Stocks Jump After Jobs Report… And China’s Big Opportunity 11/1/24

0:02Indeed, it does live for the NASDAQ market site right here in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap. A big tech comeback. The MAG7 rallying into turbulent week. Is this the start of a sustained strength for the group to the end of the year? Or a head fake designed to take your money? Stocks up despite a dismal jobs number. The streets shocked by a weak unemployment report. So why didn't the markets care? What does it mean for you ahead of next week's Fed decision and the election? Also tonight, Boeing shares are taking off on new hopes to end the strike.

0:36Super Micros' rough week gets even worse, and Trump Media clocking a third straight day of double-digit declines. Happy Friday, everybody, and welcome to November. I am Brian Somson, in for mail tonight, coming to you live from Studio B right here at the NASDAQ. On your desk tonight, Tim Seymour, Karen Feinemann, Courtney Garcia, and Julie Beal. Welcome, everybody. Great to be back. All right, so let's kick it off here. There really are two big money stories that are happening right now. Earnings and jobs. Let's start with the payroll number. Shocking the street. The government saying only 12 ,000 jobs were added in October.

1:18That, my friends, the worst jobs number since the pandemic. But investors apparently didn't care. Markets today higher across the board. Maybe on hopes the Fed will cut rates again. We're going to find out. But your other big story was earnings. A huge week in the books and more to come. In fact, nearly one in five S &P companies will release their numbers next week. And you might have heard about the selection. Yeah, I've heard about that. We got the selection thing on Tuesday, which could bleed into Wednesday, Thursday. You wouldn't know it from the markets. But you would not know. We're going to talk about all of it.

1:51And by the way, be sure to tune into our coverage. Contessa Brewer and I will be hosting the critical hours from midnight to 5 a.m. on Wednesday morning. That's actually when we might see a result. And maybe a big move in the market in the overnight session. All right. Then you've got the Fed next week, sort of the penultimate decision of the year. That Fed meeting is on Thursday. So, Tim, let's talk about all of it. Jobs, earnings, the Fed, the election, maybe something else. By the way, in terms of teasing next week, I can't wait to hang out with you Tuesday night at midnight. Will you be with us for the whole shlamazel?

2:25Absolutely not. Are you kidding me? I'm going to go to sleep. I'm going to spend a half an hour with you, and then I'm going to bed. Well, we look forward to this thing. But it's going to be exciting. And today was exciting. If you think about the payroll number, a payroll number, by now you've heard 12 ,000 jobs were added, yet the market rallied. So no fear of growth. And more, I think, perversely, interestingly, you saw the Treasury market. So yields continue to go higher. So in other words, this wasn't a follow through from the Treasury market that said, oh, my goodness, there's no growth.

2:51In fact, we're going to have to cut. The Fed's going to be cutting. You saw the short end and the long end close at effectively four and a half month highs. You're now at 438 close, the high yield on the 10-year, and it did not respond to a labor number, which apparently everybody has flagged. Two hurricanes, a Boeing strike, no one's too concerned. Wages were actually higher. If you actually look at the work week, it's a pretty solid. And if you look at a 4.1 percent unemployment rate, it tells you we're essentially near a historic close. So I think the number on the headline was confusing, even though the politicians seem to like the ability to talk about this one going into an election.

3:25It was a wild number where the market did not care. It gets back to the leadership we saw, the recovery today across the tech sector. I think we're going to continue to have it. November is that month. And it was a very interesting day. Yeah. I mean, Karen, as I tweeted out earlier, the haters love the number because they've been waiting for some bad news. Right. And I just said, basically, take it easy. We got to your point, the hurricanes, the storms, strikes, a lot of other stuff. The market, the bond market really didn't move. The stock market did OK. Should this change our view of what the Fed may do on Thursday of next week?

4:01I don't think so. I think that, you know, this is such an outlier that I don't think it gives you any information at all. So I think that I mean, we had you were here, Loretta Mester. Oh, no, you weren't here two days ago. We had Loretta Mester on. She was talking about a 25 basis point cut. That would have been, you know, she's not on the Fed next week. Right. Next week. So I don't really make much. I know it is fodder for political discourse, but I don't think we can make much out of it. It's interesting. I think that what I agree with absolutely everything said, including the 12 to 1230. I was going to say that's the right call.

