Stocks Rally Ahead of Busiest Week of Earnings, and a Chinese EV Maker Locks in Its Best Week of the Year 7/28/23

0:01Right now and fast, the rally reignited. Stocks closing out the week with big gains recouping much yesterday's streak-breaking losses. The S &P and Nasdaq on pace to post their fifth straight month of gains with more than$10 trillion worth of S &P companies set to report next week. Can this momentum continue? Plus, emerging opportunities. The chartmaster says he is a buyer of overseas stocks. We'll take a trip around the world to find out where he is most optimistic. And speaking of opportunities abroad, one Chinese stock just closed out its best week of the year. What is behind this move and can it go even higher from here?

0:33The big reveal coming up. I'm Melissa Lee. This is Fast Money. We're live with the Nasdaq MarketSite on the desk tonight. Steve Grasso, Courtney Garcia, Bono & Eisen, and Tim Seymour. And we start off with a rally on Wall Street to end the week. The Dow now up 14 out of the last 15 trading days. The S &P had its highest close since April of last year. The Nasdaq seeing its best session in more than two months. The gains coming after softer than expected inflation numbers this morning. All three indices also higher for the week, with the Nasdaq leading the gains up almost 2 % since Monday. All this ahead of the busiest week of this earnings season.

1:07158 companies set to release results next week with Apple and Amazon the major headliners. Both stocks strong going into their reports. Apple, in fact, posting its highest close on record today. It has added a trillion dollars in market cap just this year. Will next week's results help keep this broader rally going? This is not the best setup, I would say, Grasso, going to earnings. But we have had pretty good results so far. Yeah, and I would think that when you look at the overall market and the way it's performed, people have bet against this market aggressively. And I feel like we always say it, or the media always says it, that this is the most hated rally ever.

1:47This feels like the most hated rally that there's ever been. And it's been such a breakneck speed rally that no one knows what to do with it. Do I buy it now? Do I sell it now? Now you're at this level where it really becomes crucial, but people are dumping back into all of those large cap tech names. What was the last wind of it? AI. If people are jumping back into AI, that's the next leg of the rally. That's the thing that's going to take you higher. Technology stocks are the biggest percentage of the market. Therefore, the market goes higher. Yeah. Courtney, what do you think in terms of the setup ahead of next week?

2:24Well, I think, too, and you're saying AI has been the big driver, and I do agree with that. But also, if you take a look at like Intel's earnings, for example, we did see maybe some positive signs where PC demand is coming back. We're a little less focused on artificial intelligence, actually still benefiting in Intel. Those things actually could lead up well for an Apple. So I do still think your tech companies are probably overexpensive. It's not really where I'm overweighting or forcing money to right now. But I don't you know, I don't necessarily see a dip here, you know, necessarily in your future.

2:50How about you? I think Steve stole my notes. So should I go to Tim? No. So one, I definitely agree that, listen, those tech companies, and I've said it time and time again, those five or seven names are really perceived as having that margin of safety. So that's probably where you are going to be. I will say the economic backdrop definitely and the inflation backdrop definitely sets up positively. And then the earnings expectations have been ramped down so low that I think unless you get a real shoe to drop, the trend tends to be higher. But that does give me some concern. It feels like everything is starting to be priced in.

3:24It's like everything has kind of come out roses. And so I wonder, Intel might be the exception. Yes, PC demand likely has troughed. I didn't really see a lot more there that really gave me a lot of excitement. But that name has underperformed so far for so much and for so long that I just think that like anything that wasn't terrible was perceived as a positive. I actually think that the earnings setup probably is on the other side of that coin where things are so best that things have been ramped down so much that anything that doesn't kind of like move you from that center probably comes back, you know, space.

4:01Yeah. I mean, Tim, some could argue that Amazon and Apple could be potentially the thorniest earnings. I mean, there are question marks concerning the competition around cloud for Amazon, the strength of the consumer, the trade down there. And Apple, you know, given the cautious commentary that we got earlier from TSMC, there's some questions about demand there. Well, I'll talk about Apple. And if I look at some parts of their business that I think we've been worried about over the last couple of quarters, International shipments are up 20 percent. Global market share is at 20 percent from 16 a year ago.

