Stocks Sputter to End a Rough Week, and the Chart Master Updates His “Most Controversial” Pairs Trade 9/22/23

0:01Indeed, it does. And thank you, folks. 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. Sputtering out. Stocks giving up early gains and ending in the red on Friday. The latest blow in what has been an ugly week for the markets. The S &P and NASDAQ both logging their worst five-day streak since March. The Dow less than half a percent from its 200-day moving average. And that's not moving in the right direction higher. That's coming down toward it. So as we count down to a likely government shutdown, is there more pain ahead in the week ahead?

0:36Plus, striking out, the UAW expanding its work stoppages. at GM and Stellantis plants. And now President Biden may be joining the picket line. What's it all mean for the auto industry and the suppliers? We're going to dig in on that one. And later, in an otherwise rough week for markets, One Stock's gains caught our traders' eyes. The name far outpacing the broad indexes today and where it's going next. Good afternoon, everybody. I'm Tyler Matheson in for Melissa Lee, coming to you live from Studio B at the NASDAQ and on the desk tonight. Tim Seymour to my right, Bono and Eisen to my left, and Guy Adami, wherever he is, an undisclosed location.

1:17We're glad to have you here. Yeah, he's somewhere out there. We got him. We start on this Friday fizzle on Wall Street. Major markets all dropping to end the week, despite earlier gains today. The Dow down more than 100 points, about a third of a percent. The S &P 500 losing two-tenths of a percent, and even the Nasdaq slipping into the red at the close, but basically flat on the day. The loss is adding to what has been a rough run for the markets. The S &P and the Nasdaq both down for a third straight week and each posting their worst stretches since March. And take a look at some of the biggest laggards since Monday.

1:53Target down 8.5%, trading at its lowest level now since May of 2020. Dollar General at its worst level since January 2019. Walgreens not seen at this level since 1998. Yeah, don't remind me about that one. So what does all this action tell us as we head into the final week of the month and the quarter? Could be the second straight month of lower prices for stocks. Tim, what do you see? Well, disappointing that we closed on the lows and disappointing that after, you know, I still think that the Fed's rhetoric from Wednesday is what they had to do and not necessarily where we are going. It doesn't mean, though, that the hire for longer rhetoric, which I think is the theme for the week.

2:38It was a week when, obviously, fixed income yields on the Treasury curve. Bond yields broke out to fresh highs for this cycle. And we've been talking about this relationship between equities and bonds for a long time. The good news for equity investors, I mean, if you look at, you know, bullish positioning or lack thereof, we're kind of at six-week lows again. And we've done this a couple times. And I think you've quickly seen investors shift over. Now, this allocation shift, I think, is something that's going to be a big challenge for equities, because I just think we're in a place here where the asset allocation shift towards higher yielding fixed income is something that's really going to continue to draw assets from equities.

3:12But it was a week when the data wasn't terribly supportive on housing. The data wasn't terribly supportive in terms of where the energy prices are and the headwinds that they are there. And also all we hear about now is the government shutdown. September, Bono, and living up to its reputation and being one of the toughest months to make money in the market. Yes, and they were living up to his reputation. I think investors are living up to their reputation of hearing what they want to hear. You know, we can criticize the Fed into our blue in the face, but honestly, I think they've gotten this one right.

3:39And I think they have nothing more to say than I told you so. So what has changed here, right? So Tim talked about the volatility that we saw on the curve, and I want to specifically focus in on the long bond. We've got 20 basis points of high to low action there. What has changed? Has economic outlook changed? Because this isn't really the inflation battle that they're saying. Have inflation expectations over the long run changed? If not, again, nothing new here. So why the price action that we're seeing here? And I really think that we continue to fight the Fed here. The higher for longer rhetoric, again, is not new.