4:37Yeah. The first half now with Brian, then going to sleep. So thanks. Yeah. Thanks a lot. Midnight to five. Sorry. It's going to be good TV. I know that. Okay, so we've got the jobs number doesn't matter. The jobs number doesn't matter. And I think, you know. And yet we're leading the show with it. Well, because it's important, we do focus on it. We do want to know what jobs is. But it ended up being, I thought we would see how should we adjust it for these hurricanes and how should we adjust it for Boeing? I don't know is where I ended up with that. So I just sort of discard the whole piece of information.

5:10But I think the enthusiasm over Amazon and some of the other tech names, I think that's what also helped the market today and therefore the 10-year down. And I think that's the question is how much of this is due to the hurricanes or Boeing, or do we actually have a weakening labor market, which I don't think anybody can like confirmatively say at this point in time. We need more time. We need more numbers. We need months of confirmation. Exactly. Which is why I think this is essentially being thrown out. But I think if anything, it kind of was a positive thing for the Fed where they were getting a lot of flack for saying, OK, maybe they started cutting rates too soon.

5:40But then you have a jobs report like this. And so I think that actually takes a little bit pressure off for them. I don't think it changes what they're going to be doing when they meet next week. It's still expected they are going to be cutting. But I don't think this is something that you can really use to kind of write your hat on at the end of the day. All right. So we got doesn't matter, doesn't matter, doesn't matter. We got to go to Julie. I don't think I don't know. I didn't say that. You're putting words in my mouth. I didn't say that trick. I didn't say that. I'm sure Julie's not going to say what do we call for quadrophenia.

6:04I will see. Julie Beal. I did it for you. Maybe they're best. Julie Beal. Yeah, no, I agree. It's hard. It's hard to put any stock in this report. Right. Because, of all of the effects that we've talked about. The one thing that I did notice is that we continue to be in this wage upgrowth trend. We had a real bottom in the summer, and it's just kind of quietly ticked its way up. And I think that is the one thing that could give a little bit of noise to the Fed discussion. I don't think it changes anything as far as their decision, but I think it will come out in the minutes that there will be a little bit more concern about wage growth pressure.

6:42We're seeing it mostly on the good side, less on the services side, which is great news because the services has been the place where it's been more persistent. But I think longer term, it's not really going to have any kind of impact materially. Yeah. And I've often, Tim, said that the stock market is not the economy. Yes, you have. It sort of reflects earnings and it reflects parts of the economy. But just because Amazon's numbers are good doesn't mean the macro economy necessarily has to be good if Amazon can manage its business that well. So do you agree, I think, with your friend Karen that it was really the Amazons, the earnings of the world, that's going to matter, not the jobs number?

7:22I think it's both. I think, look, there's an element of today's action that is really important. That is, I think people feel at least the Fed does not need to pause. They're going to go 25. They have to go 25. But the sense was that we had had at least data that indicated and some stickiness inflation that the Fed could actually soften up. I think there's been periods where the market has been concerned about that. If you look at the rates markets again, I mean, we closed on the highs and yields. There's nothing about the economy. And by the way, I actually think that the move in the bond market, both that move down to 360 on the 10 year and this move back up, is a reassessment of the economy, not of the Fed and not in the longer term of the U.S.

8:00credit worthiness and the issuance dynamics, even though we talk about that all the time and we should be talking about it. Well, hold on. I want to go back to quickly. We're going to move on to Big Tech. You said the Fed has to go 25. What? They don't have to do anything. Well, they don't have to. But I think based upon how they've guided us and based upon the numbers that we've had and that we are still, I would say, restrictive, I'm not looking to see them do more than they need to do. But I think the market two weeks ago was concerned that the Fed could pause it. Who really cares? I don't know.

8:29It does get back to earnings. And, yes, those are strong numbers by Amazon and Google and Meta. But I do think today was some sense that actually the economy is okay. Well, we've got to move on to big tech. But very quickly, the three of you at the same time, raise your hand if you think the Fed will cut 25 basis points next Thursday. Reluctantly. Hi there. We've got four. That thing was completely unhelpful for people on the radio. Well, that's why I said hi there. Yeah. So, by the way, if you're on the radio, thank you for listening. It was four of four. I abstained on the independent congressman from Guam.

