? What crosses the most interesting to you in terms of the risk reward? Yeah, so China is actually on holiday, right? So when we look at how the Chinese currency is trading, we have to look at CNH as opposed to CNY to get a real-time picture. They'll only come back on Wednesday. But I think that's where the action will be. That's where the clue is going to be. And right now, I'd say the risks are underpriced because I don't think the situation is just because they have delayed things for Canada and Mexico doesn't mean that it's going to be late in the same way for China.

20:25So watch out there. I think that could be a big move. That could also spill into all the ADRs and so forth of Chinese companies that are listed. So I think some equity action is pretty likely on that front, too. All right. Yans, we're going to leave it there. Thank you. Yans Nordvik of Exante. So, I mean, it's make volatility great again in the currency markets also. It's been great for a while. And I think it's going to continue to be nice. Right. I mean, listen, the one is absolutely something you got to watch. Dollar yen without question. But what happens? All roads are leading back to gold as well, continues to make basically new time, all time highs every single day in environments where historically it shouldn't do well.

21:06That's what you should be watching. You know, a friend of the show, David Rosenberg, Rosenberg Research, had a note out this morning, really interesting stuff. I mean, his point was he thinks that Trump has kind of overstepped his bounds with this negotiation. And what it does, it runs the risk, OK, of inflation going higher. And the very people who voted him into office are going to really feel the effect of higher inflation and they're going to forget that the Biden administration was the cause or the way they thought the cause for that inflation. And then what happens is you have some pressure on getting through some of these pro-growth sort of fiscal policies because in his own party, in the House, OK, you're going to get these fiscal hawks acting up a little bit.

21:44So again, I think they have to walk a very fine line because that was one of the reasons for the changeover that we saw. People wanted less regulation, more pro-growth policies. And this could be the sort of thing that actually causes it to kind of get stalled in that first year. I think your point about the electorate and people, consumers out there feeling the impact really is going sort of as confetti falls on me. You know, people are underestimating that impact, Julie, because you think, you know, up to the elections, people put on hold their purchases. They're hearing that things are going to cost more.

22:20I mean, that's sort of the untold effect. the last time we had tariffs, we weren't coming off of an inflationary scenario like we are this time. We are in shock still from inflation. People are still feeling it out there. Yeah, I think that's something that's kind of understated is that, you know, the last time we had tariffs, none of us really had experienced inflation in any kind of recent memory. And I think it's much more meaningful now to have price pressure happening. And I think having so little clarity on how it's going to impact consumers still is a big concern. I think we continue to chart prices and see that there are pockets of goods that are really under quite a bit of pricing pressure, particularly in groceries.

22:59And that's a place that was pretty central to the debate for Trump versus Kamala Harris. So I think going forward, the real key is kind of continuing to follow how this impacts the consumer. because I think so much of the U.S. economy is driven by what happens with the U.S. consumer, and the confidence around that and the willingness to spend is going to be critical. Coming up, earnings season in full swing, and shares of Palantir surging after reporting results. The details and the numbers moving the name next, plus the bar lowered yet again. Booze stocks pouring one out as tariff headlines hit the group.