Stocks Snap Win Streak in a Big Way, and What to Expect from Nike Earnings 12/20/23

0:01Hey, everybody, 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. Can't win them all. The streaks for the Dow and NASDAQ are over. Was the market's late-day sell-off just profit-taking or after a big run or the start of a meaningful pullback? We will debate that one. Plus, Shoe Dog or Dynamo, shares of Nike struggling for much of the year, then rebounding big time in the past two months. Will earnings lace up more upside or send the stock back down? and later reports after the bell that Warner Brothers Discovery and Paramount are in early talks to merge.

0:38We will have the latest and ask whether a deal would start a wave of media mergers. I'm Tyler Matheson in for Melissa Lee. Glad you could join us. Coming to you live from Studio B at the NASDAQ. On the desk tonight, Steve Grasso. Good to see you, Steve. Karen Feinerman, Guy Adami and Julie Beal joins us remotely. We start with a sharp late-day sell-off that ended the market's win streak in a big way. The Dow dropping 476 points with every member, everyone down on the session. It was its worst percentage loss since way back on October 3rd. And all that after the index had notched a new intraday record earlier in the day.

1:18Meanwhile, the S &P and Nasdaq both falling about a percent and a half. All three now in the red for the week, putting them in danger of snapping a seven-week run of winning performance. performance. Every S &P sector lower on the day, consumer staples, energy, discretionary, biggest losers there. And take a look at Treasuries. The yield on the 10-year dropped as low as 3.85%. That's the lowest it has been since late July. So was all this action just a little profit-taking after the run we've had, or is there more maybe trouble brewing onto the surface here? Guy Adami, what do you think? Is there anything to really worry about here?

1:57Well, I mean, I've been worried incorrectly for a while, so I'm probably the wrong person to ask, but Steve, Karen, Julie, Oldman, Bullish, I'll say this. One of the things, many things that have concerned me about this market are these zero-day-till-experi options, which when things are going higher, nobody seems to care. When things are going lower, everybody starts to point their finger at it. And volatility is a great thing when you're shortening and getting paid, but it also works against you. And around 2.30 today, something clearly happened. But when you have it happen on a day where we make a new 52-week high.

2:28We test the all-time highs effectively in the S &P and reverse the way we did. Even if you're the most bullish person in the world, you have to take notice of today's price I was on the air at 2.30 today. It was nothing I said. I promise you. I promise you. Steve, what do you think? Yeah, so I did take notice of it today. But if you look at it, rates have been falling. I think that's a tailwind for the markets. We're coming up to year end. We've had such an outsized rally and such a run up that you would probably, I don't want to say you'd be crazy not to lock in a little bit of profit, but I think once somebody sells, everyone else has an itchy trigger finger.

3:07I think it just spirals out of control. So I do agree with Guy. I think it could have been options related. There were a couple of Taiwan headlines around. They're just rumors. But if you want a reason to sell, you could find 10 of them. Yeah. Julie, was there a predicating event here today that you can identify for why the market turned a tail the way it did at 230? No, I don't think so. It's hard to really point to anything, and I'm not sophisticated enough to pick up on these micro movements. But what I will say is, you know, you've seen a clear revaluation in the market that's related to interest rates.

3:41And what is going to have to take us from here is earnings and fundamentals are actually going to be what propel the market forward. We've already kind of seen the benefits of lower interest rates and now the hard work of fundamentals has to take play in order for us to keep pushing higher. And how do you evaluate those fundamentals? What do you think's in the cards? Well, you know, I think the most important point is if we continue to see good, strong employment, then the consumer remains healthy and then most of our economy is okay. But I think the sectors that are showing some weakness, you know, in consumer, it's really a function of are you creating value for your customers?

4:17And so in the old days of the pandemic when we didn't have anywhere to spend our money and we were looking for dopamine, we would buy literally anything. I could sell a macrame for all I cared. But now you really have to provide value for your customers. And that's true even on the business sector, too. Value is really important to people in an inflationary environment, even as prices softened. Karen, it was some consumer staples that took hits today. General Mills among them. FedEx, not a consumer staple, but a transport. What are you seeing? Well, it's interesting. You know, it's a big move, clearly, within a couple of hours, an hour and a half, really.

