Stocks Snap Losing Streak… And Impact From China’s Sanctions 1/3/24

0:01Thank you, John. And indeed, it does live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast Money, and here's what's on tap tonight. Back in the win column, after five straight days of losses, the S &P closes the week with a solid rebound. Could this kick off a jubilant January? We'll debate that. Plus, big booze warning. The Surgeon General wants additional labels on alcoholic beverages, alerting users to potential cancer risks. The hangover for this sector is real. And later, the ripple effects of President Biden's decision to block the U.S. steel deal. Bitcoin strong starts at 2025 and tapestry keeps rocking.

0:40How long will the run last? I'm Tyler Matheson in for Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight. Table for three in the studio here. Karen Feinerman, Steve Grasso and coming in remotely, Tim Seymour and Julie Beal. Tim, welcome back from a nice holiday. Good to have you back with us. And we start with the markets on the rebound. The Nasdaq and S &P both rising more than a percent, breaking five-day losing streaks, longest since April. The Dow is up 340 points on the day, breaking a four-day downdraft itself, higher by almost 2 percent there. Meanwhile, U.S.

1:17Treasury rates on the rise, continuing. The yield on the 10-year touching 4.6 percent again just in the last hour. The Fed Governor Adriana Kugler sat down with our Steve Leisman to discuss what's coming from the central bank in 2025. For all the headlines from that interview, let's join Steve now. Hi, Steve. Hey, Tyler. Yeah, Fed Governor Adriana Kugel here in San Francisco seeing a stable employment picture on one side and what she called a bump in the inflation data on the other, telling CNBC in that exclusive interview that the Fed can take its time this year reducing interest rates. There is a view that we can take our time to slow down maybe the pace to be more gradual.

1:58Well, that bump that we saw at the end of the year until we see that that gets resolved. If, on the other hand, unemployment for some reason doesn't continue to be as resilient, we would be ready to act in a different direction. Kugler noted that the average Fed official at the last meeting marked down their outlook for Fed rate cuts this year from 100 to 50 basis points. She seemed to endorse that, though not specifically. She would not comment directly on the futures market pricing that has a single 25 basis point rate cut built in, but only puts a 48 percent probability on that second rate cut this year.

2:33She was not especially concerned with the rise of the unemployment rate to 4.2 from a low of 3.4, noting that it's risen only gradually, unlike recessions, when it could rise quickly. She also said she was optimistic about productivity gains, suggesting they could have some staying power, but was uncertain about the fiscal policy outlook. On that score, she wouldn't comment directly on the possibility of slowing immigration under the new administration. She'd only say it's helped rebalance the labor market and has been slowing of late. The Fed's response to tariffs, she said, will depend on how permanent they are and whether there is retaliation.

3:06Tyler? Well, I was just going to ask you, actually, whether she addressed tariffs and that possibility, because there are, in those two areas that you concluded with, on immigration, on tariffs, a fair degree of uncertainty as we turn the page to a new Trump administration. Yeah, that's right. And Fed Chair Powell told us there's three kinds of Fed officials. One who incorporated something of what they think is going to happen next year. Another kind, another group of officials who didn't incorporate anything. And a third who wouldn't say. Unclear exactly where Coogler is on that. But, you know, Tyler, it's a bit like saying, draw me a picture of the room, but leave out the big elephant in the room.

3:45It's almost impossible, I would think, to think about a monetary policy this year, to think about the economy this year without incorporating some form of your belief of what's going to happen to those two particular areas of critical importance to the economy. How unusual is it, Steve, for interest rates as set by the Fed, and they really have one or two rates that they influence very directly. How unusual is it that their interest rates are coming down and longer term interest rates are going up? And what does that signal? It's pretty unusual, Tyler. It's worth noting, though, I think people kind of forget this, that in the anticipation of those rate cuts, yields did come down.

4:26And now we've given back the largest part of that decline. There was a need for the yield curve to rebalance in a way. That is to get positive again. I need to look at where it is right now. It was north of 30 basis points. I guess it's 32 basis points or so now, a positive 210 yield spread. That's good, but it's not good necessarily that the Fed wants to bring rates down, but they're not necessarily coming. There it is, 0.3190. Who's better in the back than those guys bringing that 210 yield spread up immediately? It's an interesting question, Tyler. I'm not sure we've heard the last word on this.

