Stocks Notch Best Week Of 2024… Plus White House Cracks Down On China Trade 9/13/24

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast in defensive times, and right now it's riding the wave of the AI boom. We'll take the wraps off this true utility player for your portfolio coming up. And later, breaking down biotech's big week, one shining moment for the metals and miners, and Uber adds autopilot to the menu. We'll explain all that. I'm Melissa Lee, come to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Courtney Garcia, Bono and Eisen, and Carter Braxton Wirth. We start off with that massive market rebound this week.

0:44The NASDAQ up five days in a row with a gain of nearly 6 % since Monday. That is its best week since last November. The S &P and Dow up big as well. And take a look at some individual stock moves, Arm, Broadcom, Supermicro, NVIDIA, Amazon, all seeing outsized gains. But it wasn't just big tech. The XHB HomeBuilder ETF was up more than 3 % today and more than 6 % this week. And RH, Restoration Hardware, soaring 25 % today on the back of its earnings, posting its highest close since April. Meanwhile, with the prospect rising for a 50 basis point cut by the Fed next week, rates were under pressure.

1:19The 10-year Treasury hitting its lowest level of the week this week since June of last year. And the volatility index getting crushed, falling to its lowest level of the month. So does this week's market action give us the all clear for stocks? Tim, what do you say? No, we don't have an all clear, but we have a very different tone than a week ago where we were talking about it was the worst week in how many Septembers in the worst week of, excuse me, worst month of the year. So it's a notable turnaround. It's a notable turnaround that I think has had a chance to digest our view of the Fed. And whether it's 25 or 50 and everyone's hearing these probability numbers now, and it's certainly a higher probability of 50.

1:55I don't think they're going to do 50. It is about the interest rate sensitivity part of the rotation in the market. That's what characterized today. But I would characterize as much as people want to talk about the breadth of the market and small caps. And I can't wait till we talk about utilities later on in the show. But, I mean, I think this is a case where I would look at semiconductors closed on the highs every day this week. So the dip buying mentality of the most exciting or at least the part of the market that I think a lot of people still want a piece of is, to me, part of the most notable part of this week's move.

2:27I think it's a week where we also got a chance to really look at that yield curve, which is now actually 2's, 10's, is actually normally sloped. whether it's eight or 10 basis points, it continues to move in that favor. And you're either someone that thinks that's a really dangerous prelude to what's going to happen, because we've seen that in the past with the recession. But I think it's probably something that people actually welcome seeing. It tells you where rates are going. I mean, adding to all of that is the move, as you mentioned, in the more interest rate sensitive areas, not just technology, but small caps did well.

2:57Russell, I mean, S &P 500, equal weight, outperforming S &P. I mean, that really tells you something about the broadening of the market and the belief that 50 basis points, because the odds did rise as we climbed here. Yeah, and whether it is 25 or 50 basis points, the odds are rates are going down, right? And that's why these things are doing so well. And you tend to, in this environment, have things like your small caps outperform in that environment, especially as they have things like floating rate debt, and they're really well positioned for that. And I think this is something that we've talked about previously, where I don't think your technology trade is going away, and you're seeing those things are coming back here.

3:31I just don't know if it's going to outperform in the way that some of these other sectors in the economy can. And I think that's where you want to make sure you're positioning as an investor. Don't get out of tech, but take advantage of those opportunities that are still undervalued right now, and they may start to take off. Yeah, I'm with you. I think the trajectory definitely is downward. And I think, you know, in terms of some of the more rate-sensitive areas, you are seeing, you know, the rotation into there. Because until we have earnings again in late October or mid-October, the Fed really is a story here.

3:59But I think the follow through, are we going to continue to see the gap close between tech earnings growth and the rest of the market earnings growth? I think that's going to be the narrative that's going to push this follow through story. And we've seen what has been what started as a rotation into a broadening before it was out of tech into these more speculative, well, more economically sensitive sectors. And now you're starting to see essentially people buying the dips on whether it be regional banks or whether it be technology, whether it be semis. All of these have had their issues in moments in time where they pulled back and underperformed the balance of the market.

