The Big Week Ahead… Plus Changes Coming To The Hosing Market 8/16/24

0:01Live from the NASDAQ market site in New York City's Times Square. This, this is fast money. And here's what's on tap. The big bounce. Stocks closing out their best week of the year, led once again by big tech. But with the Fed in focus, at the end of next week, is it still safe to keep buying? Plus, the new real estate reality. The change is coming to realtor pay. The impact it could have on the entire housing market. Plus, inside the about-facing semiconductors, a record-breaking week for gold. and the traders bringing us their charts of the week. So buckle up, everybody. I'm Brian Sullivan, in for Melissa once again, coming to you live from Studio B at the NASDAQ.

0:43And on your desk today, well, here on the desk, is Karen Feinerman. We've got Tim Seymour, Mike Coe, and Julie Beal also with us. Happy Friday, everybody. And we are going to start with a money-making week on Wall Street. And unless you're short stocks, that is. Coming off the turmoil of just, you know, last week, Now we post our best week of the year. The NASDAQ popping over 5 % since Monday. The S &P 500 and Dow now just about 2 % from their all-time highs. Here's a reference. Apparently it's like the 90s movie Memento because last week's craziness appears to have been memory hold. But as we say, last week was last week.

1:24And now you're in for another important week ahead because not only is it the big Jackson Hole meeting from the Federal Reserve where they often tip their hat about rates. But you've got earnings from retailers, Target, Lowe's, and Macy's. And remember, a good report from Walmart helped power the market this week. So, Karen, retail, kind of your thing. Yes. Lowe's, Macy's. Do we care about Macy's? Maybe. I mean, it's cheap, but for a reason. Okay, so what are you focused most on for next week, and how big are some of these retail numbers, if at all? So I think Walmart was really important. So obviously we got that good number out of Walmart.

2:04They're enormous, right? And so that was important. But we'll see what the follow through is. Did they get, Target will be really interesting. Did they get some of that high margin business that they were lacking before? So Walmart brought people in with the grocery, but now they were able to also get some higher margin business. Can Target do the same? That's kind of really important for the health of the consumer. We know the consumer is going to spend for staples, right? They need groceries. They're going to spend for that. But are they going to spend for home goods and other higher margin apparel, things like that, like consumer electronics, which actually I don't think was great at Walmart.

2:37But so that's an important one. TJ Maxx, which I also love. You love. I like TJ Maxx a lot. The only thing is it's expensive, but it's always been expensive. It deserves to be expensive. They do a great job. I think they'll continue to do a great job, but I'm not sure how much upside they'll really have in the short term. I also have the barbell, which is really luxury. that has not worked this year at all. So I'm hoping one day that consumer is back. But you whispered in my ear prior to tonight's show that you were starting to go a little cuckoo for Lulu. Yes, I have been going a little cuckoo for Lulu.

3:11This is one Tim and I have talked about a lot. He was actually shorted briefly, much higher. And I think it just, you know, it's really still a great company. It is not expensive. It is a below market multiple, a company with no debt. They do have new competition that they haven't really faced before. But I just feel like at this valuation, the risk reward is much more compelling, certainly than it was at double the price, which is where it was not that long ago. Fair enough. Tim Seymour, comment on everything, what you're focused on for next week, whether it's retail, whether it's the Fed, and comment on this Lulu trade and whether you think Karen's position is, dare we say, a stretch.

3:51Well, I'll comment first. I think you're a lucky guy with that private party there with Karen. So, you know, enough of that, though. Let's talk a little bit about the market that this was this week. And you get into the move in Lulu, the move in Nike, and you got some sense that the activist activity around Starbucks, the change from CMG over to Starbucks, but some of the activity even around Southwest has been good for those names that have great brands that probably need to shake up, even though I think a lot of the issues around Nike and Lulu are, yes, some competition, but also some macro headwinds.