4:53And if you step back a little bit, it just takes us to where we were Friday around lunchtime. So it's not that giant in the scheme of things. However, it's a very precipitous move. Normally, when you see something like that, you hear rumors, and then you hear something more solid than rumors. We don't have that yet. We were talking in the green room. Do we have anything really specific to point to? No. So a lot of what the guy's been saying just is it, you know, stops or just momentum. And people think, all right, that's it. The rally's over. I'm always long. So I'm going to be long into this.

5:24I'm going to be long after this fall. I think that just out of steam, maybe, although I thought it would last until year end because I think there's a lot of chasing going on just to sort of, you know, performance was head of most managers. I don't have a great reason to explain it. Nobody really seems to. I mean, I think we're kind of flummoxed here. Steve, you mentioned a moment ago some chatter on Taiwan that has kind of been in the ether on and off. Concerns about what Xi's ultimate objectives are there. He's been pretty transparent about what they are. He's been very transparent about it.

5:57And just to probably make a finer point on it, I think this is a one-day event. I think we're going to have that get back on the bull for the rest of the year. I think people won't be afraid to rally probably into year end. I think this market's going to be tested somewhere in January. Earnings have bottomed for me. People, as what Julie said, people have jobs. People are going to be spending money. I think the economy is OK. The market will be tested sometime in January. What do you think? Well, it's interesting, you know, in terms of Taiwan, and this comes after the President Xi meeting with Biden in San Francisco, whenever that was, a few weeks ago.

6:37Now the headlines are coming out that effectively President Xi said, we're going to take Taiwan's by any means necessary. And that, listen, there are all different kinds of news stories that I'm reading now. So there's clearly something there, something we've thought for a while. I mean, if in fact that's the case, that's I think that's a game changer. That's a bit of a game changer, especially for some of these high flying technology stocks. So that is out there. But, you know, Steve might be right. One day event. I mean, being bullish is being right. But when you see a reversal with the kind of volume we saw at a level that we haven't seen in basically three years ish for the S &P 500, you have to pick up your head and take notice.

7:12Yeah. Yeah. Thoughts? I just feel like if there was why didn't we hear we heard a little rumbling about that three weeks ago or so, whenever that was, I don't remember. That's a long time ago from now to have this all of a sudden seems to be reemerging. No, I hear what happened today. And information flows so freely now and so quickly. I would think if there was something more tangible, we would have heard it. Yeah. All right. More now on today's market pullback. Let's bring in Tony Dwyer, chief market strategist at Canaccord Genuity. Tony, welcome. You yesterday, I believe it was, put out a note talking about the current extreme overbought condition in the broad equity market.

7:49It's as if the market heard you. If only I had that kind of power, I'd be on the video in a commercial. By the way, welcome. Good to have you with us. It's great to be here, Tyler. You know, it's as we're talking in the green room, if I if I walked up to Guy and I told Guy a bald face lie right to him. And then the next statement I said to Guy was this one's right. I'm I'm telling the truth. You would question it. Right. So the note that you're referring to, Tyler, is we called it. Now it's proving time after you've had such a big rally in October 27th, when the market was poised for, you know, had set the stage for a rally.

8:25What was it telling us then? Everybody was thinking it was going to go to 6 percent on the 10 year. The eight of the 11 sectors were negative on the year. All the indices except for the Dow and the S &P and the Nasdaq were down on the year. What was it telling us? It was time to buy. So we're now on opposite day. And we hear that the market's telling us that because it's making new highs and it's rolling, that we're going to have a great economy and interest rates are going to continue to go down. Well, the last time it told us something, it lied. And I don't, this isn't a comment on FedEx, but it was making a 52-week high.

8:59It was going up every single day. And then they came out with weaker numbers, and it's down 11%. So the lie now is? The lie could be that everything's great. The economy is a perfect soft landing. Powell got it exactly right. You know, they raised rates in a historic way into a generationally leveraged system. We're at 18 times earnings, excluding the MAG-7. So it's hard after the rally. On October 27th, Tyler, it was identifiable. You've never been that oversold on the weekly stochastic we use. You had the bond market at 5 % on the 10-year with three events coming up. A former Fed chair was going to tell us what they were going to issue for treasuries.

