Stocks Drop With Nvidia Results On Deck… And State Of The Housing Market 2/21/25

0:00Live from the Nasdaq market site. On a day markets erased all of their post inauguration gains. This is Fast Money. Here's what's on tap tonight. A Friday fade. Stocks sinking and closing near their lows of the session. The Dow and the Nasdaq putting in their worst week of the year. Consumer stocks, transports, big tech seeing the biggest losses. How do you make sense of the action and how do you set up going into next week? Well, we're going to tell you, but it wasn't all bad news. China stocks bucking today's downtrend. Alibaba closing in on the$150 mark for the first time in over three years.

0:31But has the recent run come too far? We'll debate it. Plus, counting down to Nvidia earnings. Housing headaches, Royal, the home builders, and a market fright spot in Isle 2. Why Staples caught a bid during the session. I'm Courtney Reagan in this evening for Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, we have Tim Seymour, Karen Feinerman, Courtney Garcia, and Steve Grasso. But we're going to start with a sea of red on Wall Street. The market sell-off intensifying throughout the session as weak data on consumer sentiment and a huge drop in UnitedHealth weighed on the markets.

1:02The Dow plummeting nearly 750 points, seeing its worst day since December. UNH responsible for 30 percent of that loss. We'll have more on that in just a few. But take a look at some of the other big losers today. Discretionary stocks, the biggest sector laggard, led lower by casinos, cruise lines and more. Industrials also taking it on the chin with GE Vernova, Old Dominion and United seeing outside drops. And take a look at Meta. A week ago, it was riding historic 20-day win streak. We were down four days in a row and taking the rest of the MAG7 down with it. All this action coming ahead of NVIDIA's fourth quarter results on Wednesday, the last of the mega cap names to report.

1:41That stock now just barely positive on the air. Shares still more than 12 % off their all-time highs. That was hit on January 7th. So where do we go from here? And does this week's action make NVIDIA more or less important? Tim, you get to kick us off. Well, welcome, Courtney. And like making sense of this, I think that a lot of today was two dynamics that I think aren't totally obvious. I think the data that we got this morning was really a big part of this, even though there was no headline data pieces. You had an S &P, essentially inflation gauge. You had a dynamic in terms of University of Michigan where you had some dynamics around five to 10 year expectations on the consumer side.

2:22And they're the highest they've been since 1995. And then you look at some of the composite PMIs and you look at where we are in real terms. They came in significantly slower. So there was kind of slower growth. We had bad housing data. And all of it feeds through on inflation. You add that to, I think, there was a huge options expiry today. I'm not going to tell you that that was the reason. I am going to tell you I think that had something to do with the day when the VIX was up almost 20 percent. And you had extreme moves. In other words, if you look below the surface of the indices, it was actually a lot uglier today than it even looks on the indices, which looked pretty ugly, which you pointed out at the top of the show.

2:58I think there's dynamics next week. This weekend, we have elections in Germany, which I think are very significant, given how the tone has changed towards the U.S.'s role towards protecting Europe in a post-World War II environment. And a lot of things that we never questioned, I think, at least add to the backdrop of, yes, NVIDIA does feel like they need to kill it. And when you look at the MAG 7, it's been the MEH 7. I mean, it really has been. And now the one stock that people hated the most is the most defensive year. Not surprisingly, that's Apple, an environment where people are actually punishing high growth.

3:31I mean, Karen, does this just feel like an environment where the markets are just afraid to go long into this weekend? Tim brought up what's happening in Journey. We know we have NVIDIA next week. Obviously, the day started out pretty poor with that consumer sentiment number. That really freaked me out about what consumers are fearing about how they feel and especially their inflation expectations. They believe 4.3 percent. That's the highest since November of 2023 for their inflation outlook. Although some of the data would be counter to that. Right. OK. So but to get to your question of about is NVIDIA.

