Stocks Kick Off the Week Strong, and What the GM/UAW Deal Means for Auto Makers 10/30/23

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast money. Here's what's on tap tonight. A strong start to the week. The Dow rallying more than 500 points for its best day since early June. The S &P and the Nasdaq both rising more than a percent each. But with more earnings on tap, a Fed decision and a jobs report looming, is this just the calm before the storm? Plus, back to work. The end of six weeks of worker strikes in sight after the UAW reached a tentative deal with the last of the big three automakers. So what's next for the industry? And could the union set its sights on other car companies now?

0:35And later, a burner beat sends shares of McDonald's higher. SoFi gives up nearly all of a 15 % gain at the start of the day. And counting down to Apple's pre-Halloween launch event. I'm Courtney Reagan in this evening for Melissa Lee. Coming to you live from Studio B here at the NASDAQ. On the desk tonight, we have Bono and Eisen, Karen Feynman, Dan Nathan, and Guy Adami. But first, Wall Street kicking off the week in rally mode. The Dow jumping by 511 points, a blue chip index closing just off its highs of the day. The Nasdaq closing just shy of its 200-day moving average. And the S &P seeing its best day in more than two months.

1:12Mega cap tech stocks leading today's gains. Outperformers including Amazon, Netflix, and meta platforms. The bullish activity coming as traders get ready for Wednesday's Fed decision. So what's behind the burst of confidence here today? I mean, Bono and I was looking through some of the stats. I mean, the Dow cracking its first positive day in four. The Nasdaq down, though, three weeks in a row. It could be the third negative month in a row for the major averages. But today was a bright spot. So what happened? Why? I'm not sure if it's confidence or just false bravado. I mean, all of these major indices are down 10 percent in corrective territory.

1:44So for you not to be stepping in and participating is probably somewhat of a fool's errand. Frankly, I think I see this from the other side of the coin. I think that we have started to see a bit of correction. You've started, Mike Wilson had a great note out today, essentially talking about some of the breath waning, seeing some of the up revisions waning. I think you are starting to see some of the undertones of a more conservative Fed start to kind of play through. I think you are starting to see some of the cracks for the consumer. With that said, it's not right for us to expect this to be a precipitous fall down and to the left.

2:16So you are going to see some pockets where you're going to find some stability. But it was just last week when we were saying, listen, these markets have been able to hold 4 ,200. Speaking about the S &P, That's a key technical indicator that is now going to be probably offering some some resistance from the top. So I would be careful before I would be willing to jump back in with both feet. But down 10 percent in a market where we are still seeing robust economic data. I do think you probably want to take this opportunity to at least put some chips on the table, but start to average it. Yeah, Karen, I mean, in that in that Mike Wilson notices a strength in the headline labor data masks, the headwinds faced by the average company in a household that the Fed can't address proactively.

2:54What do you make of that? Well, I'm not quite sure. I mean, so do we if the economy slows, is that good for the market? Right. Maybe because that takes the Fed out of the equation for. And I think that there would be sort of a knee jerk reaction. So if the economy slows, though, does that mean the companies won't earn what we think they will earn? Yes. Maybe that as well. And who knows on any given day which of those is is ways more. I kind of think the Fed being done ways more. But I don't know. I think the other thing we saw, I don't know if we'll get to it later or not, was the refunding announcement, which was fine, which was fine.

3:30Last time it was not fine. It was huge. And that was scary. So fine is good. There was a couple of another leg up sort of when that came out. But I think it just seems so overdone. This is a really nice rally, but it only takes us back to Thursday at 11 a.m. That's true. So, you know, I try not to get too hopped up on it. But I also think things like, to me, that meta reaction to that earnings was, I didn't understand it at all. I didn't understand why, you know, United Rentals, the reaction to that earnings release, finally at the end of the call, it started to trade up. But so I think it was just this overdone negative sentiment starting to lift a little.

4:10Dan, is any part of that the fact that we're here in October and that this month is always a bit of a scary month ending, but seasonality play a part here? Listen, this is very similar to late 2021, OK? When the rates were still really low, the Fed said to battle inflation, they're going to start raising interest rates. And we just had some of the highest valuation stuff, the stuff that didn't make money, the most speculative stuff in the market started selling off. And, you know, we were still making highs in the S &P 500 in the first week of January 2022. And so I guess what my point here is, like, what's gone on for the better part of the last three to six months is that most of the stock market has been trading very, very poorly, you know?