9:38You had a Fed meeting and you had a payroll report. What were the odds that Janet Yellen, a former Fed chair, who's determining the maturity duration for the issuance, is going to hurt her own administration with a bad news item. So the rally was identifiable. It's gone a lot further than I or most others thought. Now it's proving time. You've got to see credit improve. Who wants to question Tony? Yeah, so just to... Everybody. Everybody wants to question Tony. Tony, he's going to tell you a lie straight to your face. That was long going into the rally. But I'm wondering, though, if you're talking about 18 times multiple for the 493, I guess, right?

10:16Right, yeah. With rates here, and if we use the 10-year as just the mathematical peg, that doesn't seem particularly overvalued to me. No. And I don't think this is a period where you go out and short. I don't know if it's a one-day event or more. But the Fed pivoted. And what's interesting about the Fed pivot, Karen, in this whole environment, is in my career I've seen it a bunch of times. Saddam Hussein invaded Kuwait and Michael Milken wrecked the high-yield market. That's 1990 SNL crisis. Then you had 1994 Orange County that made a pivot. Then you had 1998 with long-term capital. They made a pivot.

10:48Then you had the dot-com bust with WorldCom. You're going way back. Right. But but when they pivot, it's usually when things are really bad. They pivoted after there had been a 75 basis points drop in the bond market yield after there was a 10 percent rally in the stock market. So it's very strange to me how why they pick now to pivot. You're pointing to the December meeting as I'm pointing to the December meeting. Now, we had written a piece called Higher for Shorter, because when you spike in a leveraged system to 5%, it's not sustainable. And that meant to us that rates were going to come down more than most folks thought.

11:25Well, they've done that. And again, it's proving time. If you look back in last October, October 22 to early 23, the current drop in U.S. Treasury yields, mortgage yields, and Moody's BAA corporate credit yields is exactly the same as it is today. Yeah. So in other words, you've done what you did last year. Now you've got to prove that it's more. But the market, from October forward to just last week when the Fed did what it did or did nothing but said what it said, the market was basically telling the Fed, you're going to pivot, right? Right. So just to push back on the we have to prove ourselves, rates are coming down.

12:04We've seen that happen. But rates also spiked in an uncontrollable fashion to five. So they're coming down. So I think this is just the pendulum is switching back. dollars coming in, and commodity prices have come in. That's all bullish to me. And earnings have bottomed. So hasn't the market proved itself? It has. To reflect what's happened in the credit market, what's happened in the commodities market, to get that, remember, a soft landing doesn't mean you stay on the ground. It means you need to reaccelerate. You need gas to reaccelerate. You've got to open up the capital markets. You've got to open up the corporate bond market.

12:39You've got to open up secondaries, IPOs. is you've got to create a selling market for the private equity holdings. There's got to be some way to reaccelerate. You need an improved outlook for money. We have the same improved outlook for money that we had into the rally at the end of last year. So we've got we've got a point where most people have a mortgage below 4 percent. So even at six and a half to seven percent, you can't refi. You need more improvement to really kickstart that whole credit cycle. As I said in my note, this is a great start. We've had a great start. Now we need that next leg of improvement to get that reacceleration, to get the plane back off the ground.

13:23You need full fuel. And that's what we're trying to get here. All right, Tony, thank you very much. We appreciate it. Have a good holiday. Great to be with you guys. And happy holidays to all the viewers and you guys. They took us on a nice walk through history there. Right. No kidding. Wow. Let's do some trading here. Julie, I don't want to I don't want to neglect you there sitting there next to your nice tree and your lovely environment out there. How do we trade what Tony just said or this moment in the market profitably between now? And you and you emphasize, I think, quite rightly that the proof is going to be in the pudding and the proof is in the form of earnings, which are going to start coming out in a little more than two weeks time.

