Stocks Look To Close Out A Strong September… And GE Vernova’s Big Run Higher 9/27/24

0:02Live 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. Countdown to Q4. The Dow setting another record close as major indices all look to buck the trend of a downed September. How stocks are setting up as we kick off a pivotal fourth quarter and problems at the port. Longshoremen preparing to strike across the eastern seaboard. What it could mean for trade and how someone on this desk is playing the action. Plus, Tesla revs up ahead of its delivery report. A breakthrough in the treatment options for schizophrenia and a self-power play that is beating every member of the MAG7 this quarter by a lot.

0:36We'll tell you what it is and how to play it. I'm Melissa Lee. Coming to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Steve Brasso, Julie Beal, and Mike Coe. We start off with a winning run for markets with just one trading day left in September. Investors seem to be struggling off concerns over what's been a traditionally weak month. The Dow jumping nearly 2 % so far in September, closing today at another all-time high. The S &P and NASDAQ both down today, but up solidly for the month. All three indices pacing for their first September gain since 2019. And the big winners may surprise you.

1:08The discretionary and utility sectors leading the pack, while energy and health care trail behind one big catalyst, a central bank easing from the U.S. to China, driving the gains. And today, another sign suggesting more rate cuts to come. The Fed's preferred inflation gauge, PCE, coming in lower than expected for September, moving closer to the Fed's 2 % target. So as we get ready to kick off the final quarter of the year, can the good times keep rolling? Steve, what happened to your seasonality? Ooh, yeah, that's what happens with seasonality. That's what happens with seasonality, right? Sometimes it's on, sometimes it's off.

1:41It's averages. So for the last five years, September's been an awful month for the markets. Not so much this September. So I'll push back on you. Does that mean October is going to be bad? Oh, so just push back. You don't know. You don't know. We had the Fed. You never know. You never know how the markets are going to go. Well, you do have seasonality. I mean, when you go into the, you know, when you're sitting there on the roulette wheel and you're guessing black, black, black, and then it comes up a different color, there's always the chance. Right. But we did have a huge event with the Fed.

2:13We did have a huge event with China stimulus. We are in an election year cycle. So I'm happy to have been wrong that we didn't sell off. But it doesn't make me think that we're not going to sell off in the near future. I think we do need to pull back. Right. And that is fair because we are still facing an election to come where things are a little bit uncertain. It's very, very close in terms of who's got the lead and where they've got the lead. And there can be that volatility as we enter the next Fed sort of meeting period. And we don't know what they're going to do at this point. Well, but I don't think we're really playing roulette when it comes to looking at both the economy, tea leaves and how we're looking at, you know, week to week.

2:53We get data points that are always difficult to read. But when we think about the drivers for the market, we know next Friday's payroll number is going to be huge. We know that if that shows too much weakness, it may be a sense that, again, the Fed's too far behind. Fed rhetoric this week was kind of like, hey, some said, hey, let's kind of go slow. Some said maybe 50. I think 25 or 50 for the next meeting isn't the one that's in play, is not really what we're focused on. We're focused on the dynamics around the global economy. We're focused around dynamics in terms of where we are getting company earnings.

3:23You led, or at least you talked about where utilities and discretionary, which seemingly could be two different parts of maybe two different investment approaches. In other words, I've been somewhat cautious. I've been outright at times bearish on discretionary. I think the consumer has some trouble here. But, you know, go back to some of the names. McDonald's make an all-time high. It's places where we thought the consumer was most under pressure. A lot of these companies have delivered, and I think we've seen some relief for the consumer. So it was a week. We're going to spend time talking about China.

3:51We've talked about it all week. It's also a week where other central banks around the world cut rates. I mean, it was Mexico, it was Switzerland, it was other parts of the EM world. So there is relief from central banks. There is stimulus everywhere. And I thought even those GDP revisions yesterday and some of the jobless claims numbers tell you not only is the labor market, there's no correlation between jobless claims and what we saw with a higher unemployment rate. So I think the jury's still out that the labor market is not falling apart. And I also think that those GDP numbers showed revisions to consumption and spending that were encouraging.