4:32With that said, I think everything else has been priced in. I think this new narrative about perhaps 50 basis points going forward at this next meeting has given the market a little bit of breath to kind of move forward. I mean, I suppose the biggest in terms of rotation, if you think about it, because they're such large cap names, is the move into these non-growth bond proxies within consumer staples. And we've discussed that before. Utilities are a bit different, rate sensitive. But you're talking about a 45 % gain over past six months in Colgate-Pamal. A stock that has no growth at all trading at a record high P.E.

5:03It's the same thing for Phil and Morris. It's the same thing for AT &T. It's the same thing for Altria. And the list goes on. Coke, Walmart, for instance, is now trading at a 40 P.E., one of the highest. And the point is that the real money flow, as big tech is churning, has been into these super cap names, household names, that basically over any long period of time don't really beat the market. So that's really a defensive message. Well, for sure. It's the face of fear. The face of fear. It is. I mean, no one thinks they're going to win the race, the two-year stock market race or 18-month race, because they're going to have a big position in Colgate.

5:41That is when you're forced to do something because you're not allowed to hold cash. An institutional manager has someone else managing the cash. You must put it somewhere. And so they're forced, if they believe that there's a little bit of a stall, it's their Tesla or their semis, to do something, and it's going into these stables. You've always said, or you said recently— I thought you were pointing at me as the face of fear. No, no, no, no. You have a lovely face, Tim Seymour. That equities and credit, they're certainly not broadcasting a cautious message here. And yet Carter is seeing the face of fear in the S &P 500.

6:14And I think the poster child for fear is gold. And look at the move we've had in gold and look at the move in all the plays that I think are we're not sure about growth. We feel like at least there's inflation's under control. Maybe we have deflation. That's a great environment for gold. So agree everything with what Carter said. He's been pointing that out for a while. And yes, the bond market, I mean, the rates market and the commodities markets are telling you hard landing, equities and credit are not. That's why also on a day when you saw small caps outperform, I mean, it's kind of obvious stuff.

6:46But they tend to have more debt. They tend to be more interest rate sensitive. Therefore, an inverted yield curve means they have higher debt costs in the in the short end. And they, you know, they benefit only when the when the yield curve starts to invert. And again, that's part of the message this week. But back to Staples. Also, Staples had really underperformed going into this period. And I realize that maybe this period may be all of most of this year. But Staples were this great beneficiary coming out of covid of all these other dynamics that we you know, we saw McCormick spices cooking at home.

7:16was suddenly like this. All of a sudden, you need Korman. And they re-rated. And then they de-rated. And now they're back. Sorry. Are you investing like the face of fear? Are you buying all these states? I feel like you're not. I try not to be fearful. He doesn't look scared. I don't see a bit of fear there. Yeah, but you can't get too high. You can't get too low. Listen, as Courtney has said many times, you need to be somewhat diversified. But when I'm picking my spots, it is with higher beta names, to Carter's point. If you're trying to outperform, that's where it's going to come. With that said, I don't shun some of the other pockets of the market because there's time for you need to rest there.

7:49And with interest rates, the trajectory of interest rates coming down, you can't really sit in Treasuries the way that you could in the past. I mean, if you if you look at it as a factor, right, I mean, the factor, if you can screen for these things, low volatility criteria, that basket of stocks is outperforming the S &P at one of the greatest rates on a rolling three month basis that you'll find. And so the question is, should one do that? It's already been done, right? It's money flow. They've sucked up a lot of money while Meta's gone sideways for four months. But those sponges are full. So now what?

8:17I would fade them all. Fade them all? Oh, sure. But that implies that you're in cash. I'd rather have cash than Phil Morris, Altria, AT &T. Or NVIDIA or Big Cap Tech. I think so. Yep. Interesting. And you're not alone in this, right? Because I think we'll talk about what we might do as investors. But what's happening is despite the fact that rates are very likely coming down here, more and more money is going into cash, right? I think we're at like$6.3 trillion in money markets right now, plus all the short-term CDs that are going to be maturing in the next couple of months here, which is ads on top of that.