4:35And, you know, there are some some bright spots here. Maybe these are green shoots in the Chinese smartphone market, as Courtney and Bonwin have both talked about the PC market. Some of that element and at least where it feeds into Apple strength also in MacBooks and iPads. And so I think Apple going into their numbers at all time highs. And again, the world's largest company that's done 54 percent since January should always be a reason for concern. The issue with Apple really is what multiple do you want to put on it? But I think in Amazon's case, there's a lot to prove. It's the one of the mega cap techs that is really not underperformed, is not breaking out to fresh new all time highs.

5:13and is the one where the core business, it bothers me less than being concerned about AWS, which I'm not concerned about. I just know that that's where the market's going to need to see the biggest number. And I look at the strength that MegaCapTech has meant this week. This was the week actually that it kind of roared back and it obviously wasn't down. But if you look at semiconductors, they gained about three and a half percent to the S &P in the last few days. Triple Q's. Look, Q's are going to hit all time highs. Semi's got back to those all time highs. That takes the S &P to all time highs.

5:44And I think this week you had the combination of the Fed upgrading the economy and you had the PCE today, which I don't like to point out that inflation is getting a lot better. It's been hard to say that. But this PCE was very, very interesting because it shows that also over the last three months, workers wages are up six and a half percent. And yet the PCE dynamic is up two and a half. So that helps the consumer. That helps spending. That's helping the economy here. Yeah, and that also argues for another hike by the Fed. So I don't know. There's a lot of puts and takes here to the week, Steve.

6:16But in terms of big cap technology, I mean, the premium, you can argue that it deserves a premium during this period in which the Fed is going to have a very tough last mile in the fight against inflation. Yeah, but the problem is there's such a huge amount of passive investing that's going on now. And how many different ETFs is Apple the number one or the top five in? So you wind up getting this circular buying of Apple stock, even when you don't buy it as a singular stock. Right. So if it's the top five holding, top 10 holding and you're buying that ETF, they have to go out in the market and actually buy the actual stock.

6:56Amazon has lagged. Apple has the stairway to heaven is the chart. Look at that chart. So now everyone was looking at the$3 trillion market cap. Now everyone's looking at$200. That's the big fat number. And until I'm out of the name, I got out of the name around$190. I owned it forever. And for me, I'm not buying it until it trades above$200 and stays there for a couple of days or breaks down dramatically. So have a clear line of where you buy and where you sell the market. Stairway to heaven is the Apple chart. Yeah, I think so. That's an interesting one. All right. We might have to ask the chart master about that one.

7:33Let's go to overseas. Speaking of the chart master, the IMF saying this week the emerging markets will help counteract the slowdown in developed market growth. And the chart master gave the space the thumbs up in a new note yesterday. Let's bring in Carter Braxton worth of worth charting for more on this. Carter, you like this area. Why? Well, first, we got to. So it's a great song, but there are no stairways to heaven. moving on to back here on Earth. So we got five charts. Let's get right to it. Looking at the EEM versus the SPY. The first chart is a comparative chart. And what you'll see, of course, is the spread between what is the winner and what has been the laggard.

8:14Or said differently, you can see that the SPY and the EEM in the summer of 2019 ascending beautifully. They both plunged together during the COVID plunge. and recover together, but then they've diverged. And so the issue at this point is, do you play EEM for a bit of a catch-up? Big week for EEM, by the way, up 4 % versus the SPI up one. Next, three charts are identical. It's just the absolute chart of EEM. First, we know it bottoms in October, mid-October, just like the SPI, and it's been on trend. One way to draw the lines. Look at the next issue. Well, it's also moved above a downtrend line.

8:48That's the exact same chart. Third way to draw the lines, we can use a moving average, The smoothing mechanism has turned the 150-day moving average, defining what is a bearish to bullish reversal. And then finally, let's look at a relative chart versus a comparative. This is one thing divided by the other. It's EEM's relative performance to the SPY. And you can see, of course, it bottomed in October. But then it's gone all the way back to its October lows. Very poor performance. But I think it's putting in a double bottom and a good week this week. I think EEM won't. All right, Carter, thank you.