9:04All right. Let's dive deeper into the big tech today. It was a good day today, but an overall rather tough week. And here's your random but interesting stat of the day. Thank you. With this week's drop, the Nasdaq just broke a seven week winning streak. Maybe more proof that markets simply cannot go up every single day or every single week. But today, some big names did go up. We just talked about it. Amazon closing, new record high, Microsoft, Google nudging higher and even beaten down. And yeah, old Intel rose after last night's results, something we hit on a lot last night. not participating, Apple.

9:42It not just declined. It was actually the second worst performer in the Dow today. A lot of people maybe kind of underwhelmed about their new Apple intelligence AI product. And take a look at the other names that did report this week. Alphabet ended up 3.5 % following their numbers on Tuesday. Meta and the aforementioned Microsoft down for the week. But not a mixed bag, Karen. And we should say almost universally the numbers pretty well received. Yes. And go back and also add in Netflix, which had huge numbers. But Amazon was a really, really good conference call. And Google, too. Yeah, there's a lot to like.

10:20Meta for me, which is my largest position, a little disappointing. But I thought the numbers were very good. And, you know, it's all in the spend. That's sort of come back to that again and again. But I think. Well, what concerned you about what was a didn't didn't. and maybe you hit it earlier in the week on the show, what didn't please Karen Feinerman about the meta numbers? And refer to yourself in the third person. I find that almost impossible. She finds that impossible to do. Yes, she does. Karen finds that impossible. Yes. Nice job. Just the spend, again, even though they are being a little more efficient on their expenses, but I think we'd like to have a little more certainty there.

10:59But on the margin, I don't think it matters. I would not change my position at all. Anybody got a comment, by the way, on the new Zuck? You seen Zuckerberg? With the hair. The hair's going crazy. He's surfing. He's doing this stuff. He's kind of gone. Still kind of a geek. He's a rich geek. Yeah. No, I didn't say that. Bro owns an island. Yeah. No, no. Look, that guy's way cool. No, but I'm saying, and I mean this sincerely. He's got a trend for me. He's been cool on the innovation business side. He's probably that way with a surfboard. Here's why I bring up Mark Zuckerberg's hair. It's not out of jealousy, but that's part of it.

11:30Or his cash. It's actually because you kind of look at this new Zuck and you think, is he going to run the company in a different way? He kind of was on his back heels a little bit, a little bit more now. He's punching now. You know, he literally is punching. He's taking jujitsu. He's doing these things like this. You wonder if he's going to be a more aggressive CEO. Take more risks that might benefit. I think he's been taking risks for a long time. You don't think the metaverse and changing the name to meta and going all in on that wasn't a risk? I think he's been aggressive from day one. That's part of the success here.

11:58I really do. We got to get if people don't know, we got it next block. Let's get a picture of the new Zuck. We have to do a side by side comparison. All right. So let's tie all of this together. Not Zuck's hair, jobs and markets in a nice little bow and welcome in our friend Stephen Whiting. He is chief investment strategist, chief economist at City Wealth. And I'm just based on our conversation before the show, Stephen, I'm guessing you'd make it unanimous. Five of five. Raise your hand. Jobs number didn't mean anything. No, meaningless. Well, thanks for coming. Well, we'll talk about market shortly.

12:34But just think about this. 512 ,000 people said that they couldn't work because of hurricane effects, these sorts of weather-related displacements. So how could hiring be usual in the month? That number is tenfold what it was in September. It's nearly tenfold what it's been. There's the picture. You know, in Octobers of years past. So every time we've seen this, the following month you get a correction upwards. And, you know, maybe you could put both months together. But in reality, we can't measure the economy that well in periods. OK, so then how many months would Stephen? I'm just going to ask everybody to refer to themselves in the third person.

13:10How many months would Stephen Whiting and your team at CityWealth, how many months would you need to have confirmation of any kind of jobs? Three to four months. Three to four. Three to four. A quarter's worth of data is something. But I mean, you know, like the big picture, we went from the rebound from the pandemic, you know, to under 200 ,000 per month. We were doing$6 million, then$3 million, then under$2 million. This is a slowing gain for the labor market and an accelerating gain for corporate profits. I mean, last year was lousy for most companies, negative 7 % for EPS outside of MAG7. And that's why we're gaining now.

