Stocks Sell Off On President Trump’s China Threat… And A New Drug Price Deal 10/10/25

0:02Live from the Nasdaq market side in the heart of New York City's Times Square. This is Fast money. Here's what's on tap tonight. New tariff turmoil. President Trump just announcing new 100 percent tariffs on China. That after earlier threats and major indices to their worst day in months. The Max 7 losing near an Eli Lilly's worth of market cap in just one day. The impact and all the ripple effects coming up and drug dealmaking, a potential agreement on drug prices and more talk of M &A, the big trends impacting the industry and how to play these moves. Plus, we set the table for bank earnings season, a technical take on two AI names that could be heading in very different directions.

0:37And can Baba bounce back? The Chinese tech giant down more than 10 percent already this month. Is there hope for a rebound when trade tensions continue to loom large? I'm Melissa Lee. Coming to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Dan Nathan, Mike Ko, and Fairlead Strategies founder and managing partner, Katie Stockton. Welcome, Katie. We start off with that breaking news out of Washington. President Trump just announcing 100 percent tariffs on China above what was previously implemented. The S &P and Hughes down after hours, this after major indices all closed near their lows of the session after the president threatened massive new tariffs on China.

1:12The Nasdaq, which hit an intraday record early in the session, ended the day down more than three and a half percent, its worst day since April 10th. The S &P shedding nearly three percent, while the Dow lost 878 points. All three indices now negative so far in October. Emily Wilkins has the very latest from Washington. Emily. Hey, Melissa. Well, yes, we're getting this news now of that 100 percent over and above current tariffs. Now, Trump said on Truth Social that that would be going into effect starting November 1st or this is his post or sooner, depending on any further actions or changes taken by China.

1:47He then also adds that on November 1st, the U.S. will impose export controls on any and all critical software. Of course, this is coming after that back and forth that we saw today with rare earths. China, of course, announcing the stricter export controls and Trump responding to that, saying that he basically saying that they could have tariffs. And now, of course, we're hearing more clarity from it. Trump also said in his truth social post, accusing China of taking an extraordinarily aggressive position on trade and says they sent an extremely hostile letter to the world that tariffs and export controls were going to go into effect on November 1st.

2:26This seems to be a way for the U.S. to counteract what China's moves would be. And of course, questions here about whether Trump and Chinese leader Xi would be meeting. They're expected to meet two weeks from now in South Korea. Trump, of course, earlier falling into question whether it was even worth having that meeting. Doesn't seem to address that in his latest post. But of course, this mention of tariffs and of the export controls really ratcheting up the pressure here and the degree of impact and conflict this could have. Melissa? Emily, thank you. Emily Wilkins out of D.C., very busy day today.

3:01In the after-hour sessions, we mentioned the major indices are moving lower. We're also seeing deepening losses in the sectors that were most hit during the session on the initial fears that there would be sort of retaliation for what China did with rare earth. So we're seeing semiconductors continue their slide, tech in general. Where does this go from here? We were talking just yesterday, Dan, about how what China did was poking the bear. And here we are now. Well, it speaks to leverage. And I know Tim kind of mentioned that, too. You know, this rare earth has been at the center of the focus as it relates to what we need and what they have.

3:34And the flip side of that is like our high end GPUs that are 90 percent of them come from NVIDIA. They're made in Taiwan, that sort of thing. And I think when China a couple of weeks ago, you know, kind of said to their buyers of these chips, we don't want you buying them. They feel confident with the chips that are being made by Huawei right now. Now, maybe that's a negotiating tactic, but the White House had just negotiated this export deal with NVIDIA. So you put that together, their lack of demand for these chips and then them, the leverage that they have over rare earths. It's a real problem.

4:04This today right now reminds me of April 2nd. We were sitting on the desk. There was this. I think it was in the Rose Garden. this big presentation of these tariffs. And I think we were all expecting something that didn't look like what happened on April 2nd. And, you know, the stock market was already down about 8 percent into that from their February highs. So you think about that swoon that we had over the next week or so. We did have the president and administration pull back from the worst of those tariffs. I'm not sure that happens anytime soon. That being said, you know, is this market going to basically be able to take this in stride a little bit?