4:10Yet we're punishing stocks with longer duration or other assets with longer duration on no new news, which tells me that the rally higher seemed to be one where there was no real alternative. And again, to mention another one, higher yielding, lower risk assets are a real alternative now. And I think if nothing else, that got brought front and center with the Fed speaking the rhetoric around that. Other than that, I really don't see anything stock specific that would lead that. Look at the beta on the moves like you mentioned. Target, that's not a name that should move 8 percent. That's a name that should probably have half of that move, particularly when you start to drill down and look on the underlying moves of the indices as a whole.

4:50And if we look at a longer term chart of Target, look at that. Now, there it is down 4 % today. If we look longer term at that stock, lows not since May of 2020. And, Guy, it's not that the consumer is all that sick, but there seem to be troubles in a lot of the consumer names. Yeah, you have to be concerned, I think, in terms of let's talk about the consumer real quick. When you see a Walmart making all-time highs effectively, and when you see a Target, a Dollar Gen, a Dollar Tree, Five Below, all those making either 52-week lows or, to your point, multi-year lows, that's got to create some concern.

5:27Now, the optimist will say, well, you know, Target is Target-specific, Dollar Gen, Dollar Gen. I get it. But the problem, of course, is Dollar Gen, Dollar Tree, Five Below, that's typically where people trade down to. Now it appears as though people are trading down from those names. And you have to wonder what's going on. So, you know, Walmart seemingly wins in any environment, but there's clearly something going on in these mid-tier, lower-tier retailers. And I think that's concerning. In terms of the market quickly, you know, typically on a Friday when the market rallies like it did early today, that rally would continue.

6:00We rolled over around 1.32 o 'clock, went negative. Then the market tried to go higher again. We rallied some 20 handles. And you're like, okay, typical Friday, we're going to close on the highs. It didn't do it. Gave the entire thing back to Tim's point. I don't think that's particularly encouraging. I don't want to make a huge deal out of one day, but Fridays historically over the last few years have been days where the trend has been higher and those highs seemingly are made at the end of the day. So before we go to Phil Lebeau, Tim, let me turn to you. Earlier, we had a slide up there. Maybe they can put it back up of where the market is year to date.

6:33And NASDAQ is still up 20 some percent for the year. So the question, if we got that, those numbers would be great to see him again for the year. Is this a healthy market or an unhealthy market? Well, if you look at equal-weighted S &P and you look at that versus NASDAQ, we know where the gains have been outsized, especially in mega-cap tech. And that's either something to be excited about and say, you see, this is where we're going to continue to have support, or it's where you should be very concerned. Equal-weighted S &P, you know, up 5 % to 6%. S &P now is back to up 12%. There's a couple things that should worry multinationals.

7:06That dollar today closed also at highs for the cycle, actually finished 105.60-ish on the Dixie. And I guess, you know, I look at the S &P and I look at levels, and some of this is the market we have. And on this show, we are fast money, but we're also thinking tactically midterm. And we're also, you know, as Bono talked about, I mean, there's some dynamics into the setup, into the year-end. I actually think we're going to get that year-end rally, but I don't see any reason why the S &P shouldn't, which is tested through the 100-day this week, and there's some technicals that tell me we're going lower before we're going higher.

7:36All right. Meantime, let's move out and talk about the auto workers. the UAW expanding strikes today to 38 GM and Stellantis parts and distribution centers. And now there's word that President Biden will travel to Michigan Tuesday to speak about the strike and show his support for labor. CNBC's Phil Lebeau is near Detroit with the latest. Phil? Tyler, in terms of raw numbers, this is not a huge expansion. 5 ,600 UAW members. That's not huge compared to 150 ,000 overall at 4GM in Stellantis. Having said that, look at this map. This shows you how extensive it is in terms of these parts distribution centers.

8:15These are centers that ship parts to dealerships around the country. So yes, we could potentially start to see some dealerships running low on certain parts over the next couple of weeks. And depending on the part, you may have to wait to get a certain repair done. One of the parts distribution centers where we were earlier today is just north of Detroit, Centerline, Michigan. That's where we caught up with the president of the UAW, Sean Fain, and he talked about how important it is for people to remember it's not just the people on the assembly line, it's also those like the people we met who work in the parts distribution centers.