8:47That money is eventually going in. We're getting closer and closer to that as rates are going down. So I think you're right where what we might think is one thing, but investors are still very cautious as to why they're holding cash. They're very happy with the 5%. That will make its way back in, whether that's into bonds or equities is a big question. But I think we're getting closer and closer to that, which is going to be supportive for the stock markets. For the next two, three months, Tim? Yeah. Would you rather cash over Big Cap Tech, over staples, over all of these defensive sponges, which are full of liquidity right now?

9:20If we're getting a growth scare, I still think they're going to be defensive. And again, the most important thing I'm waiting for now is the next payroll number. It's not that Fed meeting, whether they do 25 or 50. It's all about the jobs market here. But I still think there are selective places to be playing in consumer staples. And I still am going to be a holder of gold. And I've been long Altria for five years. I intend to continue to be there. I don't I didn't need the 35 percent kind of growth stock move this year. But I hear Carter 100 percent. Some of these things, those sponges are full.

9:50But I think mega cap tech stocks are going to be well bid if we're concerned about growth. Oil settling modestly lower today, but it's higher for the week. WTI seeing its first positive week in five, while Brent locked in his first positive week in four. Our next guest expects more pain, though, in the oil pits. Our oil analyst, Paul Sankey, runs Sankey Research, is gracious enough to join us here on set. Paul, welcome as always. So you think the pressure is going to be on for the foreseeable future for oil? I think compared to what you guys are all debating, the big concern in oil is China. So we have a major issue here.

10:24China sneezes, oil catches a massive cold. And as you know, China over the last 20 years has been responsible for 40 percent of global oil demand growth. And it's not looking that good. So that's that. And then everything else that you're talking about, yeah, applies to the U.S. oils, which obviously is everything you're saying about cutting interest rates and everything else. So it looks pretty rough just simply because we're oversupplied. So demand is just weakening at the margin. Demand overall is outstanding, huge. But there's just too much supply. There's too much oil, too much U.S. natural gas, too much refining, too much chemicals.

10:57So we like utilities. You like utilities? What? Wait for the rest of the show. Come on. The trade we were going to talk about would be PBF. So you might have a swing at a refiner at a dumb time. Just because it doesn't feel a good, smart thing to do, you should probably buy a refiner in January. But we're pretty scrambling around to find stuff to buy in oil right now for sure. It sounds like the biggest factor for you, though, is whether or not demand in China continues to deteriorate. So as an oil analyst, I'm curious, what data points out of China do you look for or anywhere to give you some more clues about the demand picture there?

11:34It's fascinating. We had, you know, you guys know Ed Morse. He was on my call, my weekly call a couple of days ago. We were asking big, long-only managers, how do you get your information on China? And, you know, there isn't good information on China. You just have to kind of believe what they say. A bit like the Russians. And if they're talking, they're lying. Not so much in China. In China. I heard that. In China, it's just extremely difficult to really establish, especially with the way they play inventories and everything else. So, you know, yeah, that's just a huge oil problem as it stands.

12:06So, yeah, we're pretty bearish. And also seasonally, as I'm referencing with the refiners, it's not a great time. So, Paul, we were talking about people that are forced or managers that are forced to kind of deploy money. You can't be sitting in cash. And for those managers that have to mimic some type of index or at least have some of their investments in the energy space, where within that complex do you think is the most defensive, given the macro view that you have? You know, I've been covering Exxon for 30 years. I've said I haven't seen this stock in such good, this company in such good position as it's been for 30 years, since Lee Raymond, 25 years ago.

12:42So Exxon looks outstanding. They've done everything right. And that's obviously an extremely defensive play. The only remaining truly integrated global oil company, and that's about as defensive as we can get. We still like a couple of the Permian names because FANG or Permian Resources, where you need to be accessed to that resource as a global mega theme. And the market's kind of buying natural gas stocks here relative to natural gas, the commodity. and we're like, you know, this is not going to be a good 26, 25 for natural gas, nor even possibly 26 for natural gas. So I think our hiding place is the most obvious ones, which would be like an Exxon.