5:02The key here, though, I think is the extent to which the fiscal policy outlook and the economic outlook have both played a role in those higher rates. All right, Steve, thank you very much. Reporting from beautiful San Francisco. Karen, how much is the interest rate backdrop figuring into your investment hypothesis for this year? It's important because I do think there's sort of this tail risk of what if we have an auction that really goes very, very poorly and we have an interest rate spike? That I think will have a very direct and harsh effect. Hurt the markets. Yes. So I think about that to the extent that rates rise because the economy is doing well and there is some inflation, but not a worrisome amount.

5:44That's sort of OK. I'm more worried about that. That tail issue, though. Steve. Yeah, I think that we've all been concerned with a market sell off. And there's a lot that's been pulled forward as far as pro growth policies. But when you look at the long end of the curve, it's probably more economic data versus inflation. And maybe they go hand in hand. Right. So maybe more growth is equal to equal to more inflation. I'm not really worried about tariffs. Tariffs are more of a tax. They are. So if they're a tax, they could be tactical. They may be very tactical. And they could be deflationary, right, because it crimps the demand side more than it does the supply side.

6:22So and they're shorter term duration. So it's not something that's, you know, maybe what was. I mean, tariffs are shorter term in duration. A shorter-term effect on the overall economy versus what was Powell's famous term? Transitory. Transitory. So it has the ability to be more transitory than anything else. But I think people are so focused on pro-growth, that's why interest rates have moved up. It's a reflection of a growth hypothesis. Julie, thoughts on the interest rate trajectory this year and how important it's going to be for equities. It looks like there's a consensus, obviously, that the Fed and the person that Steve was just, Adriana, who Steve was talking to, sort of said the same thing.

7:06We're going to move slower than maybe you would have thought six months ago. Yeah, and I actually don't think they ever really changed their narrative. If you go back to December of last year, they were saying that they were going to cut rates three times next year. And guess what? They were right, but most of the market had them at six or seven. And so I'm inclined to believe them this time around because they were right and they kind of know what they're going to do and they can kind of control what they're going to do. But I think what's really important is the interest rate backdrop is critical when I think about small caps in particular who are more sensitive to that and the housing market.

7:41You know, we continue to be in a place where housing has been really constrained by interest rates. And those have really kind of gone back to the highs they were at before. And I think considering how much wealth, how much consumer wealth is tied up in houses, it's important to understand that in terms of their ability to continue to spend the way that they have been. You know, Julia, I'm going to turn to Tim here in just a minute. Stay with me, Mr. Cameron, because something just happened that was really quite providential. A piece of confetti from the other night just fell from the ceiling here, Tim.

8:16And I want you to think about whether that is a talisman of the market in 2025. First of all, providential. Great pull on that. I tell you what, I think, Tyler, maybe it's just that you're in the studio with us one more time here. I mean, this is an exciting day. It's great to see you. Happy New Year. I don't know if confetti got all the way into the NASDAQ. I do clean up, too, man. I'm available. I'll clean and sweep and scrub the tabletop and stuff like that. So the question is whether there's going to be confetti going off for the market as a function of interest rates or whether interest rates actually keep the market focused on the same eight or nine stocks.

8:59And I actually think that higher rates are going to be very good for the concentration of markets, which isn't necessarily good for markets. But I actually think that 25 could look similar to 24. I know that's not what people want to hear. I know over the last couple of days, we've seen broadening of the market. Certainly over the last five days or so, you've actually seen equal weighted outperform the S &P by 50 basis points. You've seen small caps actually outperform by 120. But higher rates, I think, and again, we're all, I think, talking about higher rates, 30, 50 basis points, maybe 75 basis points.

9:34If we get significantly higher, I think that obviously all bets are off in terms of what we can say what the market's reaction is going to be. Right now, I think there's no question that the dollar strength is a function of central bank differentials. These comments that we're hearing from the Fed also, if anything, we'll take our time, really mean that our Fed is in a position to be more patient and to watch the economy, which is certainly more resilient than Europe's economy. In fact, this dollar move is as much against the euro as it is against anything. So I think we put it in the context of us versus at least what's going on across the board.