13:46You sound bullish. We are. Look, you know, this has been a big couple of years. We're overweight global equities. We're overweight the U.S. by about 6%, underweight the rest of the world. by about 1.5%. And how far that will go, U.S. equities have outperformed the world by 15%. That's not that big a thing, but it's been 15 years of it, right? So the potential for us with non-U.S. stocks at 13 times earnings, we're at 22. We've got higher expectations. Yeah, I think that's, and Tim's the international expert, but I think this is a fantastic point you're making in that it's hard not to be bullish on America.

14:24I've been over in Europe covering their energy story. They pay three to five times what we pay, even X, the Nord Stream Pipeline regulation over there. The entire German DAX, their Dow Jones is worth less than NVIDIA. So it's hard not. And China's that we'll talk later in the show about China. I wonder just how much the rest of the world's capital is saying, you know what, I've got to go to the United States. Yeah. But that's, again, 15 years of this, you know, three American companies worth the entirety of Asia or the entirety of Europe. And our gains in market cap have been growing faster than EPS has gone up.

15:00We are outperforming on earnings. Our valuation is outperforming even more. So that's something in the event that if we were to go down the route of continued Fed easing, I think that's going to depend on the outcome of the election, Congress, what exactly we do after next week. But if we were to go down and be able to ease, the dollar comes off, we can see what happens. And it can be a period of some outperformance. So I'm getting excited to listen to you because you're not saying something that I think maybe you're saying, which is that you're pretty bullish on corporate profits turning around.

15:32So we've got some inflection. We didn't have it. We now have an environment which isn't there are not necessarily labor headwinds. It's slower growth, but it's still growth. And that you combine with with the earnings power. It sounds to me like we should stay long this market. Well, think about last quarter. We're not done with this quarter. You know, tech was the third fastest growing earnings sector. You know, again, we had three that were above 20. We had nine out of 11 sectors start to grow earnings again. And we have records for the next two years in our sense. Let me ask you about productivity.

16:02Was that where it comes from? Where does this earnings growth? Absolutely. Again, we had productivity growth is strengthening. Again, it won't go on forever. But what happened in the pandemic, we, again, recovered very sharply in services related hiring, which is not mechanized. It's not automated. It's very headcount sensitive. A typical large restaurant has more people working for it than a big warehouse or even a manufacturing company. So by 2022, when the Fed was tightening, seeing the labor market's incredibly strong, that was when we were getting the pandemic services recovery. Productivity was sinking and a lot of negative effects from Fed tightening were actually hidden beneath the surface into 2023.

16:45Somebody get this man an eagle. I want an eagle. He's so pro. I want an eagle on his shoulder and an American flag top hat. Okay. We've got pigeons. I don't think we've got any eagles outside. I'm not sure we've got some eagles. Things could go wrong. But no, I like the bullish take on the markets on the United States, and it's been over a decade-long run. Stephen Whiting, great stuff. You and your team at CitiWealth. Appreciate it. Thank you. Courtney, are you as bullish on this fine nation as Mr. Whiting here? We absolutely are, and I really think there's a lot that's setting up for a good end of the year here.

17:14I mean, you are seeing that profitability is expected to be accelerating. You're seeing the GDP is growing. You still have a lot of cash that's on the sidelines right now. We do have the election next week, which actually does tend to be a good thing for the markets. It's not something you should have trade on. But I think all of those things are actually setting up for a good end of the year. And tech has kind of been sitting on the sidelines the last couple of months here. People have been rotating out of it. But I don't think that trade is over. And we're actually starting to see a little bit of that come back here.

17:37So I think you absolutely want to stay long in the markets here. All right. You made a lot of people happy. Bullish take on the rest of the year. We shall see. All right. A block down, but we are not done. Coming up, we're going to talk energy. What Exxon and Chevron did today, it had them going in different directions. Plus, a big move from one big name in athleisure. Yeah. Anybody remember that? Athleisure. That is ahead.