4:20So if you want 2 percent growth out into 27, like Jerome Powell told us, equities can go higher. Yeah. Julie, what's your take? I think it's kind of interesting. This month we saw that there was a revision for the savings rate, for the average consumer savings rate. It had been trending around 3 percent and it's probably closer to 5 percent. And to me, that's actually a pretty big deal because it is a consumer driven economy. The norm is more like seven or just under 7 percent. So we're still spending more than we should be historically. But that gives me a lot more confidence that the consumer still has the wherewithal to go out and spend, to have a good holiday season.

4:56So I'm feeling a little more optimistic on the consumer sector. The thing that's really tough for me is just where are there attractive valuations? And that's where I think I have a bigger struggle with this market. Yeah. Mike, where do you stand? And do you think that September's volatility or what would have been the volatility in September was just pushed out to October? Well, I mean, it's definitely true that September and October have often seen above average volatility. But if you actually take a look at the S &P options market, and that is that you're showing the VIX index right now, it's based on SPX options prices.

5:31But where you see the biggest bump is actually the second week of November. So you actually see about a 20 percent increase in implied volatility between the November, the earliest expiration prior to the election and the first one thereafter. So it seems as if the options market, at least if it's expecting volatility, is really targeting the election more than it is the month of October right now. What do you, though, think, Mike, for between now and that week that the options market is targeting? Yeah, I mean, I actually think October is probably where you want to be making your bets. Yes, there's a couple of reasons for that.

6:07I mean, first of all, I don't think all of the economic data has been all that spectacular, although you shouldn't be fighting central banks, certainly not all of them at once, which is essentially what you would be doing if you'd be pressing shorts into this market right here. But I will say that one of the things about the election is that we're probably going to get better visibility on the potential outcome of that election before the actual election day comes. So for everybody to just wait until the actual results come out and then waiting for the big surprise thereafter, I have a feeling we're going to start getting better visibility as the day approaches.

6:39And so I actually kind of agree with Steve here that actually late October could potentially be a spot for greater volatility than even early November. And you could see the Fed, you know, counter to what the consensus is, actually stay away from November because everyone thinks, oh, it's going to happen a couple of days after the election. If past performance is indicative of future, we don't know who the president is. So what happened a couple of days later? We might need a week to figure out who the president is. So maybe the Fed wants to stay away. I hope not. I know that it could. It could happen.

7:14It doesn't sound good for markets. I can tell you that. The options market is right in terms of the volatility forecast. But I don't think people would be shocked at it that if we if it did take a day or two to count and to recount. So maybe the Fed stays away from November. Maybe that's why they front loaded in September. Maybe they stay away from November and maybe they go in December again. Because even though they're not political, you could be political if they're still counting. Can we just take one moment to pause and think about if we did not know who the president was going to be the day after Election Day or maybe even today?

7:46I mean. It's happened before. Sure, it's happened before. But in this political environment and we don't get political on this show. No, we're just stating facts. But that would be a disastrous backdrop for the markets, I would think. Yes. I don't know if you're waiting for somebody to jump in. No, I agree. I think that, you know, we are not really very confident with the level of uncertainty that that would pose. And I think it's even trickier when you have economic policies that are as murky as both sides are showing, again, not being political. And so I think looking forward, the best thing that I could expect is having better clarity.

8:24You know, I think everyone is a little bit cagey because the polling was so wrong the last two elections. But I think everyone is a little bit nervous to be able to rely on it either side. Yeah, look, there's no question we would have a tough ride for equity markets during that period of uncertainty. We also know that on some level, the markets have looked past who might be the next administration in power, as long as you have at least some status quo in terms of balance in both sides of Congress. So, you know, ultimately, I get back to where markets will have come from going into that period.

8:57We're up almost 13 percent from that intraday low of August 5th. We're in a very different place. And if we get the kind of, I guess I would just call it status quo in terms of the economic data. In other words, if this payroll number we get next Friday shows, you know, anywhere from 100 to 150 to 200 in terms of job growth, I think we're in a great spot for equities because I do think right now, even though earnings profile for 24 is still, I don't know, we're expected to get almost 12 percent earnings growth. There's still some questions about that. Right now, if you look at what the market's doing, we're getting breadth.