10:12Yeah. Well, as you so often. Go ahead. Sorry. Go ahead. No, I was just going to say, as you so often do. No, I'm sorry. Please finish. Go ahead. You go. All right. We'll transition because I was going to say, as you so often do, you gave us a perfect segue to our next topic, which is the dollar. and the dollar index seeing its fifth positive week in a row. The greenback trading around November 2022 highs, even with today's sluggishness. And the head of Exante Data expects the dollar will remain strong in the first half of the new year. Let's bring in currency strategist Jens Nordvig. He is also co-founder and CEO of Market Reader, a Wall Street analysis platform.

10:55So your prediction, Jens, welcome and happy new year. Your prediction for the dollar for the first half of the year, and will the second half be different and why? It's very hard to fight the momentum we have right now because, as was just mentioned, right, U.S. growth is better than growth momentum other places, and the Fed might get on hold. In the next several meetings, we might have a Fed that is just looking to be on hold, while almost all other central banks around the world are looking to cut, right? So that rate differential will go up, certainly against Europe, certainly against China.

11:30It's going to go in the dollar's favor. And we still have between 2 % and 3 % growth, which is pretty decent this far into the cycle. And we have also tariffs, tariffs that will potentially impact especially the dollar against China. And that's a factor as well. And finally, we have a lot of kind of political risk around the world. We've seen it in South Korea. We've seen it in France. All around the world, political risk is popping up, right? And relative to that, the dollar looks like a safe bet. Yeah. So if you look at what's going on in Germany, in France, it is not just the former weaklings of Europe.

12:13It is now the strong countries in Europe, Germany and France among them, that seem to be suffering. So what does a stronger dollar, just so we slow down here, what does a stronger dollar portend for American multinationals that do a lot of business, all of the things being equal, that do a lot of business in, for example, Europe or in Asia? Yes, well, I think there's two things. The first is just the translation impact, right? The earnings that these companies have in Europe, and Europe tends to be the most important market for all the tech companies and so forth. they're going to get translated back into a weaker impact on the dollar earnings, right?

12:56So that translation impact is there. The second factor, I think, has to do with the tariffs, right? There's a lot of uncertainty about what tariffs will be. Will they be just on China? Could we get global and so forth? And I do think companies that rely on CapEx are potentially going to see a hit in the sense that a lot of multinationals are just reluctant to make big investments before they know what's happening with tariffs, right? So the tariff fear is actually having an impact on certain types of CapEx related to exports, even before we know what's happening with those tariffs. Tim? Hey, Jens, it's Tim.

13:36So let's talk levels on the dollar index, which has already moved. The Dixies had an 8%, 9 % move, really, in a short amount of time. We're kind of through at least the levels that we hit towards the earlier part of last year. Once we got through that 112 level, do you think we could even retest the highs of where we were a couple of years ago? So let's talk about it in the context of the euro, right? So the euro is at 103 now, and it came back from above 110. And we've had a sizable move for sure. If we continue along the path we've been on for the last couple of months, right, where growth is weak in the eurozone and so forth, I think it would be logical that we test parity maybe by the end of the first quarter.

14:22But I think the real issue is whether this political risk that's brewing at the core of the eurozone in Germany, in France, whether that's going to start to feed into bond market instability and create a kind of non-linearity where it's not just a couple percent, but it's actually a kind of a real tension situation that gives us another 5 % on top of those few percent. I think that's a scenario that I worry about a lot. And I think investors should take very seriously. We could be heading into a situation where there's tension right at the core of the eurozone, which is something we haven't seen before.

14:57Jens, thank you so much for being with us tonight. If I mispronounced Exante, pronounce that word, your company. Exante, it means before the fact. I got it right. I'll be darned. You got it very well. Thank you. You can be right once a year. On day number two. Jens, thank you so much. Have a good New Year. Let's trade this. Karen, we were talking before the program about, you know, let's say you're Procter & Gamble. What does this mean for you if the dollar is strong and you're selling in markets all across the world? So, I mean, he laid out Europe is a really important market for them. So you sell in euros there, but you need more euros to buy dollars now, so the U.S.

