Stocks Trim Losses… And The Potential Risks From Bird Flu 12/30/24

0:02Live from the Nasdaq market site right here in the heart of New York City's Times Square this is this is this is fast money and here's what's on tap tonight limping to the finish after the record-breaking first 11 months of the year. Stocks end in the year with a whimper. Is a sluggish December a good or maybe a bad omen for the new year? We're going to discuss and debate. Plus, do we need to bear down with the bird flu? Why the CDC is concerned about mutations in the H5N1 virus and how a bad regular old flu season could impact the spread. Bird flu, it's a real deal. And later on, Inside Micro Strategies, no good, very bad, terrible, miserable month.

0:47In the day, on the head of the struggling housing ETF as well, and Chartmasters looking at where the energy trade, after a pretty good run the last few days, is going from here. I'm not Melissa Lee, I'm Brian Selvin. Good to see you coming to you live from Studio B right here at the NASDAQ and on your desk physically tonight. It's just Guy Dami and myself, but we have Carter Worth, Mike Coe, and Julie Beal, all standing by, ready to go on this big hour show. And we're going to start with a lot more red than green in your market today. All the major averages did close off their worst levels of the session.

1:24There's your good news. But just three stocks in the S &P 500, 30 rather, were able to eke out gains today. Well, today's winners, look at that green guy. Sliver. I like that. Just a winkle. A tiny. Yeah, winkle. Winkle a little bit of green on your screen. Today's bigger winners today, SLB, company formerly known as Schlumberger, Royal Caribbean, the Cruise Line and Valero, the refining and oil drilling company. Those gains totaled six cents. Energy today, your only sector higher. The weakness keeping most of the major averages in the red, i.e. down for the month of December. Well, the Nasdaq is barely higher this month.

2:11A small cap, the Russell 2000, on pace for its worst month in more than two years. For the year, though, remained firmly in the green with the S &P up 20 % for the second straight year. And that guy, Domi, the first time that has happened since, what is that, 1988. But does this 11th hour fade signal that all the momentum is gone? Or is this just an opportunity to buy in? Guy Adam, good to see you. I'm going to effort to answer that in a second if you indulge me for a second. Okay. You know I think the world of you. You are as unique a talent that I have met over the years I've been doing this.

2:51And I am so excited that you and Kel are going to be doing Power Lunch together. And I believe that starts this Thursday. So congratulations on that. You and Kel are going to be dynamite together. You're going to make me blush. Thank you. Well, that happens to be true. Appreciate it. Because you bring an energy that, you know, a lot of people don't understand how talented you are. I happen to understand it, having been sitting next to you for many years. So let's get into the market. I'll say this. You know, you sort of set it up with, is this a harbinger of what's going to happen early into 2026?

3:22And this is just my opinion. I think what the market is starting to realize is that, wait a second, interest rates matter, despite the fact that 10-year yields actually went lower today. And valuations clearly matter. The couple stocks you mentioned in the energy space are names that you can actually make a compelling case around on valuation. I think the market has come to the realization that there are a lot of sort of headwinds out there that have been out there for quite some time. And now, for whatever reason, the market's starting to take issue with it. So the VIX at 17.5, I think that's going to be a story early in 2026.

3:55We've said that for a while, and I think you've got to buckle in for higher interest rates, Brian. By the way, super kind, and I couldn't do it without great people like Guy Adami and everybody else around me. So thank you very much for that. Carter Braxton Worth, let's go to the charts. You heard me at the top. It is back-to-back 20 % gains for the first time since 1998. So 26 years, hard to believe but true. But what do the charts say? Strip the emotion out of it. What do the charts say about this market? All right, so there's so many things going on at the surface and, of course, under the surface.

4:28What we know is we have a very bifurcated market. The actual S &P is up 24 percent plus minus, but the equal weight is up half that, 12. And we're seeing that in sector after sector. Consider that the semiconductor index up some 20 percent, but the equal weight semi is down on the year. We know this is happening in the sector level as well, the telecommunications sector, basically a robust year, whereas the equal weight almost unch. And so the question is, is there an analog? It's tempting to find analogs and compare this period to another period. But, you know, there's that expression, analogy is a weak form of argument.