4:23But it was a week where we had certainly less inflation and more economy. And that's a week that gave the market almost everything that it needed. And I would agree that Walmart certainly helped that retail sales number reinforce the dynamic. And now that we pay a lot of attention, maybe too much to jobless claims, we got a sense that, again, the labor market is giving something back, but not all that much. So I thought it was a fascinating week. I think if you look at the markets, though, going all the way back to that June CPI reported July 11th. So we know we've snapped back. We know the S &P over the last two weeks off of that dark Monday in Japan is now up about 8.5 % to within 150, 175 basis points of an all-time high.

5:04But if you look at the underperformance, and I know we're going to talk about semis later in the show, so I'll save most of that. But at least semiconductors and the NASDAQ or the Triple Qs or the MAG7 have really underperformed the broader S &P since that CPI report that was reported on July 11th. That trend is one that I think is fascinating because while we've really come all the way back, you've certainly seen the Nasdaq lag the S &P by almost 7 percent during this time. And that's really the question. Where does the leadership come from? Next week is fantastic for retail. Karen outlined those names.

5:35I do think Lowe's and Target, which are the weaker kind of players in those pairs that are Walmart and also Home Depot, I think both set up for pretty decent spots here. You know, Julie, Tim asked a pretty good question. Where does the leadership come from? So I'm going to ask a great question. Where does the leadership come from? I mean, I thought everybody at the top of the show is going to be like, oh, it's the Fed. It's Jackson Hole. And retail earnings might be sort of a little bit on the back burner. We haven't heard that so far. How much are you watching the Federal Reserve in Jackson Hole, if at all, Julie?

6:10Oh, I think it's definitely worth watching because I think Jackson Hole has historically been a place where we see a lot of movement in the market. a lot of market reaction. The questions can sometimes be more specific and we get a lot of information. And so it's kind of one of those things where it's like, you got to keep the main thing, the main thing. And in this case, so much of the market is really being determined by interest rates. And so we really believe that getting any kind of indication of September is going to be pretty critical. And then having some understanding too of, you know, how worried is the Fed about some cracks in the employment, right?

6:44It's true that jobless claims have been looking better, but continuing claims are not looking great. And I think that's the kind of one crack in the employment landscape that I'm a little bit worried about, because the minute we start to see weakness in that, everything connected to the consumer is going to weaken, right? Consumer discretionary behavior is not necessarily based on if you have a job, it's more impactful if you're worried about losing your job. That's when you really pull back on your spending. Yeah, it's well said, you know, Mike, and I think Julie Brake makes an excellent point, of course.

7:13Of course she does, which is we forget the Fed's got a dual mandate. All we've talked about for three years is the Fed and inflation. Ah, but the second part of the mandate, obviously maximizing employment. There is no doubt the labor market has cooled and cooled considerably. Sadly, Mike, we've got to wait until Friday, until Jay Powell's speech, like the whole Jackson Hole week. And we've got to kind of debate and discuss this until Powell actually talks on Friday. So you got the Fed, you got the current economic conditions, you got retail. What is on Mike Coe's radar? Yeah, I mean, so when we think about rates, there is a couple of reasons why rates might go down.

7:52One, of course, is the inflation picture. The other is the employment picture. The good news for us, at least over the last several days, has been that the inflation picture has been arguably better than I think most people anticipated. And so these are good reasons for rates to be dropping. That combined with the fact that we've seen arguably better than expected data from consumers. I mean, and we're coming off the heels of relatively negative news coming off of from consumers. If we think back to the results that we got out of names like Lamb Weston and McDonald's, for example, which were indicating that there was a lot of pressure there.

8:25So basically, you have the rates picture being propelled by all good things for the most part. So I think that's definitely a positive. And then, of course, if the unemployment picture is also an additional justification for lowering, then you would expect maybe bigger moves in that area. So I think that's kind of the whole story right now. And I am kind of positive on names like Lowe's. I mean, I would like also to see the home builders track a little bit higher. I mean, we have a big supply shortage. They're the ones that are going to solve it. So I think that's a trade that could continue to work, although they obviously have had quite a run so far.