9:28We're getting it into places like small caps. We're getting it in terms of outperformance and equal weighted. We're getting it in terms of the parts of even the industrial complex and a recovery in the sense that some of these consumer discretionary names that, again, I didn't think we're going to do so well. So I hate to think about our country in a place where we can't figure out who's the president. I think from a market's perspective, if we go into that period with the kind of run we've had, it's going to be equally it's going to be even worse. The highs of the year yet to come, you think?

9:59Yes, I do. I do think I think both. Again, I won't spend a lot of time talking about seasonality, but I will look at the rest of the world, which is also turning out to be just OK. Europe hit all time highs this week. Japan was up almost 7 percent. You have a dynamic. It's not just China. That's that's throwing a lot of stimulus at things. and in a world where inflation has largely peaked for the cycle, as long as we don't have deflation and as long as we don't have a growth scare. That's why next Friday's payroll number is huge. Stiefel's chief economist expects this morning's inflation report to intensify division among policymakers.

10:29Lindsay Pieza is behind that call. Lindsay, great to have you with us. Thank you for having me. You know, we were so ready, and I say we just sort of as the consensus view, to sort of celebrate the Fed and sticking the landing, any sort of metaphor you want after the last Fed meeting. Where do you stand? You sound like you're a little bit like the jury's still out for you. I think it is still out because the data suggests that we're not there yet. Now, the Fed has shifted its focus from inflation to a more balanced position concerned about the cooling in the labor market. But with this morning's inflation number, sure, showing improvement on the headline, but a lack of improvement on the core, actually reversing course and pushing higher, I think it's very clear that the Fed's focus on inflation needs to remain and that their goal of reinstating price stability is far from a foregone conclusion.

11:17So at this point, I think there is still a lot more ground to cover before the Fed can drop that mission accomplished banner. So, Lindsay, when you look back, and I understand where you're coming from in your view, but when you look back on where the Fed is, does that 50 basis point cut make you think that they think they're super late? What was the reason for it No, I think the Fed wanted to come out with a strong start indicating a growing concern or growing focus on the weakness of the labor market, essentially signaling to the marketplace that they are aware, they're acknowledging the cooling in conditions.

11:52But remember, after that 50 basis point cut, the rhetoric was very clear that the Fed is in no rush to cut rates and that 50 basis points should not be seen as the new pathway forward. And furthermore, that they're not on a predetermined path, suggesting a consideration, but not a commitment to rate cuts at every subsequent meeting from here on out. Lizzie, it's Tim. Thanks for joining us. I would go back to, again, a backward-looking GDP number, but a number that at least yesterday showed us that rising incomes were better than people thought. There's a bit of a wealth effect. I've said earlier, I've been surprised at at least some of the resilience and some of the discretionary.

12:29Give us your thoughts on the consumer here. I think the consumer continues to prove resilience. Now, early on, there was a lot of concerns that with fiscal stimulus ending, the consumer was poised to fall off a cliff. But what we've seen is a number of other factors stepping in to supplement these positive consuming behaviors. Everything from improvement in wage growth to 401k tapping to credit card balances. And don't forget, higher interest rates, while they punish borrowers, have resulted in a significant increase in earnings interest for consumers. So there are a number of different factors that continue to play here, suggesting that the consumer still has a good amount of spending and borrowing power as we look out to the end of the year and even forth as we turn the page into 2025.

13:10Lindsay, great to have you. Thanks for your time. Thank you. Lindsay Piazza of Stiefel. My co-tim predicted that we will see the highs of the year to come for the markets. Do you believe that? Because if the jury is out, maybe that's sort of a hard thing to endorse. Well, I think it's important to recognize that even if we do think that there are some recessionary pressures, even if we believe that consumers could potentially fall under some pressure because they have lower savings, higher credit balances, dipping into 401ks, by the way, that isn't particularly reassuring. And she just mentioned that.