14:01Yeah, you know, I think it always comes back to this saying, right? The market is always going to do what's going to make the most number of people look stupid. Right. And that was true at the beginning of the year when everyone thought there was going to be a recession. That was true in October when we thought rates were going to stay at six and seven percent. And I think it's true right now where we really have to be thoughtful about what's the market and what's the fundamentals. And for a longer term investor, you really have to be exposed to businesses that can participate in an up market.

14:31So they have enough cyclicality to benefit if we see a reflation of demand, particularly on the credit side. But you also want to protect yourself with quality if we are if we have a bumpier or softer or weaker landing. And so it's these businesses that have recurring revenue and, you know, that are just really strong regardless of market outcomes, because I think there's just so much uncertainty. It's really hard to know which way we're going. You know, Guy, by any standard, this has been a good year in the market. The last six to eight weeks have been nothing short of spectacular, really. I mean, you look at your people looking at their portfolios, either online or receiving.

15:06People still get paper statements, I guess. I do. You do? I was the last person. Not that anybody cares. I was literally the last person at Goldman Sachs that got a check. They called me into HR for a myriad of reasons, not least of which saying, you've got to get direct deposit. I'm like, why? So yes, to answer your question. It's been demonstrably a good year for equity investors. It's been a pretty good year lately, you know, if you had bonds. I mean, you could lock in nice yields on bonds. What does 2024 look like to you? As good, not as good, hard. It would be hard to beat this year. I'm hard-pressed to believe it's going to be anywhere near as good that we've seen this year in terms of individual equities, in terms of some of these indices.

15:47It just doesn't add up. I mean, right now I think you're looking for 13.5%, 14 % EPS growth. The math doesn't work against GDP that people are saying now is less than 1.5%. I mean, so many things to be concerned about. Leading economic indicators down 19 months in a row. Bank credit has been contracting. Yeah, we got a good unemployment data last time, But I think you're going to see this stair-step function higher in the unemployment rate. When you have an economy that's driven 73 percent by people having jobs and buying things, when credit is contracting and jobs may be going away. And you heard it from a swath of companies.

16:18Look at General Mills today. I don't know how that's bullish for next year. Yeah. All right. Let's take a quick break, folks. We're watching Micron after hours right now. Shares of that semi-stock on the move after it posted results. We've got details from the quarter next. Plus, new reports that Warner Brothers Discovery and Paramount are talking about teaming up, merging, that is. The latest details and what a tie-up could mean for media consolidation in the new year. Don't go anywhere. Fast Money is back in two. You're watching Fast Money here on CNBC. We'll be right back.

17:02Wish you could have been here between the commercials, Sarah. Wish you could have been here. Welcome back to Fast Money, everybody. Earnings alert on Micron. Shares popping after the company reported a top and bottom line beat and gave strong Q2 guidance. The conference call got underway in the last hour. And Christina Partzinevelis has been listening, has the details. Hey, Christina. Hi, Tyler. Well, Micron wants investors to know its recovery is underway. And the, quote, very early stages of their growth stage, what? Driven by generative AI. Revenues and margins improved because of higher selling prices for memory chips, and the CEO is expecting those prices to climb in 2024.

17:39Migrant CEO continued noting inventories for memory and storage are at or near normal levels for most customers across personal computers, specifically with PCs. They expect unit volume growth by low to mid-single digits after two years of declines. And then they have improved smartphone inventories as well as auto and industrial. Supply, though, could be an issue for customers. The CEO saying that its memory supply growth for fiscal 2024 is planned to be, quote, well below demand growth for both DRAM and NAND memory, driving prices even higher. And, of course, the Midas touch of NVIDIA continues, Micron's CEO saying.

18:14It's in the final stages of qualifying its advanced high bandwidth memory chips for NVIDIA's next generation GPUs. But that also means CapEx, capital expenditures, will be higher in 2024 than last year. Micron CEO, though, will be on Squawk on the street tomorrow morning for more on this price recovery within the chip world. All right, Christina, thank you very much. Let's trade Micron. Steve, what do you think? Well, NVIDIA has sucked up all the oxygen in the room, and it's up 230 percent year to date. If you look at Micron, it's up 57 percent. So Christina talked about NAND and DRAM. That's what Micron is known for.