3:59So is it crucial for the market? I actually think we've seen a broadening out. Right. We've seen financials do really well until very recently. Industrials do very well until very recently. So we've seen health care do very well. So I think it's not quite the, when it was all MAG-7 and that was it and there was nothing else to focus on and that was central to it, I think it was more important. I mean, I'm long at video, so I certainly care. But I think it's a little less important than it used to be, especially with we've got all this other noise, macro noise, tariff noise, you know, some of the things Tim talked about.

4:32China, which was nowhere. China is now an interesting piece. So I think it's a little less important right now. All right. Fair enough. Courtney, you know, it was funny just two days ago, I believe, I was on one of the shows and we had a guest that was talking about how the markets are less likely to have this knee-jerk reaction when we get potential headlines about possible tariffs, that the markets have gotten a little bit better about waiting until we see actual news. But then today you get this information from the University of Michigan Consumer Sentiment about how consumers are worried about tariffs possibly to come and maybe that sparked the sell-off.

5:05So I can't quite figure out, are markets worried about potential tariffs or not worried? Because today's action, very different from earlier in the week. Yeah, and I don't think people are able to completely shake those headlines yet. Like, maybe they are a little bit less of a shock to the system, like the first time that you're hearing them. But clearly, consumers are worried about inflation, whether that's coming from tariffs, whether that's coming from just inflationary forces, like the fact that China might actually be coming back online. That actually could start to export inflation kind of across the world.

5:30And you do want to keep an eye on that because we are very much a consumer-driven economy. me. So we do have a few big points coming up next week. NVIDIA is one of those, which you pointed out. I think this for them is going to be something where they need to shake off the DeepSeek news, right? They dropped like 17 % the day that that news came out. And so I think they need to show that that's not going to be a problem for them. They've already came out to say that they actually expect that there's going to be more computing power needed based off of what happened with DeepSeek. And you've seen the CapEx from all of these major firms have actually increased, like I think$335 billion this year is earmarked to go towards AI spending.

6:05So I think they just need to prove that that demand is still there. They have a conference since I think in March, and I think that's probably going to be more of a market-moving event than what we see next week. But markets are absolutely going to be watching that. Yeah, there's just so much going on there, and it's so interesting that NVIDIA is going to have to take a little bit of a defensive position potentially and spend some time on the call talking about that deep-seek news. Steve, what do you make of today's action and all the piling into these safety trades? I mean, Hershey shares up four percent.

6:31You don't see that very often. Yeah, I mean, you know, for obvious reasons, staples are considered the safety bed for everything that everyone has said. You have geopolitical uncertainty. You have tariff uncertainty. You don't know how China is going to pan out, although Alibaba gives a pretty good indication of the of the progress. If you look at the market court, Apple is the only one that's up since DeepSeek. Nvidia, basically back to even. Microsoft down 6 % or 7%. Google down 9%. Amazon down 7%. Now, Apple is being rewarded because think about how much they're investing in AI. $10 billion.

7:19What's everyone else investing? $100 billion. $65 with Meta,$85 with Google, Amazon$105. So DeepSeek has proven their base case. Their base case is that you can do it on the cheap. You can do AI investment on the cheap. Apple is seen as a staple and thus has performed just like that, a conservative bet on the economy and the market. I want to get back to UnitedHealth because obviously that was a big talker of the day, closing 7 % lower, though down more than 12 % at its lows of the day. The Wall Street Journal reporting the Justice Department is looking into the company's Medicare billing practices.

7:56So that's putting scrutiny on diagnoses that trigger extra payments to Medicare Advantage plans. UNH refuting that report, though, defending its track record, saying in a statement, quote, we are aware that the journal has engaged in a campaign to defend a system that rewards volume over keeping patients healthy and addressing their underlying conditions. Any suggestion that our practices are fraudulent is outrageous and false. Karen, what do you make of this whole thing? Right, it's ugly, but I think there's more to come here. And, you know, when something happens like this, I liken it to the Google situation when the antitrust came after them for the way they sell ads.