4:45And we've had a handful of names that have been doing all the heavy lifting in the market cap weighted indices. And under the surface, it's been really bad. The equal weight has not been great. You know, the small caps have not been great. I'm looking at utilities, real estate, consumer staples, health care, financial services, basic materials, energy, industrials. They're all down in the year. OK, so if you're still clinging to this eight and a half percent rally that the S &P is up, well, it's in about 10 names. OK, and if you think the 10 names are the stock market, then they're not telling you what's going on, at least the way I see the equity markets, what they are saying about what's going on in the economy right now.

5:21And so to me, I think that, you know, a lot of the data that we're seeing as it relates to jobs, we're going to get that October jobs report on Friday. We have a three point eight percent unemployment level that is very near 40 year lows. OK, so that's masking some of the other stuff that's going on in the economy. So if I'm just thinking about what Karen just said, well, I'm not sure how Meta or some of these stocks are related or, you know, reacted towards their earnings and the guidance. Most stocks are not acting particularly well relative to their earnings and their guidance right now, no matter what it is.

5:50I just think that expectations over the last nine months have gotten way too high relative to where the economy is, relative to where rates are. So to me, I just think that a lot of what's going on over the last few months makes a lot of sense. I think there's a good chance that S &P gives all of these gains back up on the year. I think it'd be very hard for the Nasdaq to we need to have some of these big names in this magnificent seven or whatever they're calling them would really have to be some disasters out there. And, you know, I don't think those are lurking right now. I think it will take some degradation to the economy to have some of those big names to really have disasters.

6:22But make no mistake about it. There are some that are falling by the wayside and Tesla is one of them. I know we're going to talk about that later. Yeah. Guy, I mean, just thinking about levels here, Oppenheimer's John Stoltz was obviously cutting his 23-year-end forecast, 4 ,400 from 4 ,900. So he was very high before, now sitting right in about the middle of the street. Does that feel right to you from what we know now looking forward? Feels a little high, but OK, I'll give 4 ,400. I think 4 ,900 was a pipe dream. Thanks for being here, obviously. And I think Bono's point about 4 ,200, which was support, now becomes resistance if, in fact, we get there.

6:53We're 30 handles or so away. It all makes sense. Unfortunately, and we're tasked to talk about the markets through the lens of the markets, but I think a lot of people towards the end of last week sort of set up for something potentially disastrous to happen over the weekend in the Middle East. Thank God that didn't happen. But I think to a certain extent, there's some short covering on the back of that. Month end is tomorrow. So a lot of things sort of set up for this move higher. But to your point, Karen's point, it just gets us back to where we were a couple days ago. I don't think necessarily anything's changed.

7:22I think yields continue to go higher. We've talked about the Bank of Japan. They continue to move the goalposts. They will make rates go higher in the United States. And higher rates here are not supportive of the equity market, I don't think. Make a good point about what's going on with the war in Israel, of course. and there's been focus on what's going on in the energy market. WTI off 9 % this month, Bono. I mean, what should we read into that? And how do we see that as a signal or not of what's going on in the broader economy as we're all trying to wait and see if the Fed will do what we think it will do this week?

7:53I think the common underlying theme is essentially our sensitivity to volatility. And I think what you've seen from, I'll take WTI and then I'll talk about XLE. WTI, I think what you're seeing is just geopolitical risk and supply, demand and balances bearing out. I think what you're seeing with XLE was at one point a shift in leadership out of some of the more frothy names. And so I think you had some outperformance there for a time. But you saw the same thing with real estate, for example. And then you started to see that rollover as mortgage rates have continued to climb higher. And again, we still talked about the supply, demand and balance in housing.