15:36earnings numbers are weaker. So we always hear about, all right, well, adjusting for constant currency. We usually don't have constant currency. It's moved. I kind of tend to ignore it, actually, because I feel like, I don't know, over time, maybe it sort of equals out. It sort of washes out. Yeah, maybe it doesn't, but I sort of assume that it will. So, and then on the flip side, you know, you have, you know, our goods are more expensive to other countries. To Europeans, and theirs are cheaper. Julie, does it make, does a strong dollar, all other things being equal, strengthen the argument that American investors should take a look at, for example, international stocks, European stocks, maybe Asian.

16:25Yeah, I think if you think about it in terms of valuation, that's certainly the opportunity for a lot of investors to broaden out. But I kind of agree that if I look at all of the opportunities and all of the economies, the U.S. still is the most dynamic, the best capital funded, the most stable with the strongest kind of gap accounting rules. And so I think there are opportunities internationally. I think there are wonderful companies internationally, but you really have to be selective, and that the backdrop in the U.S. is probably still the strongest going forward. But that said, I'd rather have more exposure to companies that do not have to manage through their own dollar exposure and FX.

17:03And so, again, that's another opportunity for small cap to shine. Very interesting point. Okay, Julie, thanks very much. And we're going to take a quick break. And coming up, no deal. President Biden nixing nippon steel's bid to acquire u.s steel but the saga isn't over yet the latest twists and turns next but first we'll talk about ford shares revving up as new car sales hit a five year high we'll give you the numbers and how to trade them next you're watching fast money here on cnbc we'll be right back

17:47All right, welcome back to Fast Money, everybody. Consumers feel in the need for speed, or so it would seem, helping to boost December new car sales to a five-year high. And one section of the business seems to be doing a lot of the driving. Phil LeBeau has the details. Tell us, Phil. Tyler, we haven't seen these numbers, really, since 2019. 16 million. We eclipse that in terms of total sales of new vehicles here in the United States. best since 2019. Take a look at the major automakers. They reported their Q4 results today. General Motors, an increase of 20.8%, 8.8 % gain for both Ford and Honda, respectively.

18:25And take a look at shares of GM and Ford over the last year. Why are we showing you this? Because both of them reported their best U.S. sales since 2019. And then there's Rivian. This was really the auto stock of the day, if you will, the EV play of the day as well, up more than 24 % as the company reported Q4 deliveries of more than 14 ,000 vehicles. That eclipsed the street estimate, which was at 12 ,700 vehicles, production of basically 12 ,727 vehicles for Rivian. And as you take a look at their annual deliveries, they now, you know, it was basically flat year over year, but it gives people confidence that perhaps they can make it through this period where they are trying to get through to production of their next generation of vehicles.

19:12And that's why you saw shares move substantially higher. Take a look at the auto dealers. And the reason we're showing you this is because the sales rate was expected to be about 16.5 million, but I've talked to a few people who now say their calculations have it coming in at 16.7, even 16.8 million. And as I mentioned earlier, we are looking at the best sales since 2019, eclipsing 16 million vehicles. We haven't been there in a while, Tyler. And a lot of people thought we would be here at the end of 2024. And they finally got there with a very strong December and fourth quarter. Of course, obviously, it's post-COVID recovery, I suppose.

19:52How do you square the numbers that came out today for GM, Ford, Honda with the numbers that came out at Rivian with the numbers that came out yesterday for Tesla. That's question one. And question two, because I'm famous for compound questions, question two is what was it that did so well for GM? What were they selling most of? Well, a couple of things. One, GM's got the pricing as well as it's got a really solid mix right now. They've done a fabulous job in terms of managing their inventory, their average transaction price back over$51 ,000 per vehicle. Obviously, trucks and SUVs are going to be a big part of that.