8:37Right. That's a huge thing. Really important. And ultimately, we got a bad verdict. And then at some point, the market sort of forgets about it and shakes it off because we don't really have a resolution now. We don't know what the actual remedies will be. And there'll be some counter negotiation back and forth. I could see a similar situation here. I think this is sort of the first inning I would wait. I know it's not expensive, but I feel like there's more PR shoes to drop here. Right. They cherry pick either a cherry pick or they find from extensive number of people who claim that they were pressured into giving additional diagnoses that they didn't even test for.

9:13I think we'll see a lot of that kind of stuff come out. that probably won't sit well with the market. But ultimately, it's going to take a long time to resolve this. And I think at some point, the shareholders will just shake it off. Okay. Tim, I mean, this is not the first time, obviously, that UnitedHealthcare has come under scrutiny and the government sort of getting involved, digging around. Does that make you nervous, even if these things end up turning out to be either forgotten by the market or they determine, well, there was no wrongdoing? Well, I mean, I agree with Karen. I'm not sure you need to do anything with UnitedHealthcare, which I think our viewers know at different times, this is a stock that we've brought up as being one of the most bulletproof stocks in the market and one of the greatest charts over the last few years.

9:49But if you look at this chart now, ultimately, UnitedHealth is probably somewhere right around three years support. I want to think that actually this is a buying opportunity. I think there's been a lot of media attention around risk coding. I think it's an easy political football. UnitedHealthcare has had quite an extraordinary last three months, including some really sad news around their former CEO of one of their units. And we followed that news. So, I mean, we we know where some of the public opinion has been around this. At the end of the day, the reason why this stock was one of the best stocks in the market for three years was because that the earnings power and the margin attached to what was better than not even close to pure growth is something that drove this stock higher.

10:32I think those are things that investors can still hold on to. But whether you need to jump in on Monday here, I don't know. But I do think at some point you're buying this weakness. Cordy, it is trading at a 30-plus percent discount to the S &P. Does that make it attractive at all? And it might. So I don't disagree with anything that Karen and Tim are saying here, but I do think if we do continue to see these headlines, if there is pressure, and if the government really does try to actually put their foot down this time around, which I think what people are worried about, about 27 percent of their revenue growth in 2025 is tied to Medicare Advantage plans.

11:02So I think that's where you want to look at this and say, OK, if that is actually a risk, that could be a risk for the stock. So I don't know if it's a reason to stay out of it, But there will still be headlines that are going to affect in the short term. Absolutely. Steve, what do you make of UnitedHealthcare right now? Today's headlines or even the actions we've seen so far this year? Yeah, I would go down the same path Courtney did. If, you know, 27 to 32 percent of the revenues are tied to Medicare Advantage. If you go to Umana, that's up close to 90 percent of the revenues. That's why Umana got hit as well today.

11:32CVS is around 24 percent, but Cigna is probably the buy on this. It's only about 4 percent. So that's why you saw the rest of the space a lot weaker than Cigna was. So I think the market does an excellent job out of sifting through it. The only problem that you have or the huge problem that you have with UnitedHealthcare is that for the last five years, it's only up 55 percent. So it's had its fair share of headwinds and it's a bipartisan headwind that they're suffering from. So you have to be really choosy over which one you're picking and you have to know really what is involved in the revenue mix.

12:07All right. Well, we're going to continue with this discussion. Let's bring in John Ransom. He's managing director and director of health care research at Raymond James. John, thank you for being here. I mean, it seems like you're not deterred at all from your bullish call on UNH. Why do you think the markets are wrong in the reaction today? So as one of the panelists mentioned, if you look at the last five years, every time the stock gets to a 30 percent or more discount to the S &P, it's bounced, number one. Number two, I think a lot of this concern is rear view mirror. So to take the coding, totally agree with the coding scrutiny.

12:40But what people have to remember, this is way in the weeds. The government changed the coding in 2024. It's called V28. So they eliminated about 2 ,300 codes when they moved from ICD-9 to ICD-10, which happened for the rest of the world in 2015. So they eliminated a bunch of codes that triggered these payments. And so looking in the past and say, well, in 2021, they had a code, that doesn't that that got dramatically curtailed with B28. UnitedHealth has said this is a 15 billion dollar funding hit over three years. So they ground through the numbers last year by cutting about four billion SG &A.

