Stocks Hit Records As CPI Comes In Light… Plus Banks Break Out 5/15/24

0:02Live! We're gonna do it live from the NASDAQ market on a record breaking day. for your money, hopefully. This is Fast Money. Here's what's on tap. The CPI surge. Stock is jumping after the latest inflation report. All three major indexes notching closing and intraday records. The Dow now less than 100 points from 40 ,000. Did this morning's CPI print just give the market bulls the green light? Plus, bet on the banks. The group has quietly outperformed the broader market over the last month, and a slew of names are hitting 52-week highs today. Now, can that rally roll on? We're going to go off the charts to find out.

0:41And then later, Apple quietly hitting a three-month high as its comeback rally takes hold. The old guard tech titan Dell jumping to new highs and a nice market cap. Dell is something. And Bitcoin's big bounce back, over$66 ,000. Where the crypto coin is going from here. I'm Joe Kernan. I'm in for Melissa Lee. I owe her. Whenever we ask her, she's there early. and she's also here at night. She's amazing. So I had to be here. I want to be here. I do. Yes. I do. Coming to you live from Studio B at the NASDAQ. And I feel like this thing might, like, this is Elon Musk here. This is my first time here.

1:22This is much more high tech than your desk. Do I need to have a badge I used to wear in the lab to see how many regs I'm, whatever? Is it radiating us? It makes you feel good, Joe. Exactly. I hope not. Tonight, who's here? Well, you've seen everyone. Tim Seymour. Nobody needs an introduction. Karen Feinerman. Steve, I like to say Grasso. Do you like Grasso or Grasso? It's pronounced Grasso. I think Grasso is more accurate. Yeah. And my man from here on, I see you a lot in the morning. Chris Verone, technical macro research at Strategas, which, if you don't know, is a Stiefel company. We're going to start the CPI-fueled rally on Wall Street is where we're starting.

2:00We had a PPI-fueled rally. Explain that. But the Dow, the Nasdaq and the S &P 500 all closing at records. The S &P breaking above 5 ,300 for the first time ever. The Dow at its peak got within 65 points of 40 ,000. And that was after April's CPI came in at three-tenths of a percent, ending a three-month streak of hotter-than-expected inflation. And that sparked hopes, maybe, that the Fed could get started with rate cuts sooner than the most recent forecast, which was later than the forecast before that. But now there's a chance of a move by June. That jumped in the last 24 hours. The benchmark 10-year, meanwhile, tumbled below 4.4 percent, its lowest level since early April.

2:46Gold moved. I mean, all the markets moved and did exactly what you would expect if you really believed this number today. So did today's inflation report give the all clear for stocks? The revisions yesterday, is that why we turned around? And then today, is that two in a row of cooler numbers? Yeah, and I think that everyone was just so poised for a hot number because we've had a trend of hot numbers. So everyone thought the cuts were sort of off the table. So I'm still at three. I thought you were going to say six. Yeah, no, no, six. I cut back. I'm still at three this year. I think they go in July.

3:26I think they go in September. And I think they go in either November or December. But I think there's a total of three. They must really want to go because there's no reason. First of all, they really do want to go. When you hear Chair Powell say, when he talks about the markets, he's measured. But I think he needs to go. Well, he can't help himself. I mean, like every time fouls. Well, I don't know why. First of all, Joe, great to have you. Thank you. Good to see everyone. Thank you. It's been a while. We miss you. That means old. What is that? I could be hairy. We don't throw royalty around.

3:59I could be hairy and Megan. I could be young. But I think that CPI number, there's a couple of things that you draw from it. First of all, we're still 140 basis points or 1.4 percent away from the Fed's PCE target of 2 percent. And we're we're not that close to where they want to be. Are they going to make adjustments? None of us really know. Should they make adjustments? that's both a political and I think an economic theoretical issue. I do think you have a case with that CPI number. Wasn't that fantastic? You had owner's equivalent rent. That's still very sticky. Services part of I think the inflation picture remains very rough.