8:25So I think it's really those two things, all of which sets up being that we have a more restrictive monetary policy, means that we're more sensitive now to underlying volatility shocks, whether that be the VIX or commodity prices or interest rates. I think that's the commonality or common theme that I see bearing itself out across various sectors and asset classes. I can't believe we've actually gone this long. We haven't brought up the yield on the 10-year, Karen. I mean, how do we even handicap it from here, from where we go and what it means? When do we care? When do we don't? When are we shocked?

8:55When aren't we? Well, I guess, you know, we'll get some more news on Wednesday, what they're going to sell. And to the extent that they sell further out, right, so the 10s could be under more pressure. So I think this is, I don't know, maybe a little bit of positioning on the expectation of more 10s and 20s and 30s to be sold, I think. I don't exactly know, but that's the way I'm sort of positioned. I have a little bit left of short TLT.

9:28And I think it's interesting because this is something we never used to pay attention to before, right? And now it's become so central. The idea of, oh, my God, there's just too many between QT and, you know, what the Treasury needs to issue. There's just too many bonds to be absorbed. And so I think we'll see that higher, which the only positive is it does the Fed's work for them. There you go. Right. So we come back to full circle again. What's the Fed going to do? And the market wants to hear they're done. Right where we started this conversation. And so it's a good time to bring in Steve Leisman, the Treasury Department out with its latest quarterly borrowing projections, expected to raise slightly less than the current quarter in this current quarter than it did in the third quarter.

10:08So let's bring in CNBC senior economics reporter Steve Leisman. Tell us what you've learned, Steve. And what does it mean? I thought it was interesting that Karen said it was fine. I guess you could argue that. In the October to December quarter, they're going to be issuing$776 billion of debt. And the good news is that's quite a bit below the number that they had by$76 billion that they had estimated in July. And then they said$816 billion in the next quarter. So I guess it's fine that it's less than we thought it was. But it's hard to argue that it's fine that we're issuing$1.6 trillion of debt over a two-quarter period in the first half of the fiscal year.

10:54I don't think that is fine. And it's unclear whether or not we ever quite reach a top or where we find that top in the five-year, so long as it's unclear that we have a handle on what's going on with revenue and spending in this country. We did apparently get something of a boost in revenue from deferred taxes that were deferred in California. Some other folks and some other states also did that. The IRS also because of some disaster relief that was provided. So that tax money came in. But still we have this lack of congruity between the growth numbers, which seem to be pretty strong. But the revenue numbers are not coming in, which raises the question, is the growth really that strong?

11:42Or is the revenue yet to come? Steve, it's Karen. So a couple of things. First of all, fine, it's all just relative to expectations. That's all that fine refers to. I understand. OK. I understand. So what about to that revenue question? Is it capital gains that are missing? Where is the how does that jive with this GDP number that was so hot? Yes, well, your question is absolutely fine because it's right on target in the sense that it was capital gains that was the big miss. In other words, we talk about what happened in the summer and how the market was kind of surprised by the huge surge in issuance.

12:23Well, that's because I think capital gains were something like a half a trillion dollars below estimate, in part because the market has been what the market has been. And that means capital gains taxes are not what they were expected. We don't know what they're thinking right now. We might get some more information on that shortly. And we don't know what their outlook is for revenue. But it may be that, you know, this GDP number, I've got a friend of mine in the business who said friends don't let friends use GDP numbers, especially the quarterly numbers. 4.9 percent. I have maintained from the beginning, I think that's overstated.

12:59I think it's likely to be stronger than had been expected, certainly, because we were looking for below 1 percent. But look, if the economy is growing at least above potential, we should have better revenue numbers. And hopefully those will start to come in. And hopefully between Janet Yellen and President Biden, they'll start to realize that the market is sending them a very plain message that you need to somehow give us some guidance that infinity is not the right number when it comes to debt issuance. Steve, speaking of Janet Yellen, I know you saw the Stan Druckenmiller comments about Treasury and how, you know, the worst mistakes they've made since Alexander Hamilton.

13:39And I guess some of it's Monday, Monday, quarterback. I don't know if there would have been demand for a 50-year bond or a 100-year bond, but speak to that. Were you surprised by his comments? Would they have been able to do it at that time? Do you think there would have been the commensurate demand to sort of float those things? You know, obviously great respect for Stan. Stan is a very smart guy and a great trader. I can only come back and tell you what Treasury policy has been, having covered it for, I don't know, five or six administrations now. And the mantra they tell you is that they want to be reliable and predictable.