8:48These are the best of times in the history of these companies, and these workers have created these massive profits, and they continue to be left behind and going backwards. That has to stop. All right, so what's Wall Street's take in terms of where things stand with the UAW right now? Mixed message out there. City out with a note this afternoon saying that it is encouraged that the UAW says there is real progress when it comes to the UAW and Ford and their negotiations. On the other hand, Barkley's out with a note this morning saying this strike may go until November. And finally, you've got Wells Fargo saying it expects at least two more weeks of pressure.

9:24How much pressure remains to be seen? If you take a look at shares of GM Ford and Stellantis, keep in mind that so far their inventories really haven't shown a huge impact because the bulk of their plants continue to crank out new models. But that may change in the weeks ahead, and it'll be interesting to see what happens next Tuesday when President Biden comes here. Let's see how much pressure that adds to both sides to do more in terms of their negotiations. Tyler, back to you. And Phil Ford was spared this expansion of strikes because there's apparently progress made or at least the perception of it.

10:00Yes. Between the two of them. Correct. And while that is encouraging, while that's encouraging, Tyler, keep in mind that Sean Fain went after he said that on his Facebook Live this morning, explaining an update on talks. He then said, we got a long ways to go with Ford. So, yes, it's encouraging, but it doesn't mean that we see an agreement anytime soon. All right. Thanks very much, Phil. Phil has a long weekend ahead of him, I'm sure. Phil LeBeau. Bonwin, what do you do with either the auto stocks or the parts companies? How do you trade this? I don't really think from a trading standpoint these are really different.

10:32Sorry, from an investing standpoint, these are very different. On the headline number, I would think that Ford probably tends to outperform in the interim. But I don't think this is a positive setup. There's not a united front being presented one side vis-a-vis the other. So you have Ford that's the outlier here. So you seem that there's going to be less interruptions in terms of production and repairs. But until they really start striking production equipment, I think that's really where you start to see profits hit, particularly on the truck side. Right now, these are secondary vehicles that are being serviced.

11:02I don't think this really has a revenue impact that you would see long term. It's still at the negotiating table. And until that grows into something much larger. And until it really does target those high profit, high margin vehicles, which are the trucks. Well, but there's a couple things to say in response to the union chiefs. These stocks are not trading like they're at record profits, and they haven't for a long time. And if you look at GM, around this 32 to 34, these are two-year lows. The stock's done nothing and has not participated. The fact is more jobs are probably going to be lost the more they stay out of it.

11:34This is what the auditors are saying. The market is saying that the investment into EV and the profitability in the future for these guys is what they're most worried about. I think there's going to be a relief rally on the eventual settlement, and there will be one. I won't handicap the timing on this. I think there's more pressure on the union. All righty. Coming up, demand for the latest iPhone is red hot. Fans packing into Apple stores as the new devices went on sale today. But will it be enough to boost the stock? The chart master will join us with an update to what he says is his most controversial pairs trade.

12:06And later on options action, a bank breakdown. Financial stocks have been under pressure all year, and the traders see more downside ahead. how they say you should play it next. More Fast Money in two.

12:24Welcome back to Fast Money, everybody. Apple's iPhone 15 going on sale worldwide today with investors watching whether the latest model can give a much-needed jolt to the slumping smartphone market. Shares finishing the day a little bit higher by a half percent on an otherwise down day. Steve Kovach has been standing by at Apple's flagship store. How long have you been standing by at Apple's flagship store? Tyler, about 13 hours, you know, not too bad. And actually, the line is just now starting to thin out. But still, lots of crowds, lots of tourists, lots of gawkers. And look, the story here is people are still showing up for the iPhone.