4:38Today was a little bit of a panic, Right. You know, next week, we don't have the bond market open on Monday. There's going to be lots of time to digest the stock market, if you will. And I'm not sure we have what we had in early April over the next couple of weeks, because I think the administration knows they don't want the stock market to fall apart. That's a loss of confidence in the administration. But they have a stock market at all time highs and they've got some room. So if I'm the White House, I'm in a much better position to be as aggressive as possible. And I think it's it's easy to flex muscle with all risk assets, all time highs.

5:11But those are good points. And, you know, we don't usually you know, we don't we don't always get it right on this desk. But that conversation yesterday was was was the conversation to have because we're having the conversation about de-dollarization. And, you know, we brought up I think this is as much about China. And then we brought up that rare earth is really not something that's been settled and that it you know, they're 92 percent of the world's refined rare earth. Now, over the summer and at different times in the last year, as we've been having tariff conversations, for sure, we've discussed the U.S.'s desire to begin to build away from that, to reinvest.

5:46MP Materials is a great example. But we're still talking about three to five years. So when markets have had the kind of move they've had, there's no question you get this kind of pullback. Katie's going to have some it's great to have her here always. But on days when suddenly you immediately check some charts and say, wow, are we about to violate some really key levels on the downside? Just when we were where we were on the upside. And I also say, you know, it's been easy to be very blasé about a government shutdown when, in fact, there are headlines coming out every day about A.I. and trade dynamics that very much include Asian companies to trump.

6:23and sorry, I guess pun intended, I don't know, but to override concerns about a government shutdown. It's amazing how suddenly people are saying, hey, maybe with the government shutdown, I mean, banks sold off today because maybe, you know, they're more concerned about growth than ever. Suddenly the market doesn't just digest tariffs. It digests the second derivative of that, which is growth. Well, firings out of the government shutdown brings the shutdown to a new level in terms of an economic impact as well. I mean, not just the hit from shutting down, but the hit to. There are people out there who are not getting paychecks for sure.

6:55But all of this begs the question, Katie, as to whether or not the markets were primed for a pullback period. And this was just the excuse. Well, it does feel like there is some pent up selling pressure. Our sentiment metrics were not overly bullish, however. So it's a little unusual that this is happening all at once. Coming into this week, we had our first sell signals from something called the weekly DeMarc indicators. since the April low was established, in fact, since late last year. So we were paying attention, very close attention now, of course, to momentum gauges, short-term momentum gauges like the 20-day moving average that is now likely to roll over next week.

7:34And that would be our first impetus to get hedged or to recommend hedging strategies. We also feel that the VIX was a great risk metric, and it's been just kind of range-bound for many, many weeks and now has poked its head up against the 200-day moving average, looks poised also for some kind of volatility spike. So I do think it's interesting. I think it's meaningful. The sell signals that we had teed up are now confirming. Mike, do you think that the buy-the-dip mentality that has been reigning in the markets, has that come to an end? Is this the end of the road for that? Well, I think that investors are going to require a little bit more clarity before they rush in and buy this one because we have a confluence of things going on.

8:18And any one of these would probably be absorbable, I would say, at any point in time. But the combination of the government shutdown, the fact that we just had a - this is an important technical move we saw today, a downside reversal. The fact that we had gold trading at all-time highs, which spelled some unhappiness with the dollar, I would say. And the fact that we were already at pretty heady valuations for the S &P, I think those things serve as a pretty good counterbalance for what we normally would have to buy the dip, which is that this is seasonally typically a good time and that there's a decent amount of cash on the sidelines.

8:53But again, two standard deviations above the long term forward average of price to earnings for the S &P. I think all of those things are a little bit testy. And you can see that there was very much a rush for the typical safety trade. So utilities X the energy generation and staples. Yep. I'm glad you mentioned gold. It is ironic that all of these things going on with trade and the I don't want to say erratic, but unexpected moves by Trump. All of that sends gold higher and that all strengthens China's hand at the same time. And the dollar goes down. So isn't this a buy the dollar day? Usually the dollar goes lower and gold goes higher.