4:33But what the market gave you on the back of that, we debated this last night. Do we think the market was positioned for a weaker number, or would that be a sell the news if it was a weaker number? Look at semiconductors. They closed it, too. however you're following them, whether you're looking at the stocks or you're looking at the SMH, SMH closed at 234, which is right where it was on that March 7th high. The leadership that's coming in the market in the form of both the mega cap tech stocks, Apple we're going to talk about is suddenly a leader again. But the broadening, the banks is really an exciting part of this.

5:02So I just think that the market from a positioning perspective has a runway. And they have a runway and they have a runway that I think that whether the Fed wants to or doesn't want to, yet retail sales, it's a number that were decent. This economy is not falling apart. Rates are moving lower. Tim, I might add to that. I think this business is always about how much space between what should happen versus what could happen. And I think we probably all agree the Fed probably should not cut rates into the fact pattern that we have. But it doesn't mean they won't. And who's had this right all year is gold.

5:32I mean, gold has told us all year that what should and what could happen may be wildly far apart. And you look at the price action today and the only Fed speaker I care about is the two year yield. And the two-year yield a few weeks ago never made new highs. The two-year yield yesterday reversed on a hot PPI number. And look at twos today, not just domestically, but look at two-year yields globally. They're breaking down. And then what leadership do you get from that? These banks act great. All the REITs rallied today. I think it's telling us the Utes have been fantastic. So I think the leadership fabric of the market has been suggestive that, you know, we've probably seen the cycle high in bond yields here.

6:06Who thinks we get to 2 % on inflation this year or next? A two-handle or two? Two. Two-zero. Two-zero. Where they got to go. So you're saying that if they see light at the end of the tunnel, they'll be able to cut. They don't really need it. That's the same as moving the goalposts, isn't it? I think a two-handle is enough to clear a victory. Two-nine is not two. Right. But if you were saying two, I don't think the economy gets to two. That's where we're going, aren't we? They're insisting. But also, I mean, you know, they're not operating in a vacuum. You've also got this fiscal situation. And I mean, that sort of makes things very noisy and difficult for them.

6:46But yeah, do you think we're tight right now? You think we are restrictive right now? I don't. Actually, I don't. I feel like if you especially be looking at the interest rates over time. Why would you cut? Because we are we are higher than real rates. And by the way, then we're restricted. We are restricted. We're always higher than one. Not always. The normal course is higher than real rates. I mean, right. That's got to fall. Yes. The whole thing's got to fall a little bit. I mean, I think pragmatically. But they did just cut. They already cut. They if you want to look at QT, you cut back from QT.

7:20That's de facto easing. Right. So you've you've already cut rates. So it's just a matter of doing the headline where you cut 25 basis points. But when you think about it, when Tim talks about owner's equivalent rent, there's a lot of stuff in housing that if he cuts rates will come down. CPI, I mean. So CPI, owner's equivalent rent or rent or housing is a third of CPI. And then if you add in services, you're going all the way up to 75 % of CPI. So there's a lot of things in there if you – by the way, when you cut, it's never supposed to be like you feel like you're cutting. because if jobs are cascading lower, he waited too long.

7:59The Fed is never in danger about being ahead of the curve. You see the Nasdaq ripping like this and Bitcoin ripping like this. Why would you think you needed to cut? You've worked so hard to get a little bit of dry powder back in yields and 5 percent. I remember 8, 9 percent. And I would also make an argument that higher yields are not necessarily a reflection of higher inflation. There's also a premium that we're paying the government now to invest in this country. And, you know, even though I think we are the best place to invest, the credit profile has changed. And I think there's a dynamic here where we look at yields and let's not confuse the two.

8:40I think policy, as they say, by definition, if we're we are restrictive, if we're above the risk free rate. But we all recognize the dynamic. Financial conditions are very, very loose. The wealth effect, look, when the Fed is actually targeting to stimulate the economy, the first thing they did after the crisis was target 10 and 10. That was 10 ,000 on the Dow. I know that sounds like a long time ago and below 10 percent on the unemployment rate. So there's no question that the stock market, the wealth effect, the dynamics here, financial conditions are are out of control. Look at the price of copper.