9:24By the way, Carter's going to chart Apple in options action. So we'll ask him about that stairway to have options action, of course, at the bottom of the hour here. Courtney, you are in EEM. You like this area? Absolutely, yeah. And I really like this call here from Carter. And I think this is something that people have been so focused on. When we talk about emerging markets, everybody focuses on China, which I do think still has a lot of opportunity, especially as they're starting to add stimulus in. You're seeing that with commodity prices increases, which I think is pretty indicative of that.

9:49But even outside of China, you look at places like Brazil, Mexico, Argentina, they've actually outperformed the U.S. this year. They're up anywhere from 24 to 44 percent. And I think people are forgetting that, especially as commodity prices are increasing. Some of those are very commodities driven economies and will benefit from that. So I absolutely think this is a great thing that you can take advantage of right now. Tim. So the ambassador is wearing his global ties tie, if you can see that. I don't know if you can get in close to that. But the point is that EM is making the breakout. And remember, the false breakout we had in May of 21 when yields were breaking out.

10:21EM, as someone who's been investing in EM for 25 years, the relative lows against the S &P have been a constant story for the last 13 years. Have we broken out for the first time and really in a long time? I don't know. I believe in mean reversions and long tail investing. And I think we could be at one here, especially if the Fed has peaked. The other part of EM investing here that's really been the tailwind, especially in Brazil, Courtney brought up, the reals probably one and a half, excuse me, 11 and a half percent stronger against the dollar in the last three months. Brazil's up 33 percent during that time.

10:53And EM, if the currency is in your favor, you're getting that's really the time to be investing. The two things for EM right now are our currencies and China. Let's be clear. The moves in Alibaba and Tencent this week, I think, are more than just the trades. And I've mentioned I think this is investment time. We talked about Joe Sy being reappointed as the incoming chairman. The stock's up 22 percent from the moment that was announced. And I think there's more to go here. So I'm going to join the crew here, but with a twist. So I actually like a Paris trade here where particularly if you look at the year-to-day performance of IFA, you're concerned about global growth slowdown, but you still think that if there is going to be growth that's coming from emerging markets, I like perhaps liquidating some of that IFA rotating into EEM.

11:35All right. Let's take a look at shares of Live Nation. This one was a mover after hours dropping as much as 16 percent. On the report that the DOJ is prepping an antitrust case against the company, Julia Borson's got this story. Julia. That's right, Melissa. Live Nation shares plummeting on a report from Politico that the Justice Department could file an antitrust lawsuit against Live Nation Entertainment and its subsidiary Ticketmaster by the end of the year. We have reached out to Live Nation and the DOJ for comment and have not heard back yet from either. The Politico article says the DOJ suit in the works alleges that Ticketmaster is abusing its power over the live music industry and could potentially lead to the breakup of the company, though the article also notes that the DOJ might also decide not to bring a case.

12:22All of this comes after Live Nation's Ticketmaster has faced scrutiny for issues around the sale of Taylor Swift tickets, which the company attributed to a cyber attack. Just yesterday afternoon, Live Nation reported far better than expected top and bottom line results, driven by a surge in concert going. Melissa? Julia, thanks. Julia Boorstin. And funny enough, Tim, I know you heard this comment from Karen, who is a shareholder in Live Nation, that she likes this in part because it is, you know, you cannot replicate this business, especially in this antitrust environment. Yeah, that's right. It's a monopoly.

12:58And the exclusivity they have over the venues is the issue here. They can control and even some of the biggest artists in the world don't have the ability to actually get to the venues that ultimately they control. I think there's there's I think there's it's easy to vilify Live Nation. And I'll just say that's fine with me. You can see all the concert posters behind me. I think they have abused their power and I think they will continue to unless until it's checked. I think the Taylor Swift story is one that people don't know the whole story. And a lot of times artists are mispricing their tickets out there.