13:21We like midstream, you know, so we get the yield from an energy transfer or from an enterprise product partners. Stuff like that looks good to us as well. But it's a super defensive book for us. So there's another side to your long PBF, and that's short Oxy. Yeah, well, as you know, I mean, one of the big themes of the media market, if you want, has been Warren Buffett and whether or not he's buying or selling. And, of course, Buffett had bought Oxy very systemically once it got below$58 a share. And he just literally stopped dead. And the stock just went through the floor. And the multiple looks high to us.

13:54So I think it's a fairly easy short for us, yeah. So the famous pair trade I was going to have for you would be long PBF short Oxy. OK. Paul, good to see you. Thank you. Have a good weekend. Paul Sankey, Sankey Research. Where are you in oil? Well, I tell you, I do like the diamondback trade. I do think you've given a lot back. And I think they're in a prime spot in terms of U.S. production where there is growth, where there's efficiency. I think if you think about someone like an EOG, you listen to management and they're talking about margins, they're talking about optimization. That's not a lot to get excited about, except for that you have to hope in a downtrend in the headline oil price, these companies are run differently.

14:29I think they are. But I agree they will. They have underperformed. And I am still bullish on energy. But I do think you have to be careful about this announcement by the IEA this week that Paul referenced. I mean, the interesting thing is that the very poor performance in the energy complex, the shares were, was not confirming the move in oil when oil was strong. And now, of course, oil has come down. But at this point, I 100 percent agree with the Exxon trade and some of the more defensive, not the drillers. But that's the place to be. And it's not a bad chart pattern. All right. Meantime, Boeing shares under pressure after factory workers rejected a new labor contract and went on strike for the first time since 2008.

15:05More than 30 ,000 members of the union walking off the job this morning. Phil LeBeau is at one of Boeing's factories with all the details. Hey, Phil. Hey, Melissa. This was a day where it began with workers walking off the job at midnight Pacific time. We were with them early this morning when they were vocal and saying we're not going back to work. And then as the day went on, we started to see the financial pressure that this is putting on Boeing. Let's start first off with the credit agencies, Fitch and Moody's, both of them issuing warnings today that they may downgrade Boeing's credit rating.

15:39Obviously, if they lose investment grade status, huge implications if they have to do a capital raise down the road. The CFO says the company is focused on conserving cash while it's going through this strike. One month of a strike. The estimated cost, according to Sheila Cuyula at Jeffries, is$1.3 billion in free cash flow. Let me break this down in terms of what the impact would be per airplane as you take a look at shares of Boeing. In August, they delivered 40 aircraft. But the bread and butter has long been the 737 MAX. They delivered 32. Every one of those generated approximately$10 million in free cash flow.

16:17You do the math. that lack of deliveries is going to really start to pinch the bottom line at Boeing if this is an extended strike. And that's the pressure that new CEO Kelly Orpberg is facing. He has met with machinists. He's been on the floor earlier this week before the vote. Not not pleading, but basically saying to the workers, look, we're in a spot here where we can turn this company around, but we've got to work together. That wasn't enough for the workers I talked with. All of them said the same thing, which was 25 percent is not enough for me. I need 40 percent over the next four years.

16:50So they rejected the 25 percent raise. Again, the wage target, Melissa, that they're looking for, 40 percent. Not sure they're going to get all the way to 40 percent, but they believe they're going to get a lot closer than where they are right now. Is there another set date for a meeting, Phil? there's nothing that has been set in stone i wouldn't be surprised if we get some type of announcement over the weekend that they're resuming negotiations early next week the boeing management is motivated to get this taken care of as quickly as possible the question is how much will it cost them how much it right now the estimate is that the 25 contract that was rejected would have been about a$900 million annual cost hit.

17:38Probably is going to be north of a billion dollars, Melissa, because they're not going to get, I would be surprised if the workers settle for anything less than 30%. And even at 30%, I'm not sure that would get approved. Wow. Phil, thank you. Phil LeBeau. And Phil mentioned the financial pressure, should it get downgraded? Technically, it needs two rating agencies to declare it junk in order for it to actually lose the investment grade. So it's already got Moody's and Fitch putting it on warning. $45 billion in debt right now, Tim. I mean, the pressure is real here. Yeah. With$4 billion come and do in the first half of 25, they're going to have$10 to $11 billion in cash, depending on who you ask at the end of the year.