18:10All right. Welcome back. The biggest of big oil, both reporting their results today, of course, talking Exxon Mobil and Chevron. Now, these companies often get lumped together. But today, Tim, pulled a journey and they went their separate ways. Exxon ending the day lower. Chevron higher. Now, on the year, though, Tim, Exxon outperforming by about 12 percent. Their production of the premium Chevron's as well coming up. Your take on one, both, either. I think it's a case of the outperformance of Exxon was a higher bar going into this. Chevron has underperformed. I prefer Chevron here. It is the C in Blysep.

18:47It is a case where also their free cash flow was extraordinary. And so if you combine that with some upstream growth, which is where they have been lagging. And let's not forget, there's a battle for this this Guyana asset that is the most exciting oil production asset in the world. Brian, you know all about this. I mean, this is a case where Chevron, who purchased Hess for that asset. and there's been some question about what's going on, I think ultimately they do get that asset. And again, share it with Exxon. But I think that the story for integrated right now, especially the biggest in the world, is free cash flow and that these businesses are run so that they are more efficient.

19:20And it's not growth at all costs. I think they are both all-weather stocks. At this point, I do like Chevron over Exxon, but I wouldn't be jumping out of Exxon based upon today. We've got to worry, though, I think a little bit, Tim, about China. We've got OPEC supposed to meet in person in a month. I'm planning to be there. We'll see if they do. They're supposed to raise production. China's been a disaster. I mean, there's a you could make a real case for fifty dollar oil. And if we and if you made that case, you wonder what that would mean for for these companies and more. But if OPEC is raising production, isn't that a bullish sign?

19:51I mean, ultimately, I believe based upon how they've been able to both have consensus and control. And Saudi obviously has the swing capacity. They bear the brunt. And this is a market share game that they're trying to protect the market share against the U.S. But I still think if they are raising production, they won't do it at the expense of the oil price if there's not the demand behind it. And I think we also can't forget that their break-even prices are actually lower than this. So even if oil does go lower, it's not necessarily a bad thing for these energy companies. They just had to become so much more efficient back in 2020.

20:19And they're just in a much better position at this point in time. And I think when you look at both of these companies, they're coming into their earnings, both beating expectations. But actually, Chevron is now trading below its historical averages. Exxon, just a higher bar, like Tim said. It's now trading above its historical averages. I think that's where some of you see that movement today. But I think longer term, there's absolutely opportunity regardless of what happens with energy prices. And also, don't forget, with all the tension in the Middle East, there's also the chance that energy prices will go higher.

20:45I mean, we're just sort of one headline risk away from a$10 pop in oil. I think Karen needs to talk about her acronym because we know that energy is the E in Helm. Energy is the E in Helm. XLE. Energy is the X in my Helm trade. And it's been a frustrating trade. I mean, you know, particularly looking at Chevron. Nice move today. Free cash flow was a very substantial beat at five and a half billion when I think we're looking for four, seven or so. However, this has been a frustrating, frustrating acronym. Well, listen, give yourself a break. You're not the only frustrating acronym out there. Well, anybody would name that.

21:25I got you. But here's a serious point, though. Here's the reality is there is a huge group of investors, particularly we talked about it earlier, like investors in Europe that either can't or in some cases are not allowed to buy oil and gas stocks. They just they don't want to they don't want to buy anything associated with oil, gas, carbon emissions, climate change. And so no matter how good these numbers are, you don't have the pool of buyers, I don't think. and I'd like to hear your take on this, that an Apple would have, you know? Well, for sure. But also, I mean, if you look at what has happened to, I don't know where the energy trade now is in terms of the S &P, but I mean.

22:05It's like 4.1, 4.4, something like that. Right. It used to be 11, 12. Yeah, it was 14 % at its peak. At its peak. 2006, I think it was. Okay. Into the crisis, yeah. So that is an extraordinary move. Not in a good way, right? And yet, it seems to keep going down. I keep thinking, all right, well, it'll bottom, it'll bottom. But that hasn't been the case. So it's frustrating. Yeah. They mean the multiples here? Courtney's right. Dividend cheap? The absolute production cost number break even are probably in the 30s for some of these companies. But you do have to add in dividends. And so the break even on the physical production, maybe 36, I'm making that number up, but it's probably directly correct.