13:28And that's part of the reasons why you see this kind of a move in the aftermarket. The fees, the dynamics here have to change. And look, I think there's a premium built into the stock because of the catbird seat they're in. As a fan, I do feel like this would be great news. You never want to go against anything that's with Taylor Swift, right? So when you look at this on a chart, year to date, it's up 28%. Obviously, I'm not counting in the after hours of what's going to happen with the DOJ. There's going to be a settlement. Let this breathe. And they do have a monopoly. Buy it on that settlement news.

14:01Coming up, it's not just big tech reporting next week. From Starbucks, the Caterpillar, the calendar is chock full of high-profile names. will get you the trades on some of those biggest stocks. And later on Options Action, bullish on Bud, the beer maker clawing back after a rough spring. Why the traders think this stock will rise above its recent controversies. More Fast Money right after this.

14:23Welcome back to Fast Money. Apple and Amazon may be headlining next week's earnings, but there's a lot more than just big tech on the calendar. So how do these stocks look going into their reports? Let's find out with a little game of... Trade it or fade it. Come on, guys. Smile. You guys are drowning. I mean, aren't you happy to play? It's America's favorite game. Trade it or fade it. All right. First, Merck Center Report Tuesday morning before the bell. Trade it or fade it. Grasso. I would be fading this one. The stock looks a little too discombobulated to me when you just look on a technical level.

14:54Their number one drug is Keytruda. Their sales in Keytruda are moderating here domestically. And internationally, they're facing some pricing headwinds. So I would stay out of the name right now. Courtney, your thoughts? I would trade this. I think people have been a little pessimistic here, especially on some of your pharmaceuticals. I do think Keytruda is facing some issues here, but they are looking at actually expanding uses of that. I think when you look at Gardasil, I think the foreign, how that's being used abroad, actually, I think is likely going to help them. All right. Up next, Caterpillar, the industrial giant also out the results Tuesday morning.

15:28Bono in, trade it or fade it? So enthusiastically, I'm trading this one. Listen, if I'm going to express an economic view, an economically bullish view, I want to do it more on the corporate side rather than the consumer side. And that's really the reason. And then if you kind of take a look at, again, the pair trade between Caterpillar and Deere, that spread has come in. I think, you know, that makes for a compelling reason to trade this one. Tim? I'm going to fade. The five-year highs on the stock are not the reason to sell it. The fact that they blew the doors off of their first quarter numbers.

15:58They beat EPS by 28 percent. Their sales were up 17 percent. This is the problem. How long does this upcycle go? Hardly expensive at 15 times forward, even relative to peers. But I think we've priced in an enormous first quarter. The bar is very high here. All right. Starbucks meantime, slated to report Tuesday after the bell. Courtney, where do you stand? I would trade this. I think this is a company, I mean, they have shown a very loyal customer base. They've been able to increase their prices by almost 7.5 % annually the last five years. And I think, too, this is a bet on China. I think people have been a little pessimistic there.

16:31But I think as you're seeing their stimulus come in, it's going to continue to benefit Starbucks. Bonoan, trade it or fade it? I'm going to fade this one, actually. So, you know, you've heard some of the restaurants come out and say that they've had upward pressure. They're either having to raise prices due to labor or food input costs. I just think it's just a matter of time before you see that similar type of dynamic with Starbucks. To Courtney's point, I do think they have a very loyal customer base. But I think, you know, I think the best days are behind them, at least in the short term. All right, let's get to Uber now.

16:56The rideshare company out with results on Tuesday morning. Tim. I'm going to trade it. Rideshare has been resilient. We're getting back to whatever normalized is. But look at what's going on in travel, et cetera. Also, driver's supply is a tailwind, meaning it's lowering prices, which is increasing demands. I think Uber goes higher. And I think the valuation makes sense here. Steve? This one was based—I agree with a lot of the fundamentals on Uber. I think they're killing Lyft. It is. There's a one-person show that's going to win this debate. It's going to be Uber. They have a lot of levers to pull.