9:09We talked about it last night. All time highs in Dr. Copper. That to me is a function both of the economy and also where there is there's there's very structural things, copper specific. But there's also a story throughout precious metals, throughout industrial metals, throughout the commodity complex that is telling you that there are people that are speculating. There's a lot of money at work. Tim, take that one step further. You said, is this still the best place in the world to invest? I think what's been notable about this rally the last four or five weeks is S &P did not make a new high first.

9:38Right. Europe made a new high first. EEM made a new high first. The move in copper, certainly the move in gold. Like when you're coming out of these corrective phases, pay attention. And who's going to be cutting? ECB is going to be cutting. BOE is going to be cutting. We've already had the Swiss. We're going to be last. And this is a global market. So you don't want to be the only one not cutting. Because then you're going to hit all of your multinationals because your currency is going to strengthen. So you might get forced into it. If all other central banks are cutting, then we have no choice to cut.

10:09So I agree. On paper, it doesn't look like we should be cutting. Unfortunately, he's going to be cutting. We've got a guy here who might have some. opinions for more on today's inflation read and what it means for the Fed and when or if. We will see cuts. Let's bring in Wells Fargo senior economist Michael Puglisi. It's good to see you. Thanks for having me, Joe. Welcome. Yeah. You were listening. Is everyone FOS or does anyone know anything? Yeah. The inflation discussion to me is one where it's either a glass F full or glass F empty. If you're an optimist, where I look at the inflation outlook right now is take core CPI as an example.

10:46It's a 3.6 % year over year. That's the lowest we've been at in three years, right? We're moving lower slowly but surely, grinding to a much more kind of normal inflation environment. A little more pessimistic kind of your side of things, Joe, 3.6 % still really high. 37 months above 3%. Exactly. To give you kind of some scale for that, 2.4 % was the high in the 2010s on core CPI. So you're still 100 basis points above the highest we saw over that entire decade. But again, down from 7, 8, 9 and moving in the right direction, I absolutely think is the case. We didn't know it was moving in the right direction until today.

11:22That's fair. We had three bad prints in a row. Yeah. Took the Fed out of the play. And so this is for sure. This is for sure. I mean, markets look like it today. And if the two-year is the only Fed guy you listen to, I mean, then... Mr. Two-year. Yeah, Mr. Two-year. So how many this year? I think two. I think three. I'm a little skeptical. we'll get to three. I'd probably bet on one before three, but I do think they'll go this year. If we keep grinding lower like this, and we were at about 4 % at the end of last year, you're at 3.6 today. I think if you can get kind of the low to mid threes on core CPI, you know, mid twos, high twos on core PCE, I do think they'll go.

12:00It'll be slow. It'll be gradual. I don't expect it to be a really strong pace of easing like we've seen in the past, but one or two cuts this year, I think, is very realistic. One or two cuts is a lot different than higher for longer or an increase. And there's people around, what Druckenbough was on the last 10 days ago or so, said that this was a fumble at the five-yard line and we're going to end up having to come back and revisit inflation that stays too high. And particularly if we get a shock, right? I mean, I think that's what the Fed really worries about is sure, we're on this trajectory, but it's been upset before.

12:31Omicron wave and you saw Russia invade Ukraine and fiscal stimulus that comes out of nowhere from Congress and other policymakers in D.C. And that, I think, is the worry for them. Sure, everything else equal. They're on a good trajectory. But it just takes one more shock to set them back yet again like we've had the past few years. Someone today said Powell's worried about something breaking, even right now. I couldn't figure out why he is just so dead set. That's not their policy. Their policy isn't to judge what's going to break. Their policy is basically full employment inflation. Why else would he be so dead set on cutting, Tim?

13:02And he's been, even when he shouldn't be and gets numbers where he shouldn't, he says, well, we're not going to do it now, but we're closer. He didn't know if we were closer. Maybe he did now after today. You're right. And, you know, back to Michael, I mean, why do you have to cut? I mean, if this is a data-dependent Fed, this is a Fed that's, you know, not worried about the long lag effects of monetary policy. If they did, they wouldn't be the Fed. They're not traitors. So what is it about the macro right now that says they have to cut? We're at full employment. Jobless claims tomorrow, you know, or Friday, tomorrow, excuse me, you know, are starting to become this volatile series that, you know, to, again, be half empty, you can say, hey, look, it's starting to break.