9:38I'm not saying changing of the guard, but boy, that is fascinating. That's part of this conversation. It's not an overnight development, but it's also not going to end. I just point out, too, you know, there's some other geopolitics around here that include China, which is that over the last couple of days, China has been sailing naval vessels around Japan and actually was sailing them right through next to Okinawa today. I mean, there's there's there's provocation. There's there's definitely bluster. There's definitely some sense that China is ready to and listening to President Trump, listening to the White House point out the letters that were sent around the world.

10:13This isn't just against necessarily the U.S., but also other trading partners. So there's no question China is flexing some muscle, and they're doing it both in the markets and they're doing it geopolitically. Yeah, when you think about the stock market, and we hear this all the time, Tim, you just mentioned it, that they have a little room to play with, right? So we have the S &P that was up nearly 30 percent off those April lows. I just feel like, you know, when you have this level of uncertainty, you have this level of just the administration digging in, You know, this idea that the Chinese and the U.S., they really want to save face in these sorts of situations.

10:43And it's kind of right out there in the opening. So when I think about a stock market that gets hit the way it did today and we have this memory of what happened back in really it wasn't just April. It was February. It was into March as we were expecting tariffs. But think of these tariffs rates right now. We were coming into this year maybe three percent or something across the board. We're looking at high teens. And if these go into place, you know, in November, well, we're going to have global growth scares. And it brings me back to 2018 when we had a very similar global growth scare and we had weak demand here in the U.S.

11:18We had weak demand, you know, weak economy in China. And so if you think about 750 ,000 government workers furloughed, if you think about what they want to fire right now, that is one of the threats here. You think about a consumer on the lower end that is having a difficult time right now. You think about inflation. This is the thing. The Fed minutes were telling us last week that the Fed is divided on whether they want to continue to cut rates at the rate that is expected in the Fed fund futures right now. So what do you think is going to happen to inflation if any of these tariffs go into place, given the consumer?

11:52You know, so to me, I just think it's a really tough point just to kind of put a bow on this as it relates to the stock market, because sometimes this stuff can get out of your control. And the last time that we had a proper sell off, you got to go back to 2022. Proper meaning 10 percent. No. Well, I mean, forget April. Go back to the bear market we had in 2022. A lot of the elements were in place that are similar now. We had SPACs. We had unprofitable tech. We had crypto. We had a whole host of just euphoria going on. Mean stocks. We have all that right now. and then add on all of this geopolitics and central bank stuff and tariffs.

12:25All right. Well, our next guest is more worried about China-U.S. relations now than six months ago. CNBC contributor DeWardrick McNeil is Longview Global's senior policy analyst. He served in the Obama administration. DeWardrick, always a pleasure to see you. Where are we now? I mean, where are we in the grand scheme of things? I mean, I would I would posit that maybe it's even more concerning now, Because back in April, we saw when we were staring into the worst case situation for tariffs, we knew at least the upside would be talks between the two men. And now we've gotten to that point and then it was taken away.

12:59We saw that China is willing to provoke the U.S. with its leverage. It seems like it's much worse. Thanks for having me, Melissa. Great to be with you and the traders. Listen, for the first time in a very long time, the market sentiment has matched my energy. There's been a real concern on my part that we are just not prepared for what China has been planning for quite some time. The stuff that they announced on enhanced export controls. The legal architecture has been in place to do this for about five years or so. And China is finding a correct time to do this for maximum leverage. But let's take a step back quickly, Melissa, and talk about what they've done.

13:44They have announced a policy that could either completely halt or severely slow down one of the sectors of the economy that the market has been trading well on. You cannot produce chips at the downstream if you cannot control or guarantee the supply chain in the upstream. And so I think it's time for us to really focus on the main thing and let the main thing be the main thing in these discussions. And that is, how do we break this chokehold that China has in the critical mineral space? So, Dwardrick, why now then? Always great to have you. And so, you know, we're talking about this some in a couple of weeks that was going to happen anyway.