5:07And that is true. It's a comfort blanket to find something similar to say, hey, we saw this before. This is what precedent is. There's not a lot of data. When you do statistics, you're talking about hundreds of thousands of inputs. There's 100 years of data. So it's 100 inputs in this year versus that year. Every time it's different. But what we do know is the market is full. So valuation is a terrible timing tool. So I don't want to say expensive or cheap, and no one knows what that really means. But the market is full. A lot of money has been put into the market. A lot of people believe in the general way being higher.

5:41And markets in January have a way of sometimes following through momentum or faltering. And I would suspect it's the latter that we falter. You know, Julie, it's like CNBC hosts and guests have an impossible job recently because there's no denying it's been an amazing two years. We can talk about $7 trillion in new debt added. Can we make our debt obligation? Okay, fine. We'll get to that. But for an equity perspective, it's been a nice run until the last couple of weeks, maybe the last two months for semiconductors. So how do we read it? Do we read it like, wow, we've really done well the last two years?

6:16Or yeah, that was then, this is now. And the setup to Carter's point, doesn't look perfect. It doesn't, right? But I think the last two years have been a really great example of the fallacy that you can really be able to predict with any accuracy. A lot of these outputs, they're just too complicated, right? Think of two years back, we were positive there was going to be a recession in 2023, and it didn't show up. I always get a little bit nervous when the consensus starts to really coalesce, because typically that means the market's going the other direction. It really likes to, you know, screw the most people it possibly can.

6:53And when we're really sure, you know, that's when that's when you need to be really nervous. But what I will say to kind of Kar's point is I think there is an understanding that there are a lot of really challenging headwinds still in front of us right now and that the valuations being full, you know, a full valuation is not problematic all by itself. What it does create, though, is a high level of expectation. And when those expectations aren't met, there's a lot of crying as the stocks go down. And, you know, I hate, I shouldn't say hate. No, you just said it. I did. You know what? I'm doubling down.

7:26I don't like, I hate the word, Mike, perfect, because it's too overused. It's the perfect casserole. It's used everywhere. Wait, wait, wait, what? The perfect casserole? On cooking magazines, the word perfect is used for everything. You get my point, Mike, is that the market has been perfect. There's a lot of people, I walk right out here in Times Square after the show is over, and people tell me they made the 20%. I brought it up earlier on the network today because guess what? All you had to do was throw a dart, and the stock probably went up the last two years. That's kind of my point. I don't know if it's going to be like that anymore, but for people that literally just closed their eyes and pressed a button and bought NVIDIA, they've doubled their money.

8:06It makes it seem like this is a pretty easy job, and it's not. Yeah, I mean, or they bought Bitcoin, or they bought Bitcoin and they more than doubled their money. Yes, look how smart that everyone's - Everyone's a genius. Yeah, it makes it really easy. I mean, I don't know that, to Julie's point, if everybody's sort of coalescing around an idea and that sentiment is bearish, then I kind of agree with the idea that you always want to sort of, if everyone's on one side of the boat, you probably want to start thinking about moving to the other side. But I'm not sure that everybody is on the bearish side.

8:39I mean, it sounds like a lot of people on the desk tonight are, but I think there's also a lot of optimism. Certainly, we've seen and heard a lot of optimism from corporate management after the election. I mean, some have come out and said, you know, this is as bullish, at least on their own businesses, as they have been. The caveat I would offer is that we have seen sort of continuing claims on the employment side extend out a little bit. And if we start to see some weakness, you know, one of the things we don't talk about too much is sort of those incremental passive dollars that just flow into the market automatically every single time people are contributing to their 401k and so on.

9:13If we begin to see the employment picture worsen a little bit, and then you also have everybody kind of in this tide of unbridled optimism up until about a week or so ago, then I think that we do have room for a little bit of downside in January. You know, it's tail end of December, that happening. That's not the end of the world. We had a very bullish end to 21. Look how 22 started out. So that's not basically an indicator of anything. But keep an eye on employment. That, I think, is something we ought to worry about a little bit. I'll let you take the casserole thing back, Brian. But I'll say this.