13:40But I guess just explain to me why we have to go. I mean, you seem to pretty matter of fact about, too. Yeah. Yeah. I mean, the way I kind of think about do they have to go is two things. One, we look across past cycles, you don't get a lot of warning when you're no longer going to be at full employment, right? Things tend to deteriorate pretty rapidly. Look at the 2001 recession. Late 2000, they were done hiking with a bias towards going again. And by January, there were emergency cutting, and you got 475 basis points of cuts that year. The second thing is there are cracks, right? Look at the New York Fed's household debt and delinquency data this quarter we just got a couple days ago.

14:12Consumer delinquencies that are ticking higher for credit cards, for auto loans. You look at the labor market. Yeah, headline job growth, pretty good, but take a look at the quit rate. That's a really cyclical indicator. Quit rate high, people feel confident they're quitting their jobs, getting, you know, pay raises elsewhere. Quit rate has plunged over the past couple years and is already a little below where it was in 2019, which tells me, yeah, headline job growth is strong, but you're slowly but surely underneath the surface here seeing some slowdown. Michael, what do you think would surprise the consensus more?

14:41An upside surprise to inflation over the next six months or a downside surprise to growth? I think a downside surprise to growth at this point, which is a lot different from where we were a year ago, where I kind of look across the street and it's become so much more consensus to be soft landing, growth of 2 % this year, whereas I think the past few months have kind of gotten some inflation expectations across the street a little more ratcheted up. So I think both would surprise, but I think the growth outlook, you see it even in asset prices, right, has gotten a lot more placid relative to the inflation side of things.

15:09All right. Thanks, Michael. Good to meet you. Have you been on in the morning? Once or twice, but not in person. Oh, he's poaching. Did you just poach openly? I didn't even think about that.

15:22Better fly your spaceship over here, man. Yeah, right downstairs. Meanwhile, Apple jumping today after Bank of America reiterated its buy rating. So far this month, Apple's up over 11 percent compared to 5 percent for the S &P. In May, the stock now just 5 percent from the record that it hit back in December. NVIDIA also closing back in on some records. Now just$30 from March highs. I don't know if anyone predicted that, Chris. Did it? I don't think many did. Yeah. I mean, at this point, it seemed like NVIDIA, you know, when you've got another, talking Druckenmiller again, I mean, it moved enough where some people said, you know, this, I think I'm going to just at least sell part of my position.

16:09I think what's actually a little comforting about this recent move in NVIDIA is it's actually been accompanied with other semis working. I mean, the past four or five months was actually pretty narrow in semis. This has broadened out. You had KLA 10 core breakout today. You have ADI. there as well. You talk about Apple. I mean, the gap through 180 in Apple, anytime you gap through big levels, as this did over the last several days, pay attention. Well, and it's been now almost a month of Apple outperforming the S &P, which was a very decided 20 % underperformance to the S &P from, I think, December 8th through to that period in early March.

16:44And it wasn't just their numbers. So that leadership is impressive. I think the places that interesting to look. If you are of the view that this is a bit of an all clear, you have to look at software, too, which is really lag. So look at two monsters like Palo Alto and Adobe. And these are names that gave really, you know, their announcements a couple months ago of 4Q were the guide wasn't so great. Software typically has followed the semis move in this cycle. I'm curious to see what's going to happen there. I think there's opportunities there. I think if you look at the broader, you know, we talked about banks, but if you look at the broader side of the industrials.

17:19Airlines don't go down. Delta Airlines every day is up 50 basis points. And to me, there's a dynamic here where I just think the normalized part of the industrial space is the space where these guys seemingly are telling you a little bit about AI in their margin profile, but they're telling you that their business is pretty strong. NVIDIA was$200 lower a month ago. It was trading at$750. So we're still susceptible, yet everyone coming in, rushing in to cover their stocks. Buybacks are back. Earnings are we work through. So I think we're still going to test the 200 day. It's going to be a flash test.