14:12And if they come in and game the market and start issuing longer term debt because longer term rates are low, the market tends to think that all of a sudden the Treasury is going to time it and playing games with it. So what you see, Guy, is that the Treasury tries to issue the same percentage about more or less of each tenor pretty equally. Now, sometimes it'll raise a little bit the average duration or lower it a little bit, but that's within a very small margin. Stan is, of course, mathematically and financially right, at least over a short-term period. But those who agree with Treasury policy say over the long term, you maintain the trust of the market by being reliable and predictable.

15:00Steve, before we let you go, obviously, a big Fed meeting this week. I think we all think we know what is going to happen. Anything that's changed in the last, I don't know, day or so that you think we should be paying attention to? Because Karen says it all really comes back around to the Fed. Well, just be still my beating heart. They're going to have paused for two meetings in a row, which they haven't done since early 2022. And I think we're going to hear how much reliance they have on what you guys were talking about, which is the 10-year Treasury, how much that will matter. And I think we're going to hear how much reliance they're having on the forecast that things are going to slow.

15:39The Fed says it's data dependent. Well, darn, if it's data dependent, it should be hiking right now, right? 4.9 % GDP growth, 3.7 % inflation. It should be hiking. In fact, it's not quite as data dependent as it says in the sense that it's relying on a forecast that high bond yields, student debt loan payments, reduced savings, and the whole panoply of things we talk about all the time are going to be reducing growth in the coming quarters along with the lags of monetary policy. So it's letting it ride for a bit. And if inflation doesn't come down, we may be talking about the Fed hiking again.

16:17Interesting stuff, Steve. We're all waiting, of course, for those details when we get them later this week. Thank you very much. Have a good evening. Let's trade this, guys. Karen, fine. You know, I understand fine as an expectation versus expectations. Yes. Right. And anything else there that Steve said helps you sort of elaborate on your waiting for the Fed idea? Everything else that you want to understand about, you know, I guess the moves that they could make. I think it is so interesting about, yes, they're data dependent. Well, are they? Look at this data. Look at the retail sales number.

16:48There's so much you can choose for data, right? You can choose all kinds of things. Pick your own adventure for the data? Yeah. You know, mortgage prices, I guess. Or, you know, mortgage rates. You can choose all kinds of things. I think it's prudent, actually, for them to wait. It's not like we think, okay, when Powell says he's hawkish, we shouldn't believe him. We believe him, right? Sure. He has shown us he can absolutely be hawkish. But I think I think it is the right thing for them to do to just pause. And it doesn't mean they have to take any of their other options off the table in the future.

17:18Yeah. I'm just as an equity investor. You know, if you're looking for a buy point, it makes it very difficult because at this point, like to me, you know, higher for longer is the thing that weighs on the economy. It's the thing that weighs on equity valuations is the things that weighs a lot of things that, you know, like the idea. And Guy's been saying this for a very long time. If they were to actually start cutting interest rates, it's because something not good in the economy or the global economy is going on. And then you don't want to be buying equities either. And I think back to the last time where Jerome Powell was raising interest rates.

17:47It was back in 2017 and 18 to normalize rates. And what happened to the stock market? It hit a point where I think they got to like 2.5 % on Fed funds. The 10-year got to 3 % off of a very low bound. And the stock market went down 20 % in a straight line. And the last couple of times we saw really aggressive Fed hiking was 2000 into that high. It was in 2007 into that high. And so when you think about it, the stock market doesn't really have a great track record, at least over the last 25 years or so. When the Fed has done hiking rates, it's actually not a great time to buy equities. I mean, that's just been the case.

18:22And, you know, you could say in 2019 they kept on hiking into that. And you could say that the stock market— What about 94? What about 94? You know, I was in college, babes. You know what I mean? Like, I'm just talking about it. There's data that exists before you were, yeah. Yeah, understood. But in 94, we literally, when Fed Chair Greenspan talked about irrational exuberance, okay, that was in 1995. And I remember I started paying attention. I was trying to get a job on Wall Street. Well, look what happened in the market. Yeah, but that was one of the most abnormally, like, you know, yes, the S &P rallied 30 % a year for the next five years until it crashed.