13:48I don't know that that's a really a sustainable way for consumers to support their spending habits. But we are going into a strong portion of the year. And, you know, if let's just say for the sake of argument that Trump got elected in November, we remember what happened the last time he was in 2016. We got a quick 10 percent rally in the S &P and something like that could happen again. And if and if it did, that certainly would drive us to fresh all time highs. Right. Meantime, labor workers at major U.S. ports on the East Coast are gearing up for a strike for the first time since 1977. 77, it could disrupt the U.S.

14:25supply chain in multiple industries like pharma, food and retail. Nearly half of U.S. imports are expected to be affected. One of our traders has got a way to hedge against the strike. So you read about the strike and then it got you thinking about what, Steve? What's the workaround? How are people going to work around if they can't, if the port isn't open? So you want to go with railroad companies, freight companies, air, air, intermodal, everything, all the above. So when I look at Knight Swift, the chart was already building. If you look at the other companies, it wasn't building. So this was fundamental before the strike even happened.

15:02Is it going to be a make or break time for him? I'm not sure, but I think that you could play this a bunch of different ways. I just chose this stock. And if I would have asked you when the port strike in California, how long that lasted, I would have been dead wrong. I thought it was a couple of months long. I thought these things usually resolve themselves pretty quickly. That strike took a year to resolve itself. So there's a chance that you could have these names run for longer than you would think. It's fascinating to think about what disruption could mean, what it could mean also at least in terms of temporary or maybe medium-term inflationary pressures.

15:39Also just drop that into the FedEx numbers we got a week ago or 10 days ago, which were awful. and also gave you some sense that the shipping business, both in terms of their pricing power and what they're actually seeing in terms of the strength behind demand, is something that's actually in question. So it's a fascinating time. It's certainly a time when between weather disruptions and strike disruptions, and then we look around the world to things that are going on geopolitically, there are these distractions for markets. And I think this is something that keeps a lot of investors in a lot of cash and dancing near the door on a lot of these trades.

16:11Yeah, fortunately, a lot of goods for the holiday season, they're already in, they're already where they need to be in terms of warehouses. But still, there are some other things that aren't ordered way in advance, Julie, and you might end up seeing surcharges because of the workarounds. Yeah, I think absolutely on the agricultural side, that's going to be problematic. I think you can expect on the pharmaceutical side, that's already a place where pricing is up for debate. What I think this is positive for is we're in probably one of the worst trucking environments we've been in a long time. And so I think that they could see this as an opportunity to do better.

16:43Intermodal for sure as well. J.B. Hunt could be interesting to look at for that. But I think that the real question is just how long it's going to take to resolve it. I mean, I live in Los Angeles and seeing the ports shut down the way that they were and the backlog of ships out in the ocean, it's really problematic. Yeah, we were just showing a graphic, you know, just examples of companies most affected, Mike. Like Walmart, Ikea and Samsung were just a few of the ones up there. Well, yeah, I mean, the companies that have the biggest portion of imports coming into the country, of course, they're going to see disproportionate effects from something like this.

17:19I mean, we don't we've already gone through problems in the logistics and the supply chain in the past. We certainly don't want to see that again. So my hope is that we're going to see a quick resolution. I know the administration has said that they were not going to interfere at this point or step in. My guess is, though, that if there is some threat that it isn't handled very well, that they probably will step in. And I think that they might actually help sort of facilitate some kind of a resolution if that happens. Coming up, Bristol Myers higher as it gets approval for the first new schizophrenia treatment in seven decades.

17:54What it could mean for the stock long term next. Plus, it's been a September to remember for Tesla. But can Q3 delivery numbers and the long-awaited robo-taxi reveal keep the red-hot rally going? We'll debate all that right after this. This is Fast Money with Melissa Lee, right here on CNBC.