13:14But I think the focus on coding is fighting the last four. You know, you've noted that the Biden administration was really hostile to UnitedHealthcare. Do you see a difference coming up here with this new Trump administration and how they may be treated? Well, what Biden, you know, agencies aren't supposed to reduce funding like CMS did. That's supposed to go through Congress. So I don't see another$15 billion cut coming out of Trump. But the next clue we're going to get, so look, it's uncertain. Okay, let's be clear. It's been a little Delphic. But what's going to happen in April is the final rate notice will come for the Medicare Advantage plans.

13:50And that will be a big tell because in the preliminary rate notice, Biden rushed this out. They didn't include any data from 2024. 2024 is probably a 10 percent cost year for the plans. And so the big tell is going to be, I think, in April when the Trump administration pushes out the final rule. And then we're going to have a sense of how they're thinking about the industry. Hey, John, getting back to really the fundamental thesis around the stock. And I know you're very bullish. I think you've got a 640 target on it. Talk about even just the guide that they've set out there for 25. I mean, I would argue this is very cheap.

14:21When you look at their MLR guide, I think relative to peers, again, I think this is one that if anyone can kill, excuse me, blow through the bar here, I think it's these guys. Yeah, they struggled last year. We called it winning ugly. And then this year, as you know, the earnings growth is about four points below their target, their 13 to 16 % target. As we look at 2026, that's when I think you'll see some reacceleration. And then in 2027, We fully lapped this V28. So, look, I agree with what people said. I think this is going to take a while because we're going to chop around, you know, and 2025 is going to be OK, not great.

14:56But again, as the market looks six months forward, I think two things are going to happen. Number one, I think this rate notice could be a lot better than the preliminary. And then number two, and this is the key, medical costs are starting to flatten out for Medicare Advantage plans. The big problem with United is at the same time Biden's been cut or Biden cut, we had a bad trend. And we think three years on, the comps get easier and easier. And we think the trend now, again, first quarter, you could have some flu noise. But we think medical trend is going to flatten out. And the rate notice could be an upside surprise against the backdrop of the stock trading where it is.

15:31John, it's Karen. Thanks for coming on. So let me ask you, do you think that this investigation is just specific to UnitedHealth or could widen out? And do you see any shifting of who's got a bigger Medicare Advantage business a couple years down the line as a result of this? You know, I don't know the second question, the first question. But what I'd point out is that there was no news broken today. This investigation was started by the outgoing administration. And it was just we kind of thought people knew. And so the way these things normally go, and I think you guys said it perfectly, is that we get a settlement in two years.

16:11People forget about it. And it's going to be some immaterial sum of their, you know,$460 billion market cap. I mean, normally these are fairly small. And again, just the thing about coding, this is so in the weeds. And what happens is you get a judge and you get the government, you get the company and you have a squabble about it. This is exactly like taxes, as one of your guys said before. Did you document this coding appropriately? And again, just to wrap a bow on this, I thought it was so crazy that the government allowed codes to drive payments and you didn't have to treat. And so eliminating that, I think, is a positive step.

16:45If you give truth serum to the industry, they would say, yeah, I got a little out of control with all the supplemental benefits and the fact that coding, the government sort of set the game up where they created bad incentives. And so I think, again, this is kind of rear view mirror stuff. But that's kind of where we are. But yeah, I agree also. It's not going to be a tomorrow thing. I think it's going to be a grind up over the next few months. What do you think the code is for truth serum? I'm just kidding. John Ransom, Raymond James, thank you very much. I think it's called Pinot Noir, right?

17:16Pinot Noir. There you go. I like that. That was good. Courtney, I'm going to give you the final word on this one. Yeah, I think this is something we're going to have to continue to watch these headlines because I think a lot of good points are brought up that no real new news is out today. This is something that has been out there. But I think the question that people have is, is this new administration actually going to take some action on it? Because what you're seeing is they are trying to cut costs and do a lot of things that previous administrations haven't. So the thing is, should they take this administration more seriously?