9:04Karen, it's funny. We had the best week of the year this week, and yet we came off of whatever that was last week, the yen carry trade unwind. Apparently, the yen carry trade unwind was rewound? Unwound of the unwinding? We're not talking about that at all. So I don't know the magnitude of the rewind, but I think part of the reason we had the best week was still residual leftover something or other from the pressure that was on the market last week from the unwind. Yeah, I think. I think. And I'm not even sure what we're saying. Tim Seymour, help us out here, brother. It's the rewind or the unwound or the rewound.

9:44But there was a big story I read earlier this week, which is there's a little firm called Goldman Sachs, which reported that corporate buybacks were off the charts this week. In other words, a large part of this rally that we saw this week may not have had anything to do with hedge funds. Even it could have literally been companies coming in and buying up their own stock. Well, it's fascinating to think also that the companies might be better traders than the traders. There's no question this is one of those spikes in the market over the last couple of years that, look, it's left a lot of investors with the sense that they want to buy the next dip.

10:24And that's not where people were on Monday the 5th, at least on an intraday. The dynamics around that day and the dynamics around the Japan carry trade are that there is significant deleveraging that I think is still out there and that will happen. I do think that it was a low volume day and blah, blah, blah, highly technical. But the reality is the yen at one point during the week was creeping back over 150. It closed down. I think dollar weakness will be something that will probably have a backdrop to it with the Fed doing what they're doing finally, but also the fact that the yen does need to be strengthening.

10:58I think there are volatility, call them potholes out there, that I think a lot of investors are looking to play for. And I think that's also part of the setup going into the fall. I think there's some sense that there are a handful of, call them, you know, black swan events that are out there, but that the most important thing right now really has proven to be the job market and where the Fed will come in line. So it's an important week. We'll get a lot of flavor on that. I would just point out, though, as we get into those retail numbers next week, and part of what we heard out of Walmart that made it such a great number, and it gets back to the overall earnings season, is where are margins going to be?

11:35Because I think the dynamic for the equity market is for a lot of companies and for a handful of sectors and certainly some subsectors, we've been at peak margin. In Walmart's case, they're the biggest retailer in the world. They can push on price. They can push on a lot of things. They have economies of scale. And their gross margin got better. In the case of Lowe's and in TJX, are we going to see that? They certainly have the valuation that gives you a lot of support in the event that they, you know, I think this could be a clear out moment for Lowe's. I think they're expecting a minus 5 percent comp.

12:02And I think if the margins are OK, it may be all right. The market needs to worry about how profitable companies are in addition to everything else. And I think that's part of where the fear is. I think so. And it's amazing, guys. We'll go to our guests. If you bring up the VIX chart back up, I mean, the VIX hit 80. It's back under 20. It looks like the skyline of Dubai with the Burj Khalifa, this huge spike, and then it comes back down. What a week it was. All right. Look at that. Am I wrong? All right. If you're on the radio, too bad. All right. Your first guest sees a shift in the market as mega cap growth starts to slow a little bit.

12:35So let's bring a new voice into this conversation. That is Sound Income Strategies co-CIO Eric Bayrich, who joins us now. Eric, you heard a lot. You've been patiently listening and waiting. Want to comment on anything you heard? What's on top of your radar? What's the most important thing for you right now? Well, I certainly don't speak as quickly as you all do, but I'll try to cover some of the highlights. I do think your focus on interest rates is everything for the markets now. When it looked like there was enough data to suggest the Fed was going to pause yet again and we weren't going to get three cuts this year, that's helped unravel the markets as well as the rate hike in Japan that undid the carry trade to some degree.

13:16But there's been a shift in leadership. You can see it not only in some of the stock behavior, but also in the earnings revisions and in the movement. The big challenge with the AI stocks is that they're so damn expensive, even though they're great companies and they have great margins and great earnings growth, they don't have enough earnings growth to sustain those multiples. So as you have interest rates fall and the rally theoretically broadens out, and we've seen it not just in the stock movement, like I said, but in earnings revisions broadening, then I expect to see more of that, you know, small cap stocks rally, more value stocks and the dividend stocks, which is what we tend to focus on coming back.