20:29But their EV sales, they're expanding very quickly. So they've got the right ingredients, if you will, in terms of their lineup. In terms of Tesla versus what we saw today, keep in mind that Tesla reported Q4 deliveries globally. And they've got a number of issues, whether it's in China, whether it's in Europe. And this is a company that it's fighting the headwind of electric vehicle demand, perhaps plateauing a bit in North America. certainly a much more competitive environment in China and in Europe. So a bit of an apples to oranges comparison when you look at the automakers and their U.S. sales today versus Tesla yesterday.

21:07And those are global deliveries for Tesla. Interesting distinction there, Phil. Thank you so much. Have a great weekend. Steve, let's trade these companies. What do you think? So GM is, by their numbers, they're obviously run more efficiently. Their gross margins are— Did you ever think you'd say that? No. No, but it's all relative, right? So when you compare it to Ford, they look great. So Ford definitely tried to turn their mix around. But GM, you have Ford, the F-150. You have the Silverado with GM. GM, as Phil said, has done a masterful job with throttling their EVs, selling more gasoline, giving the public what they want versus what they think they should want, as the government has tried to cram down lately.

21:49So they're trying to spin that around. But when you look at Rivian, Rivian's always running out of money. Their burn rate is about a billion dollars per quarter. Right? So, and first of all, I don't know what you show as short interest. I show about 15%. I show like almost 19%. Yeah. So between 15 % and 20%, that gives you the 25 % spike every time you get a sniff of less bad news. But you're always going to have to be borrowing money from someone every quarter or two. If you have between$6 and$8 billion and you're burning$1 billion a quarter, that's simple math. I will say I'm starting to see more Rivians around.

22:26You do see them. It's a nice-looking car. Yeah, it's a good-looking car. Tim, jump in here on the car stocks. Well, I think GM and profitability, everyone said it. It trades almost sub-five times earnings. I think you stay long in the stock. Back to Rivian, let's not forget who their partners are, And let's not forget that Volkswagen upped their investment to$5.8 billion back in November. They also said they're going to cover the cost of the technology platform. In terms of profitability, the guide today is part of also, you know, this is a company that's going to stop burning cash. I like Rivian here.

23:00I don't like the valuation. I don't like the cash burn in the rearview mirror. I love the partners. I love the space they're in. And I think it's probably going higher. But, you know, to me, GM's the story. Jim is the story that's still not trading at a multiple that's anything close to what the company's doing. And I think you stay there. All right, Tim, thank you very much. There's a lot more fast money to come. And here is what's coming up next. A big red X for U.S. Steel. President Biden officially nixing Nippon Steel's takeover of the industrial stalwart. What's next in this saga as the hot roll drama gets hotter and a trade war tit for tat.

23:39China hitting U.S. defense names with fresh sanctions as the U.S. fires back with hacking accusations. How rising tensions could impact the market in 2025. You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.

24:04Welcome back to Fast Money, everybody. President Biden officially blocking the nearly$15 billion takeover of U.S. steel by Japan's Nippon. Biden warning that putting one of the nation's largest steel producers under foreign control would create a risk to critical supply chains. U.S. steel down 6.5 percent today on the news. And the CEO just responding to the news, calling the president's action today shameful and corrupt. Karen, what do you think here? Well, that's some fight words. That's pretty powerful. Now he's going to change his mind. So they are. I mean, they are taken to court. I don't know if, you know, they talk about it being an unlawful blocking of the deal.

24:42I don't know how this is going to end up and I don't know exactly what you know. This will not be resolved, it would seem, during the Biden administration. And Trump, although, seems to be also against this deal. This has been a crazy one from beginning to end. But I don't know. I sort of, I understand the idea of it being an important company to U.S. The national security issues and infrastructure. Yes, but they are one of our closest partners. Now. Now. That doesn't mean forever. But are we then shutting the door on any other M &A, cross-border M &A? I don't know. Julie, you want to jump in here on U.S.

25:25steel, Nippon, and any ripple effects that could move through this sector broadly defined? I agree. I think the only winners here are going to be the lawyers, because I think it's going to take a very long time to unwind this. There were so many agreements and side agreements that were related to whether or not the transaction went through. I think, you know, it does put some kind of a chill on the ability of foreign companies to do any of their buying and shopping here in the U.S. for our companies. And so I think that that probably has a longer term effect that we'll see over time. But I'm really curious what Tim thinks.