18:56And then we had a three-year bear market. And we had one of the deepest recessions in a very long time. And I don't want that. I don't think anybody wants that. I don't think the Fed Chair Powell wants that. And so that's one of the reasons why higher for longer could really crimp growth. And it could also make investing in equities not a great time right now. We are basically, what, 4 ,800 was the all-time high. We're 4 ,160 or something like that right now. S &P, right now, as far as valuations, there are periods that don't make it that interesting with interest rate trade here to start investing or putting new capital.

19:28Well, let me just say one last thing. If the market's not a monolith, right, there's a lot of things that have really that have not. You know, you talk about the Magnus and seven all the time where who have been doing all of the heavy lifting. There's a lot of things that are really not expensive. And so I think that really not expensive, but they might be value traps. The way they're acting are telling you that the economy is not as good as three point eight percent in the unemployment. It's not as good as that four point nine percent GDP rate. It's telling you that, to me, it's telling me that interest rates higher for longer because we're about to go into a stagflationary period is not going to make equities particularly that attractive at 18 times forward, which is in line with, per fact said, you know, the 10-year average when interest rates were much lower.

20:10So, I mean, to me, when you say that the market's not a monolith, I get all that. But the things that I'm looking at, small caps, I'm looking at, you know, a whole host of other things, they just don't trade well. And so they're saying something. At least there's a big disconnect between those 10 stocks and then the other 490 in the S &P 500. We'll stick with Fast Money and we'll help you understand what they're saying. Coming up, we're watching some after-hours action. Shares of Pinterest, Wolfspeed, and Lattice Semiconductor on the move. As a result, cross the wires. We'll bring you details from those quarters next.

20:37Plus, a so-high stumble. Shares initially popping after its latest earnings report but ending the day barely in the green. So what made those gains fizzle? We'll dig into the action when Fast Money returns.

20:52Welcome back to Fast Money. Earnings alert on Pinterest. Shares surging after the company reported a beat on top and bottom lines. Guidance for the current quarter also coming in slightly above expectations. That conference call just getting underway in the last hour. Julia Borson has the latest for us. Hi, Julia. Courtney, that's right. Pinterest beating on the top and bottom line. And the key fact here, revenue accelerated to a faster than expected 11 percent growth rate. Monthly active users added$9 million more than anticipated, and the company guided to fourth-quarter revenue growth in a range with a midpoint ahead of the street consensus.

21:25Now, as for those concerns raised by Snap and Meta about the fourth quarter, saying that fourth-quarter ad spending could be impacted by the war in the Middle East, Reddy just saying that when the conflict broke out, some proud advertisers did pause spend with a short-term impact, but they've seen most of them return. And he said if the situation did get worse, they would be impacted and brand advertising would be most at risk. But Reddy stressed that he did think they are well positioned. He also said that the company's new focus on shopping was key and that the impact of AI was important. He noted the potential for generative AI to make better ads.

22:02He also said that while the Amazon partnership is going better and growing faster than expected, the full impact of that Amazon deal won't be felt until 2024. I will have an exclusive interview with Pinterest CEO Bill Reddy. That's tomorrow in the 11 a.m. Eastern hour of Squawk on the Street. Courtney. Thank you very much, Julia. We'll be watching for that interview tomorrow. Guy, that's a pretty big jump in shares of Pinterest, almost 15%. It absolutely should. Revenue up 11 % year-over-year, global monthly average users up 8 % year-over-year, and ARPU. If Tim was here, he would chime in. Up 3 % year-over-year.

22:36All very good. And, you know, valuation-wise, it's still compelling. They have people in the stock now. They're activists in the stock. We've talked about this now for the better part of a year and a half when it was a teenager. I think the stock still has room to the upside. Yeah, you know what's interesting, though? Also, a great balance sheet going to go to gap profitability next year, 77 % gross margin. And when you start talking about generative AI making, you know, basically helping their ad business, that to me means greater monetization, right, of those users. So higher ARPU. So, yeah, the stock sold off pretty significantly over the last couple of weeks.