18:15The union's never had more leverage. And yet Boeing probably gave their worst negotiation contract, in other words, the line that at least they can negotiate from first. So I'm sure they're going to make concessions. I'm sure they're going to work quickly to do this. But it comes at a time when this company, even without any of this dynamic. And Phil's numbers, let's assume, I'm sure they're right, 1.3 billion. The last strike that they had of any substance was 2008, lasted two months. This company's break-even on free cash flow now at best. I'm long-bowing. I don't like this news, but I do think this is just negotiations with the union.

18:52Coming up, Uber and Waymo expanding their partnership, bringing their robo-taxis to two new U.S. cities where you could soon be seeing these cars driving themselves around and what Uber's CEO had to say about the push. That's next, plus a chart of gold. The precious metal crossing the$2 ,600 mark for the first time today and setting its 35th record close of the year. The chart master will hit the technicals to see if this trade can keep rocking. Don't go anywhere. Fast Money is back in two.

19:24Welcome back to Fast Money. Uber shares taking off today on news. It's expanding its partnership with Alphabet's Waymo. Users in Austin and Atlanta will be able to book robo-taxi rides exclusively through the Uber app starting early next year. Waymo cars are already available to users in Phoenix, though the company operates its own app in that city. Uber's CEO discussed the partnership on Squawk on the Street this morning. We believe Waymo is the leader here. You know, their goal is to build the world's most trusted driver. There are different ways to approach the technology. But as you know, Waymo was the original player here.

19:58They are very much focused on safety. And we want to make sure that any partner that we work with is wanting to grow this business, but build it in a very safe way. And you can't ask for a better partner than Waymo in that regard. All this as we await Tesla's big robo-taxi reveal, which was pushed out to next month from August. So the fear was always that these guys, Waymo and Cruise, they'd be competitors to Uber and Lyft. And this expanded partnership looks like, oh, maybe they'll coexist here? Well, they didn't really have much of a choice. They essentially weren't able to execute the autonomous business plan organically in-house.

20:34So I think them picking a prime player and looking to expand the presence makes sense. I think there's additional upside if they're able to execute in those new markets, Atlanta and Austin, on the Uber Eats as well, which has also proven to be a very prescient move by them. So I think it's a positive, especially for Google as well. And I think, yeah, I think, you know, Tesla, perhaps this might be a lead for them to get out of the downtrend that they've been in for quite some time. This really is the future. And now if this becomes the new narrative, I think we're no longer focused squarely on delivery numbers and pushing things out and slashing prices, which has been their narrative for the last six to nine months.

21:10Yeah, and I think it's absolutely a positive for both parties involved, right? Because I think it's going to benefit an Uber. You're going to see operational efficiencies are likely going to improve. It can help their margins down the line. And it really, to Waymo, it's going to give them the opportunity to get on that taxi network that they just haven't really had the ability to do themselves. So I think it's absolutely going to be a positive for them. I think there's always this comparison with Uber versus Lyft. And I think this is, again, kind of put them above Lyft in my eyes. And I think it's something you would want to take a look at.

21:35But I think it's going to help them in the long run. And Lyft, of course, is the L in Blysep. Yeah, and so I'm not sure I want to be driving that acronym right now. And I will, and I won't run from it. But I think the question really is, if this is good news for Uber, is it necessarily good news for Lyft? And are these partnerships, I would assume, with two players, they're going to have to be involved. And I would think, again, these AV networks are, that's part of the strength of owning Uber, at least, because of the other applications for it. Less so with Lyft. But I think, as it relates to Waymo, I'm hopeful.

22:08There's a lot more Fast Monday to come. Here's what's coming up next. Sitting on a gold mine, can the yellow metal rally keep shining? And do the technicals back it up? What the chart master is seeing in gold next. Plus, targeting a trade loophole. How the White House is cracking down on China retail giants. And the names in the crosshairs. You're watching Fast Money live from the NASDAQ market side in Times Square. We're back right after this.