9:48I mean, since you mentioned, well, look at William Sonoma chart over the last year or so. I mean, that's been remarkable. So somebody is actually not only making casseroles but buying the what? What? You were so nice to me. You get my point, though. Everybody just made money in this market. So Mike Coe just sort of touched on it. Passive investing. A trillion dollars of funds came or flows came into ETFs last year, which was a record. Passive investing trumps all else. And if you think about it, names like Apple, I think there are over 400 ETFs now, of which Apple is one of the top 1515 holdings.

10:23They win in this environment. That money flows in. Those stocks sort of, they reap the rewards of passive investing. And the levitation that the market's done is on the back of that. My concern has been, and it's been unfounded, but it doesn't mean it won't happen. At some point, passive will start to become active. And it's never active on the way up. Okay, let's bring in another Voices conversation. I want to try to clarify what I was talking about. Ben Emmons, chief investment officer at FedWatch Advisors, must read daily notes. Here's the point I was trying to make, casseroles aside, Ben, which is this.

10:57Let's say somebody's gambling on football, and they bet five games, five bucks, right? They don't care, and they win all five. They get a little more bold. They start betting ten bucks. They win five more in a row. Pretty soon, they might say, you know what? We're going to mortgage the house. I'm going to bet money I don't have because I can't go wrong. I can't miss betting on football. And I do worry there's a part of this market where that's where we are with stocks, that people have the risk is not has not gone out of the market, Ben. But I don't want people to get too confident, too cocky, too complacent, because that's when you get hurt.

11:34I think that's right, Brian, because, you know, I described recently like it's like a casino market. At least it has some feel to it. Right. You get speculators coming in. And indeed, you know, with a blind eye, just bet on something because it's going to go up either way. And so that casino element, I think, is playing out a little bit here at the end of the year because those are probably the people who want to take off the chips at the table really quick. So it adds a little bit of this downward momentum. So with the panel that we're probably going into the new year with some pressure on the markets, but keep an eye on what's happening with bonds too.

12:05We're having a pretty good rally today. I myself kind of bearish on bonds, but I do think that too, there was not a blind eye on bonds, no casino there, really about fundamentals. I think you get a little bit of a rally in bonds too at the start of the year. OK, rally in bonds. But let me ask you the other side. Do you think if we it doesn't sound like you think we're going to 5 percent 10 year. But if we got close to that, Ben, because stranger things have happened. Can the equity markets, quote unquote, I'm doing air quotes, survive a 5 percent 10 year treasury? I think markets will be under pressure because at 5 % buying, we may not even be at 5 % the high enough because I think there's where the psychology comes in on those who are, I think, really overweight bonds.

12:52They start changing their minds because I think that 5 % represents what everybody has been pricing into the equity market, a stronger economy with more inflation and the Fed that only has to stay on hold. and may have to reassess where they are. So I think that's going to be a pressure point there. Not to mention, we deal with this debt ceiling coming up in January. You can kind of tell during the budget resolution, and even today, there's some tension about this speaking and about what's going on with that, that the bond market could react to that debt ceiling negatively, i.e. going higher with yields after the short-term pullback that we're seeing here on yields.

13:26So I think it's a pressure point, Brian. It's something that we have to watch because we're going to go to 5%. sense, we're likely going to go a little higher from there. Yeah. And Ben, your work has been extraordinary. And you've been one of the few people who thought that yields could go higher correctly. So but what you're talking about in the very short term, I think, is tactical in the TLT rallying into January yields, maybe going down to 4.4 percent. But do you think that could be on the back of potentially a flight to quality as the stock market sort of sells off? I think we've got a glimpse of that a little today.

13:59Yeah, I think that's right, Guy. I think that's the relationship that probably plays out a bit. You know, people making note of economic data and surprising these days that those are curled down and yields have deviated from that. So there may be some reason here for people to say, hey, there's a short and technical opportunity. But if you think about bonds and you think about the risk of bonds, you think about the economy, we have too much duration risk still in these bonds. Each time yields go lower, that duration risk actually goes up. What does that mean? Can you say duration risk Ben, in plain English for the folks at home on the radio that maybe knew listeners and viewers because the stock market has done so well?