18:48If we have to power all of these different AI functionality and AI companies, we're going to need a ton of DRAM and NAND. I think it's more palatable to buy Micron versus buying something that's already outperformed. All right. Any rejoiners there? You've got to believe this is a trough quarter. I mean, for the record, they pre-announced this quarter, I think, on November 28th. So they were slightly better than the lousy pre-announcement less than a month or so ago. The stock closed that day around 78. We're 82 now. It all makes sense. Again, you've got to believe this is a trough and things will get better from here.

19:21And this is the worst it's going to get. and things will reaccelerate because the quarter by itself obviously was not all that good. It's your belief system that they're going to be at the forefront of this AI revolution and Micron could be a reasonable valuation based on that that makes the stock attractive. Julie, a thought? Yeah, I mean, the most encouraging thing I saw in this quarter was about gross margin. And that's what really is going to drive this business forward. And it's just a reflection that inventory is finally getting to places where they have some control of pricing. I think that makes sense, and it probably is a trough quarter.

19:53And if you are trading in semiconductors, this makes sense. But if you're a longer-term investor and you really care about fundamentals, the fact that their earnings deteriorated the way that they did just reflects how much of a commodity product this is. And so for longer-term investors, I don't think it's really that attractive, even relative to NVIDIA. Faint praise for Micron there. Thank you, Julie. Appreciate it. Calling them as she sees them. There's a lot more fast to come, and here's what's coming up next. A real Nike swoosh. Shares jumping over the last few months. So can we expect the same slam dunk performance after earnings?

20:29We're running circles around that trade next. Plus, channeling your portfolio's inner animal spirit as Cat pounces on new highs heading into the new year. Can the ferocious industrial stocks keep climbing? You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

20:56All right, welcome back to Fast Money, everybody. Nike on deck to report after the bell tomorrow. The sportswear giant sprinting into year end now up nearly 40 points, excuse me, 40 percent, percent, not points, from its September lows. Our next guest says tomorrow's results could tell a huge story about valuations in the consumer trade. BMO senior retail analyst Simeon Siegel joins us now. What do you think of Nike? They were a little slow in the last two months. They've been real good. By the way, how good are they for making puns? It's just like it never stops. There's a lot of work going on here.

21:29And it'll continue. So good to see you guys. So I think what we're going to see right now, listen, who reports earnings the week before Christmas? I mean, that's like in and of itself. So here we're going to get the last look on consumer right after all the consumer stocks have uplifted. And so I've been watching, and the whole conversation now is around, is this market, is this fundamentals, or is it sentimental? Is it the fact that now interest rates are down, or terminal value changes, and therefore multiples go up, or have numbers actually moved? No numbers have moved. And so I think tomorrow we get a good result.

21:56I think that Nike generally beats, guides down, rinse and repeat. And so we'll get that. That's the fundamental. The question's going to be, do people want to own it? Are they okay with the multiple? And right now, people want to own it. What is the multiple now? I can't remember. I just did this report with my son on Nike the other day, but it's changed in the last two days. You've gone from high 20s to low 30s to mid 30s to high 30s like that. And so that's what I mean. Numbers have the anticipation. And that's the market, right? That's the idea that with interest rates where they are, you change what you put in your DCF.

22:30Last quarter, I think in September, stock was 89 bucks. Inventories were down 10 % against very decent sales growth. Even China was probably better than expected. But you've had this run now. Margins will improve. But to your point about valuation, is it improved enough to sort of justify this valuation? So last quarter, I'm glad you brought that up. It was fascinating. See that? See that, Ty? Look at that. On the head. So$89. But you know what? The other side of that trade was where Lulu was. And so last quarter, you talked to any institutional investor, and they're long Lulu, short Nike. That was the trade.

23:03That's changed. Lulu has run even more. And so right now, I think this conversation, Nike gave us a good North America number last quarter. So now that should keep going. This is the difficult North America quarter. They get through this. It starts getting easier for the rest of the year. Karen? So last quarter, they seemed to get a lot of goodwill on what were some nice improvements, but not so fantastic. I mean, the inventory issue, which really weighed on them, they finally sort of started to get control of that. So what is the thing that's going to compel them forward? And I'm long. I'm a little nervous about how rich it is.