14:27You've got leaders that, you know, we're going to be there anyway. It wasn't necessarily about getting together, but China does seem to be going on the offensive. And before I referenced the naval vessels and, you know, what are clearly provocative two days of cruising around Japan, why are they doing that? Why is this, you know, where is the I don't want to call it bravado because I think China's, you know, felt this way for a long time. I think China's got a lot of muscle they can flex. But it does appear that there's a confluence here and there does appear to be timing. And I don't believe China does anything happenstance.

15:02And here we are in the last few days. The movement in gold has highlighted just how much China has already diversified away from the U.S. And with gold, it does give some backing to their own currency if they're the biggest gold holder and producer in the world. So sorry, but why now? Why all this now? Yeah, look, I think there's two ways to look at this, Tim, and both of them are likely correct. In the short term, I do buy a lot of what we're hearing other analysts talk about in terms of trying to maximize leverage for what was potentially, it may not happen now, a meeting on the margins of APEC.

15:40And China, look, let's be clear, they still want some things for us, at least in the near term. I think they're pretty annoyed that IEPA fentanyl tariffs are still in place at 20 percent when they've made a deal with Biden to do something about fentanyl. They came back and offered a deal to Trump. None of that has moved the Dow on the IEPA 20 percent tariffs. I think China, despite what we know over the long term, still has a desire to get access to advanced chips in the short term. So they want to see those export controls go away. But those are near term things over the long term. Look, I do think they believe that now is their time to really assert China's role in the world.

16:23and they don't look to be subservient to the U.S. And they're showing the world that they can stand in the ring and match us blow for blow. And that has diplomatic value over the long term, Ted. You know, Duarte, we talk about rare earths and obviously China has a chokehold on them. And our defense industry obviously relies on that. But it's not just rare earths. A lot of our supply chain that goes into defense manufacturing really is involved with China. A lot of things that go into a lot of our weapon systems and stuff like talk a little bit about that. That's something that I mean, to me, should be very frightening.

16:59I know, Trump, when he was speaking to all the generals last week, he talked about the ships. He loves the ships. Well, we don't we don't make enough ships and they make a lot of ships. Like, isn't this a really important part of this whole discussion? You hit it on the head. Listen, I've been extremely frustrated with both the Biden and the Trump administration of Trump, one Biden and Trump, two, because we have spoken very clearly about the chokehold in our defense industrial sector, but not much is being done to really bolster that sector. And so we're in some real tough straits as we look at critical minerals and all the other things that you talk about, Dan, that we're dependent on from China in our defense sector.

17:39So, you know, I would like to see Congress and administration really get serious, stop talking about it and do something about building the U.S. defense industrial base. We are going to always be at the beck and call and the chokehold of China if we cannot figure out how to build here at home, or here's a novel thought, with allies. Let's re-engage allies. They're still out there. They would still love to work with us, but we have to focus on the main thing. I keep coming back to that. DeWordrick, great to get your take. Thank you. DeWordrick McNeil. Thank you, Melissa. So, Micah, what would you do?

18:14What would you be inclined to do ahead of Monday? Well, there's not much we can do ahead of Monday, is there? Well, in your mind, what is your plan as to what you do on Monday now? Yeah. Okay. So, yeah, I mean, look, there's a critical level here. About 30 in the S &P is going to be the 50-day moving average. I think if we manage to hold that, that would be a decent show of confidence. And you know our principal business is selling volatility. So from my perspective if we do get some dips we are going to get a big bid to implied volatility. We saw that in the VIX that's certainly part of it. But you know we're seeing it sort of across the spectrum a lot of single names and certainly the high beta names which are the ones that fell the most.