14:39Yeah, that's a good question, Brian. So think of the idea that if the yield of a bond goes up, the price goes down by X percent. That's kind of what that duration measures. So duration five years, yield goes up by 1 percent, the price goes down by 5 percent. You know, and actually currently today, that duration in Treasuries is higher. It's more like six, seven years. So talk 6%, 7 % loss that you could have on the Treasury bond if yields go up by 1%. That's actually what happened this past fall. I think that risk has not abated at all. If anything, any kind of short-term pullback in the yields makes that interest rate risk even more elevated, therefore future losses.

15:18So it's something really to keep in mind for people watching. Listen, I think it's an important lesson and education. Ben Emmons, FedWatch Advisors, have a happy New Year, Ben. Thank you very much. You know, Mike, I think he brings up a very interesting point, which is it was so easy. And then bond yields reversed. September, they hit, what, 365 of the 10-year. Now they spike back up. And guess what happens? All these high beta, high valuation names, not all of them, but a lot of them, get hurt. The market, Mike, can turn very quickly on people. Yeah, I mean, there's really two markets I probably think of first when I think about the interest rate exposure.

15:55One is sort of the high duration equity. And when we're talking about high-duration equity, we're talking about stocks, not ones that are paying big, fat dividends and have sort of stable growth, but all of those companies that are pricing in a lot of future growth. Those are going to tend to be more interest rate sensitive. And another area that's going to tend to be more interest rate sensitive is the Trump trade stocks, which is probably in Julie's wheelhouse, actually. But companies that are more capital dependent on the debt side, which is typically going to be the smaller cap stocks, Russell 2000 type names, those are going to be very sensitive to interest rates in ways that sort of the high large cap stocks might not be.

16:32I don't really see Alphabet as being materially impacted by something like this. Those companies that carry a lot of cash on the balance sheet actually could see interest income, if you will, on the$50 billion that they've got. And they don't really have much interest rate sensitivity elsewhere. But those are the two sort of barbell ends that you have to worry about if you're thinking about the 10-year rate spiking. Yeah, been a pretty remarkable turn in, especially the longer end of the bond market. Guys, thank you. We're going to get back to stocks in just a second. But, folks, obviously, former President Jimmy Carter died yesterday.

17:03He was the age of 100. He had a two-year fight, very brave fight, with cancer. As the 39th president, Carter faced sky-high inflation, an oil embargo, the Iranian hostage crisis, and a general sense of malaise in America. But Carter also oversaw the beginning of things like deregulation in industries like the airlines, railroads, and energy. And he appointed the man who would ultimately crush inflation. That is Federal Reserve Chairman Paul Volcker. It's not a political show guy, Domi, but I think Jimmy Carter's economic impact. 100 percent. I mean, you mentioned deregulation. I saw Mike this morning talking about similar and a lot of people on Twitter were pointing it out.

17:44You can say what you want about his presidency. It was obviously a very difficult time in this country. With that said, I mean, the deregulation that we sort of enjoy today is at the foot of that Carter administration some 40 something years ago. And I'll add this. I mean, you can make an argument that Paul Volcker is the most important Fed chair that we've had over the last 50 or 60 years. And he was appointed by Jimmy Carter. He obviously did his work under the Reagan administration, was put in place under Jimmy Carter. So a remarkable man. I don't think there's any denying that an incredibly well lived life.

18:16And quite frankly, his presidency set up a lot of things that we're enjoying right now. Well said. You know, what's amazing is that Jimmy Carter, when he left office in 1980, was only 56. passed away at 100 years old. More Fast Money right after this.

18:34All right, welcome back to Fast Money, everybody. Like the rest of the market, the semiconductors got hit hard today. Now, most of that damage coming earlier in the session. But then the group, as the day went on, tried to recoup some of their losses. Now, overall, overall, Christina, the group still ended the day down. What we say is in the red. But, of course, there's a company called NVIDIA. And I don't know if you've ever heard of NVIDIA, but they make chips for things that people are going to use. NVIDIA stock actually closing. That was deep thoughts with Brian Sullivan. NVIDIA ended up three-tenths of 1%, although it was up 2 % at its high.