18:23Welcome back to Fast Money. Shares of Bristol-Myers Squibb up as much as 4 % today after the FDA approved the company's highly anticipated schizophrenia drug. This would be the first treatment of its kind to hit the market in decades. CNBC's Angelica Peebles has got more. Angelica, already it's expected to be a blockbuster. Yeah, that's right, Melissa. This approval marks the first new class of schizophrenia drugs in more than 30 years. Clinicians telling me they're excited about this drug called cobenphy because it promises a new way to relieve symptoms, and it doesn't come with the off-putting side effects that the older ones do, things like weight gain and tremors.

18:57Remember, Bristol's making a big bet on this drug, spending$14 billion to get its hands on it through its acquisition of Karuna Therapeutics. Bristol plans to start shipping the drug next month, but broad insurance coverage not expected to kick in until later next year, so it could take a while to judge just how this launch is going. In other pharma news, JPMorgan predicting that Novo Nordisk's third-quarter sales will come up short of estimates. Analysts making this call based on a slower supply ramp and lower U.S. net prices for Rogovi. They also see Ozempic sales coming in lower than the street expectations, but JPMorgan seeing any potential weakness around the results as a possible buying opportunity ahead of some catalysts later this year.

19:37Melissa? And Angelica, another sort of story in the weight loss space is Cantor initiating Amgen. I thought that was really interesting because Amgen is developing a drug, but it's not really considered sort of at the forefront, at least for now. And yet they're saying that that could actually be the reason for Amgen to see P &L growth. Yeah, everyone is really focused on this upcoming Amgen readout of its experimental obesity drug, Meritide. Remember earlier this year, Amgen said that they are encouraged by the results that they've seen and they are moving that program forward. but we still haven't seen the data.

20:11So everyone's really focused on that and hoping to see more results by the end of this year. But this is definitely a name to watch in the space. All right. Angelica, thank you. Angelica Peebles on the Pharma Beat for us. Mike Coe? Yeah, I mean, on the Bristol side, first of all, we did see a lot of bullish activity. It was about four and a half times the average daily call volume. And it was the Jan 50s and the March 51 strike calls that we're seeing the most activity, both traded about 8 ,000 contracts apiece. So obviously there's some belief within the options market, at least, that the spike that we saw today, well, I don't know if I'd call it a spike, but the move upwards that we saw could continue over the course of the next several months.

20:51It is interesting. If you are to believe J.P. Morgan and Wells and their predictions about prescriptions being lower than expected for weight loss for both Lilly and Novo, So, Julie, then there's a slowdown in demand for this space. And you wonder what is behind that. I think it's still the challenges with understanding the payer market and who's going to be really responsible for paying for these drugs. What kind of applications they're going to have? Are we going to get something that's not an injectable? I think there's just a little bit of uncertainty around that. But I still think that we can recognize that obesity is a pretty heavy weight and burden on our medical system.

21:29And I think everyone recognizes that this is a place where there's just going to be a lot of demand. But I think it's a little bit like AI, right? It moves and fits and starts as people try to understand how to incorporate it into their thinking. There's also some belief that NovoShares might be capped a little bit from here because we are expecting a readout of late stage trial data on KagurSema, which is expected to have even more weight loss by the end of 68 weeks than with Govi. And that could be a game changer. So we're sort of waiting for that result. Look, the bar gets higher and higher.

22:00And I do think you have a case where not only has the valuation got higher and higher, but investors more broadly say, you know, here's a great day for Bristol's. Here's a chart that a lot of chart folks would look at and say reverse head and shoulders. In other words, this is pretty bullish here after a two-year period of underperformance and evaluation that makes a lot of sense. And again, when people start talking about the GLP land, they start talking about the addressable market. Well, what are they doing in schizophrenia today? They're saying 28 million people globally, 2.8 million in the U.S.

22:26There could be room for four or five,$5 billion plus drugs. And BMY right now is probably an 18 to 24 month lead along with possibly Amgen. So that's the dynamic here in pharma. I kind of like the underperformers here because I think the valuations give you confidence. Yeah, I think people got so used to rushing into Lilly and the main names for GLP ones. But when you look at the Bristol's that are finally starting to perform, it's giving people to say, hey, you know what? I've missed the boat on that. Let me just roll up here because Bristol was at$80 a year ago or whatever the number was. It's fallen off a cliff.