17:53And then we're going to get right back on the horse when he starts the cut and we go rally right into the year end. When you start seeing articles and I saw it on some website, the the Drudgington Post, I think it's called anyway. So it said Tim Cook is out of ideas. That reminds me when they weren't taking a close the patent office in like the late 19th century or something. And that Tim Cook, he was never going to have a good idea when he came in. Exactly. And yet under his... He was an operations guy. Right. Tim Cook is out of ideas. I mean, that's a buy. It's not out of money. And part of this move on Apple is capital markets.

18:25I mean, it's$110 billion in buybacks. It's a dividend. It's the ability to engineer. I'm not saying they're engineering earnings, but the predictability of the earnings flow. Tim Cook's obviously... The stock tells you he's done a great job. You weren't with me on a Drudgington Post. Have you looked at that mess recently? What happened to that website? Do you know? No. You don't look at it anymore? No, I haven't looked at it in a very long time. It's out of control. But just to put a bow on it, Apple has never innovated. They've often replicated. So there's a case to be made that now they're just getting into that AI ball.

18:58So that's why they're getting that tailwind where they've never been there before. And now there's sort of grasping on straws trying to compensate for the China headwind or the DOJ headwind. They've got multiple headwinds. And they've seemed at this point able to get a tailwind of AI. OK, yeah, you sell Tim Cook short. I'm not going to do it. I'm going to be on the sidelines coming up. Some after hours. We have some after hours action to bring you shares of Cisco on move after reporting. Details about that quarter next. Plus, Visa announcing a new update, new updates to its payment offerings, how AI is factoring in and how it could change the way consumers pay ahead.

19:39Ed, don't go anywhere. Fast Money is back in just a couple of minutes. You're watching Fast Money here on CNBC. We'll be right back.

19:55Welcome back to Fast Money. And we have a news alert on Peloton. Shares on the move after a report that the company's in talks with J.P. Morgan for an$850 million loan sale to help with its debt load. Just sad. $4. $4. Yes. That's a lot. I mean, I guess the thing is just a little refinance, put a little more time for them to sort of get it together. It's sort of an option here, though. If we have more life, if they have debt, and so they have cash in the short term, they have more life, then it'll be all right. I wouldn't own it here. All right. Earnings from Cisco. Shares jumping after the company gave upbeat guidance for the full year.

20:37The conference call got underway in the last hour. Christina Parks and Nevelace is here with the details. Hey. Hey. Well, what we're seeing is that orders are coming back for this name, and it helped Cisco's quarter. So during Q3, the company completed its largest acquisition of cybersecurity firm Splunk and added over$400 million specifically in Q3 revenue. He talked about more reoccurring annual revenue as well. The acquisition, though, this is a key. It's part of a push to remake Cisco not only as a networking provider, but also a software provider. Right. Everybody wants to cover all facets.

21:10But Cisco shares have underperformed the Nasdaq just over the last year up, what, 5 percent. Nasdaq was up 35 percent. And you had just the last two quarters, they lowered guidance among demand weakness, especially amongst enterprise customers. Well, this time around, it starts to see some improvement. I was able to chat with CEO Chuck Robbins just earlier, and he said that although telecom customers, which they complained about last quarter, is relatively muted still, they are starting to see signs of stabilization. He also made similar comments on the earnings call, which is the quote you're seeing on your screen.

21:41The CEO also saying on the call that they are seeing product order growth in two of their largest product portfolios. That would be data center switching and campus switching. That's really just the process of connecting your computer with your printers, access points, et cetera. So overall, the market is reacting positively. There was more comments about AI in the call and all that, but the bar was lowered, right? And they were able to surpass that low bar. I can't get past the$600 billion market cap that I remember, Tim, back when GE was worth$600 billion. Is there any reason would you buy Cisco at this point?

22:14Well, before we came back from commercial break, I kind of lamented to this group that I've owned Cisco for a couple of years. And there was a time two years ago I thought it was really an interesting value play in mega cap tech. Part of it was the networking business that I think was at least stable and sideways. ways, but there was the software revenue that was at least a higher margin dynamic. I mean, the bottom line here is that Cisco has significantly underperformed the group. We are trying to see them get into the higher margin parts of software and services. But really, it's taken a long time.