13:04I talked to a bunch of people online. Not only is it showing up for that, they're showing up for the Pro line of iPhones. Those are the more expensive ones, including the Max phone, that top-tier phone that cost$100 more than it did a year ago. And those are the devices that Apple really needs to sell well, not just this quarter, especially in the holiday quarter that's starting in just a few weeks. We know smartphone demand is low. We know Apple is facing its fourth quarter of declining sales in a row. That would make it a full fiscal year of down sales. things will get better as far as comparisons go next quarter just because of all those production problems.

13:41But everyone's counting on the demand for the pro staying strong. Just a few data points we've been getting Bank of America out with a note just this morning saying, you know, wait time to the pro max. You're going to have to wait about a month, Tyler, if you order online, if you're not lucky enough to stand in line like these folks. And if that continues, that shows there's an appetite for those more expensive phones that could make up for the average selling price of the phones and keep that top-line revenue growth coming back, Tyler. All right, Steve Kovac, thanks very much. Hope you get to sit down soon.

14:13Appreciate it. All right, Guy, what's your thought here on Apple? Steve Kovac made the point earlier today, and I was kind of arguing a little bit, that from one iteration of an iPhone to another, the changes are really incremental as far as I can tell. I think iPhone 3, Guy, is that correct? But if you're in an iPhone 3 or if you're in an iPhone 11 and you've held on to phones longer than had been the case before, it really is a different phone from four years ago. Yeah, I mean, I still my favorite application is the clock app. It tells me what time it is, oddly enough. If you're if you're I mean, this is going to sound I'm going to get a lot of hate mail, I'm sure.

14:53But if you're waiting online to get into an Apple store, I mean, you're just living life entirely the wrong way. number one but number two in terms of the stock i mean tim has said this and he's been right i mean it's it's expensive i mean if you didn't know what it was and you just said okay here's a company's trading close to 30 times next year's numbers you've had three quarters in a row of accelerating eps and earnings margins are seemingly contracting or at least haven't really moved all that much mid single digit eps growth ish maybe mid single digit revenue growth maybe It's expensive. It's especially expensive in this environment.

15:30So this was a prior high, this 175 level from December of 21. It's got to hold. But I got to tell you, if China wants to ratchet up the rhetoric, it's going lower from here. All righty. Let's go to the chart master. Four months ago, the chart master made what he says was his most controversial pairs trade, sell Apple and Microsoft and buy Amazon and Google. Today, he says it might be time to, quote, book it. Let's bring in Carter Worth of Worth Charting to explain. Hi, Carter. Hi. Yeah, it was just so steep. I mean, sometimes it's as simple as that or adored and loved Apple, Microsoft. You know, their market cap in May was twice that of Amazon and Google.

16:08So those two stocks representing basically 23 % of the QQQ and Amazon and Google were down to 11. And so the pair trade was, look, fade those that are loved and those that have been lagging, embrace them. But maybe talk about Apple. We can put up charts as we talk. Apple, and here's the real issue with Apple. Its relative performance peaked a year ago. So despite all of this, from a year ago, Apple's up 15%. My gosh, the tech sector is up 34%. IBM's up 20%. I mean, Apple's trailing IBM. Apple is trailing Intel. It has not been a good pick. And it was so loved. And now what? But I just don't like it.

16:53So what do you think? Well, I'll tell you, it's a case where I agree on the charts. This 170 and 175 guy framed that level as well. Steve Kovach framed the dynamics. We're going into our fourth quarter of slower sales. If anyone can manufacture EPS, it's Apple. Between the balance sheet and the free cash flow generation, that's what this is going to be. But I just, look, the dynamics in China, I don't think have really been priced into the stock. I'm not sure what we're supposed to price in. I do know that Huawei is a threat. Yes, I mean, that's part of the story. And I don't think the rug is going to get pulled on Apple in the short run.