19:13Christina Parts and Evolas joining us now with a, shall we call it a deeper semi-sweep-up? Call it whatever you want. Yeah, you can call it whatever you want. To your point, chips did fall in tandem with greater tech. Really, that's been the scenario for a little while. But there were specific narratives at play. And you mentioned the big dog, NVIDIA, only one in the green after closing. Reason for that, there's two things. The acquisition of its startup, Run AI, that went through developers. It helps developers optimize their AI infrastructure. And then another report actually coming from the information that says the parent of TikTok, ByteDance, plans to spend up to$7 billion on NVIDIA's AI chips outside of China.

19:51and this is in 2025, so another customer. So NVIDIA shares, though, if you look at it just over a two-month basis, pretty flat, maybe 1 % down, barely above their 20-day moving average. And that's because of the rumors about chip delays, Blackwell, and then chatter about the AI trade unwinding because large language models may be hitting limits and smaller models are getting really better, so you don't maybe need as many AI GPUs. But if you lump all of these players together, these AI winners, You know, Broadcom, Arm, Marvell, TSMC may have been lower today. And then NVIDIA, their average return on the year is still about 107%, far outpacing the broader chip ETFs as seen by the SMH.

20:31It's up over 40%. The stock's up 14%. And then, of course, you've got those with less AI exposure that are really feeling the pain. On-71, one of the worst chip performers today, slowdown in EV sales hurting them. And then the list goes on, too, with those slowdown in PCs and smartphones as well, impacting names like Micron, AMD, as well as Intel, because of that recovery that's taking a lot longer than expected. We are fortunate she is back covering this space, number one. Back from maternity leave, six months, gone. And it's great. And she does an extraordinary job. And she mentioned these names.

21:04You're so nice today. As opposed to what? I don't know. When you say that. Speaking the truth. I'm speaking the truth. Well, you are. Now you got me off my train of thought. What I was going to say was, though, you know, we mentioned NVIDIA, Arm, Marvell. Absolutely. But for every one of those stocks, I mean, look at what Qualcomm has done over the last five or six months since their earnings release. Look at what AMD has done. AMD was everybody's darling. That stock has been under considerable pressure. And then if you want to throw sort of a micron in the mix. So there's a lot of cross currents in this space right now.

21:36And you know what's coming down the pike? Competition. And at 18 times sales-ish, which is where NVIDIA is trading, it's not about price to earnings. That's reasonable. It's about price to sales. And their ability to grow into it, I think, is going to be challenged. And Carter Braxton Worth, here's the challenging part, I think, to Guy's point. We love to lump these companies all together. We just say the semis, right? We say the banks. These are all different companies. To Christina's point, OnSemi does something very different than Marvell, which does something different than Broadcom. So when you look at the charts for the group and some of these individual names, what do you see?

22:13This is as bifurcated, again, an area of the market as there is. So as a simple statement, if one had to check a box semis were good or semis were bad in 2024, the answer is, of course, they were bad. The Philadelphia Semiconductor Index itself is up 20 percent. That's less than the market. And it's a whole lot less than the tech sector, up 37. 67, 16 of the stocks in the index are up, 14 are down for the year. It's been a treacherous area. It required perfect stock picking and not aggregation, not just being long a theme. And what's so ironic is it was such a good theme for most of the market, which is to say, if the tech sector is the most important part of the market at 32 percent and semis are the leading edge of that most important sector and were the most owned and most believed in with, of course, NVIDIA and Vago becoming such drawings.

23:06How is it possible that after all of this, the equal weight semiconductor in this is down on the year 1.2 percent? Bad year for semis. He said a lot. He typically, what is it? No, but I mean, he was like, this is the most important group and the most important group and they're down. We're going to get more on that later. Christina, great to have you back. She has M &Ms on her fingers. You see what she's got going on? Christina Partzenedles, thank you very much. Folks, there is a lot more fast money, and we are back right after this. Here's what's coming up next. Adding to the pile, micro-strategy scooping up even more Bitcoin as the crypto hovers below 100K.

23:47But as their average buying price creeps higher, will there be a reckoning in the crypto trade? Plus, another potential risk for markets as bird flu cases come into focus. The latest on the virus, its mutations, and the impact an outbreak could have on the country. You're watching Fast Money live from the NASDAQ market side in Times Square. We're back right after this.