18:57So you know from my perspective I think it's an opportunity to start scaling into short vol because if the VIX gets up to about 30 plus generally speaking the next 30 days for the S &P is actually pretty good. in terms of its performance on a relative basis? Yeah, I mean, the way I look at the VIX is obviously as a countertrend indication of transactional gauge of market sentiment. I feel that this is probably the beginning of the volatility event, not the end. And I say that largely because we have these sell signals that have relevance for about nine weeks from now. So as much as we didn't get the volatility event in September or early October as is normal.

19:39Perhaps this is a bit more of a rough Q4 for the broader market. Meantime, as we had mentioned, safe havens performed decently today. Utilities, staples, shares of Pepsi in particular bucking today's sell-off. The stock up nearly 4%, adding to yesterday's 4 % gain. And that came after the soda and snack company topped EPS and revenue estimates with international growth offsetting lower volumes in North America. The stock, though, is still down on the year. Is it time to start switching into safer areas? For sure, because I think either way, there was positioning that should have been into places.

20:14And utilities are this strange, hey, they're not your father's utilities, your mother's utilities, somebody's utilities anymore. But staples are what they are throughout multiple cycles. And some of them are better positioned on multiple here. Pepsi, as you noted, had fantastic numbers a couple of days ago. Stocks really taken a couple of days even of a run, not just the immediate reaction on Wednesday. So you have a dynamic here where people are assessing the best of breed companies in there. I do think both snack foods and places that were overly hurt by GLP trends and whatnot. But also, I think there are places in some of the very traditional staples, and that includes tobacco and some of the Unilevers and the Procter & Gamble's of the world that look interesting to me.

21:02You don't ever. You know, safe haven, we all seem to talk about treasuries, right? And so we see a 10-year that's kind of in and around that 4 % again, which is, I think, kind of interesting. We talked about gold before. Look at Bitcoin today. It got killed. Not so safe. And that is really interesting to me, and it goes back to what we were talking about 2020 and 2021. You know, Bitcoin was one of the worst-performing risk assets in 2022, And it was supposed to be the one that acts well in an environment right like that. So, you know, Bitcoin has become very correlated to the Nasdaq. And I just think that's an interesting one because that pillar of the bull case seems to be gone right now.

21:40Coming up, big bank earnings kick off next week with JPMorgan City, Goldman and Wells Fargo all out on Tuesday. We're taking a first look at what to expect out of these results next. Plus, the White House preparing a new deal to lower drug prices. The details right after this.

21:59This is Fast Money with Melissa Lee, right here on CNBC.

22:13Welcome back to Fast Money. Earnings season gets in full swing next week when big banks kick off results. Citi, Goldman Sachs, Wells Fargo, JPMorgan Chase all report on Tuesday. Leslie Picker has more on what to expect from the group. Hey, Les. Hey Mel, yeah, interesting timing this quarter with concerns about credit quality rippling through the financial system. Take a look at shares of Jeffries right now, down more than 8 % in after-hours trading. And that comes after Bloomberg reported that several large firms are looking to at least partially redeem from its Point Bonita subsidiary. This is the one that had about$715 million invested in first brands' receivables.

22:52The auto parts conglomerate went bankrupt a few weeks ago, roiling certain pockets of the financial industry. So far, though, the six big U.S. banks have held up OK, with J.P. Morgan, Goldman Sachs, Morgan Stanley and Wells Fargo trading right around their all-time highs before today's sell-off. As for next week's earnings, they should provide fresh clues about the state of the economy and how the loan books are holding up. Guidance, particularly on net interest income, the profitability metric for loan making, will be a key indicator of demand. Investment banking pipelines are a barometer of corporate confidence.

23:26And the amount banks are setting aside for those bad loans would show how they feel about the credit quality right now. Alyssa? All right, Leslie, thank you. Leslie Picker. How does what happened today change the picture in terms of confidence for deals, confidence for IPOs, all of these things, Tim? I don't think it does. It does. OK, we're having this conversation one or two days into this. And I would extend this to the markets dynamic. I think there's a lot of people watching that can't wait to buy the market. Now, that will change very quickly if we're 10 days into this and we have a lot more ratcheting higher.