17:28But this gets back to a discretionary spend and gets back to multiples that we're willing to pay for stocks on the week that we're talking about the 10-year that moved up another 15 bps. That's the story around Apple. It's not worth 30 times in this market. It wasn't so long ago, Bono, when that Apple was trading at an all-time high for Apple. But as Carter points out, it has trailed the group of technology stocks. It's trailed an IBM. It's trailed an Intel. Is it a sick stock? Well, it's not. The IBM comparison is very eye-opening, very eye-popping. But you've got to go further back. What you're getting with Apple is that you're getting a much more steady march up and to the right.

18:05And I think investors are still willing to pay for that. So performance in the short term notwithstanding, I still think that particularly when you're comparing it to an IBM, for example, you're still getting growth and you're still getting an orderly appreciation of your stock investment. All right. Carter, thanks very much. We will see you, I'm told, very shortly on Options Action, and it'll be fun. I promise. But coming up, an emerging opportunity, shares of Alibaba getting a big bounce today, even as the broader market struggles. What was behind the move and can the momentum last? That is next.

18:37And as CNBC celebrates Hispanic heritage, here's the CFO of Toast. I'm really proud to be a Hispanic Latina and in a C-level role, and I think I represent what's possible for a lot of young Latinas out there, including my own daughters. There's so much rich history and culture and music and family that I would love to share with my non-Hispanic colleagues. And when I think about the fact that Hispanics will be such an important part of our communities, of our workforce in the future, I think it's really important to bring them into the fold and really enrich the conversations that we're having every day in our communities and in the workplace.

19:32All right, welcome back to Fast Money. Alibaba topping the tape today. The stock bouncing 5 percent, far outpacing the broader market, which was, of course, down. The Chinese tech giant gaining ground on a report that Beijing is considering relaxing rules on how much foreigners can invest in domestic, publicly traded companies. Shares still basically flat on the year, even after today's move. Tim, you flagged this one. Yeah, it's a combination of just the sentiment in China is so poor right now that some sense that actually the government is inviting global dynamics and wants more Western investors.

20:07Anytime we've seen this out of China, it's been important. And I should be reminded that for all the geopolitics out there, China all along and still wants to be a global money center. They want these companies to be world class companies that trade on a global stage. So this was great for the entire space. Also, in the case of Alibaba, you also had news that they're going to be IPO-ing Kainayo, which is essentially their logistics arm that they own 70 percent of. And one of the stories around Alibaba is monetization, spinoffs, some of the parts. They're actually getting these companies ready to sell.

20:36And on some level, that's going to unlock a lot of value. Someone's been long from higher up in Alibaba and actually from lower down. And my kind of recent run in this stock is to be adding to weakness, because I think a lot of the worst is behind it. Quick thought. Any thought, Guy, on Alibaba? 84 was the June low. That's where we just traded down to a couple days ago. And this, and Tim can tell you, this has been a stock where you traded opportunistically from the long side. And I think we're in one of those spots now. Bonwin, any thoughts on Alibaba? It's certainly cheap. You can't argue against evaluation.

21:07So, yeah, I'd be trading from the long side as well. Shall we do our final trades? It's time, Tyler. I think it's time to go around the horn. A lot of help from you this week. Well, thank you for having me. It's really good. Our final trades. Let's start with you, Guy. I dig you, Tyler. You know that. Have a great weekend. Vistion, VC. Vistion. How about you, Tim? Walmart. Bottom line here is the consumer that's going to Walmart is the consumer that didn't go to Walmart before is trading down. And those that have to be there, they're still leading up price. I think their margins are getting better here.

21:37And I know it's at near all time highs. You stay there. And you think about Target. You think about Dollar General. They're struggling. Walmart over Target. We've seen this before. My wife was in a Target last night. She was empty. What'd she buy you? Nothing. She said there was nothing there. It's the first time that's ever happened. You're final. I'm just kidding. You're final. Kind of like Arm. Listen, that IPO price, that reversal is pretty scary. I would stay away from this one. You'll probably get a better opportunity. All righty, folks. Thanks, guys. And that does it for Fast Money. But Options Action is coming up next.

22:08Stay with us. We'll be right back.

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