17:32Unfortunately, I'm going to fade this one based purely on technicals. This is where the stock should stop. I would be a fader. All right. And we do have time for a bonus stock. AMD reporting Tuesday after the bell. Trade it or fade it. Courtney. I would fade this. I mean, it's done fantastic. It's up about 77 % since the beginning of the year. It has not ridden the AI wave as much as some other companies, but it has still ridden that. I just think at a certain point in time here, you're going to see this pull back. Steve. I would trade this one. And for the same reason that Courtney just said, put that up to the mirror and I would trade it.

18:06They haven't got the AI boom. Somebody else has got that. NVIDIA has got that by two times what they've gotten it by. So if you're going to jump into Semi, you're going to jump into AMD. You're not going to buy NVIDIA at this price level. They have a bunch of different processing units. And if the PC is doing better, AMD is going to do better. All right. Coming up, our chart of the week, how a deal with a legacy automaker got this Chinese Tesla rival. all charged up. We'll tell you what it is and what it means for the EV space. More Fast Money in two.

18:46Welcome back to Fast Money Time for our chart of the week. It is XPeng soaring 60 percent since Monday. Shares charging higher after the company announced a deal on Wednesday with Volkswagen to develop two new EV models for the Chinese market. Volkswagen also making a$700 million investment in the Chinese EV maker. That's almost a 5 % stake. X-Pen closing out its best week since December. NIO, not too bad either in terms of performance, Steve. EVs are sucking up all the air and all the oxygen in the market, whether it's around charging with Tesla. Tesla's going to own all the infrastructure around EVs.

19:23Tesla's still a great EV company, but now other people are really partaking and getting their fair share. Yeah, it's really hard to bet against the China EV market right now. I mean, generally speaking, right? And I think perhaps the rules of engagement are a little bit different only because the subsidies and that backdrop are very different. So, you know, yes, you have to understand there's somewhat of a binary nature there, given the whims of the Chinese government. But while they're still continuing to support that situation, I think it's hard to bet against them. Yeah. And Tim, in terms of what Ford said about EVs and the EV market, the intense price competition, it's just not as profitable.

19:56Scaling back its production goals. I mean, it really sort of underscores this notion that it's not as easy as one thought in the beginning to have the legacy automakers enter this space. Yeah. Although I heard from Ford that their ICE business was resilient and the hybrid business was also something that was durable. But there's no question. I love this trade for Volkswagen. We've seen GM also partner in China. This is how you have to do it. I do think this is a combination of being able to get distribution as best you can in China, as long as that JV works out. So, yeah, no question. We've seen a massive comeback.

20:32China is probably the most important market in the world right now. Yeah. Courtney, where do you stand on the space? You know, I think this is where the future is heading, clearly. But I think clearly what you're seeing also is this increased pricing pressure that's going to continue because more and more competitors are getting into this space, and I think that's only going to continue. So I think this is a great thing for Volkswagen. It's clearly been a great thing for this company. I think long-term, this is where things are heading, but it may not be a good thing short-term for some of your other players.

20:56You didn't self-witch your honor this whole half hour, Steve. I feel like I offended you a couple of shows ago. I want to keep in the good graces of the hosts, right? That'll last a long time. Let's get to the final trades. Around the horn we go, Tim. Yeah, we talked EM. And let's go back to Brazil, EWZ. Some great things happen in Brazil when they're going well. Petrobras paid 42 % annualized dividend on a 12-month look back. So interesting times in Brazil. Bono in. I have a feeling this is going to be a common theme throughout final trade. EM, actually. I wonder why, Courtney. You know what our final trades are.

21:31That's why. But I would say VWL. This is actually in my international. This is my choice for your emerging markets. And stick with that. Steve. My final trade was going to be Rivian. but I would rather Caterpillar. Caterpillar is going to be the recipient of a large portion of that half a trillion dollars from the infrastructure bill that's going to be floating around. Caterpillar, the chart looks like it's going to a stairway to the heaven as well. Ask Carter about that. I will. That does it for us here on Fast Money This Week. Don't go anywhere. Options action is up next.

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