17:41I don't know the answer to that, but that's what the markets are trying to figure out right now. Fascinating stuff. Well, coming up, Consumer Staples, the only market sector higher today. The name's doing heavy lifting in the grocery aisle that's up next. and the home builders on shaky foundations. What a week of bad data and disappointing earnings means for the housing trade. That's up next. You're watching Fast Money here on CNBC. We'll be right back.

18:15Welcome back to Fast Money. One spot of green in an otherwise dismal day for markets. Consumer staples hanging on to gains despite another down day for Walmart. Kenview, Hershey, ConAgra leading the sector higher. Steve, what do you make of this? I mean, some pretty decent moves higher in some of these names that you don't often get a bid on, not at least like this. Yeah, I mean, if you look at them, their performance, their guidance has been good, their earnings have been good, their balance sheets are good. When you look at the performance, though, as an ETF on the whole, you know, go back five years.

18:49Their performance in five years is up 27%. The XLK, which is the technology sector, is up 136 % or thereabouts. So you have to be willing to, you know, short term, if you want a place to hide and you don't want to go into treasuries and you want to wait until the smoke clears, fabulous. If you want to go longer term, markets on average go up 10 % a year. They have dips, yada, yada, yada. But the place where you're going to get the outsized growth is going to be technology, not staples. But I can't argue with hiding them for the next couple of weeks slash months. Tim, do you find safety here? I think I think not only do I find safety, I think there's a breakout coming.

19:29I think these are stocks that at least if we remain in a higher volatility environment and certainly we sketched out a lot of uncertainty. I'm not saying that we're going there. And ultimately, my broad view on the market is markets are going higher. Having said that, these are companies that have proven that they've got the balance sheet to continue to buy back stock. In fact, Monday, we're having Julian Emanuel from Evercore on, who's written a really interesting piece on companies that are low volatility stocks that actually are buying back stock. That's a great formula here. And some of these names also have idiosyncratic stories to themselves.

19:57I mean, we know kind of the failings or the story around Budweiser, for example, and why that was such a troubled stock because of their marketing campaigns and things that at least were perceived as missteps. This is a company that's been on a tear. You look at Coca-Cola. They just gave you numbers. They're showing you they're actually outgrowing their peers, even in a segment that doesn't do so well in the U.S., but more broadly foreign. If you look at the story around Mondelez, Campbell's, you know, these are stories that I don't think are perfect stories. And Staples came under a lot of pressure on rising input costs and valuations that didn't make sense.

20:26But in this environment, I like that trend. And the XLP above 84 is breaking out to all time highs. Karen, before we go, I got to turn you on Walmart. I mean, to me, the action feels overdone, especially yesterday and then again today selling off. are now down about 9 % for the week. What do you make? Yeah, as I said yesterday, I thought the quarter was really good. The quarter was good. And I thought the guidance was fine. I don't know why they needed to sort of, you know, go out on a limb when there is a lot of uncertainty. They also did say January was really good. Right. So I think the only thing wrong with Walmart, that it was too high going in, and I'm long.

20:58I was long two days ago, and yesterday and today remain long, and I'll be long next week. I liked it. All right. Well, there's a lot more fast to come. Here's what's coming up next. Digging in on the housing data, a huge week of numbers, and a big dent in the home builder trade taking center stage. We'll dive into whether these names can build the foundation for a rebound. Plus, can a slew of earnings next week set the stage for a retail rebound? The options set up ahead of make or break reports from Home Depot, TJX, and more. Next, you're watching Fast Money, live from the NASDAQ market side in Times Square.

21:35We're back right after this.

21:45Welcome back to Fast Money. Stocks tumbling to end the week as investors grapple with uncertainty surrounding the Trump administration's economic policies and some weak economic data. The Dow losing more than 800 points at its lows, the S &P having its worst day since December, and the Nasdaq falling more than 2 percent. Small caps closing below their 200-day moving average for the first time since November 2023. The Russell 2000 losing nearly 3 % today. Block now trading under ticker XYZ, dropping after missing earnings expectations. Bank of America, though, says it may be time to buy the dip, down 18%.