13:54So sort of echoing, Eric, a note from Citigroup out today. And I don't have it in front of me, so I'm just going to kind of go off memory on it. But the summary of it was basically that, yeah, most of the earnings growth so far had been the MAG-7. But the lag or whatever, 493, are starting to see their earnings growth grow again. And that Citigroup seemed to be, I use the term happy, I guess, that there was some broadening out of corporate earnings inside the S &P 500 that had nothing to do with the seven stocks we talk about every day. Well, I didn't see the Citigroup note, so I'm glad that at least somebody else agrees with me.

14:34But I'm actually looking at the data, which is just the aggregate data coming up from Bloomberg on revisions. And, you know, it's sort of funny. Communications has had a negative revision. It's the second best performing sector. It's up over 23%. And you've seen IT revisions slow down dramatically. And that's the best performing sector. And this is within the S &P. So I just, you know, it's just normal sentiment, if you will, when there's a lot of momentum and enthusiasm. You have all the programs talking up the big names that are working and riding the momentum. And then when they look at it and they say, oh, my God, I'm paying 60 times earnings for 20 percent growth.

15:10It's not worth it. Then they start looking for something else to do. And you can get some of the value names or not necessarily retail, but in general for literally half the multiple of the market. And they have better earnings growth than the market averages. I think people are going to be more amenable to that than they have been riding the momentum. So that's what I think. Let me just ask you a question. First of all, thanks for being on. I know you've looked at some retail and you're talking about things that are really expensive. And obviously the other side of that spectrum is things that are really, really cheap, which is retail, which happens on occasion.

15:48Is this one of those occasions, do you think, where even though you can paint a not so rosy picture, that valuations already price in that not so rosy picture? I think valuations are like a pendulum. They swing too far in both directions. So, you know, you talked about TJ Maxx, which is like the done everything right company. They're just a fantastic company. But it's trading at 27 times earnings, and it's only supposed to grow its earnings in single digits this year. So if you shift to a lower quality, more, how shall we say, tormented story in Macy's, which is going to report, it's trading at six times earnings.

16:28It's got a 4 % dividend, and it's got really easy comparisons, even though it's a mess, right? They're cutting stores. They're trying to refocus brands. So I think more people in a lower-rate environment will say, you know, maybe I'll pay six times earnings for a Macy's and sell, even though TJ is a much better quality company with a much better business model for this environment, I'll sell that great company and buy something that has more upside. So I think there's the consumer is economizing. We haven't seen that on the part of portfolio managers yet. They still want the houses in Greenwich and the beach house at the Hamptons.

17:07They're not ready to go, you know, picking through the value neighborhoods yet. But very quickly, Eric, Macy's has actually is up 50 percent off its lows of last fall. I mean, so a shell of its former self, I get it. But it was an eleven dollar stock in October. It's now 17. It's got a four point eight billion dollar market cap. Eric, there's a building about nine blocks south of where we're sitting here, which some people say is worth. That's the flagship. It's an entire block. It's probably worth a couple of billion. Is there anything to that concept that effectively Macy's is trading at the value of its one Herald Square building and the underlying business has no value?

17:44Yeah, there was a guy who did a lot of work on Sears a few years ago on that exact concept. Yeah, that worked out. Yeah, maybe not as well. But I think you're absolutely right. I mean, they got a bid at Macy's for, what was it,$27, something like that? $24.50, I think. Yeah. And they turned it down. And they're a$17 stock as a shareholder. I'm scratching my head saying, hey, that was easy money. But they think, and they have a good CEO, and they're doing a lot of the right things. They think they can manifest that value otherwise. I don't own the stock. I'm just saying, looking at it, it's the kind of thing where you get people like me who say, you know, I have a hard time since I'm supposed to be buying high yielding dividend paying stocks that have catalysts for improvement.

18:30I have a hard time buying even some of my favorite companies like TJ Maxx, because they're just too darn expensive. But I can start digging into the well for things like Macy's. I don't care how much it's up. I care what I think it's worth versus where it's priced. And if it's worth$30 a share, as some of the parts say, and it's trading at$17, that's not a bad payday if I get a 4 % yield along the way. Just a thought. Like I said, I don't own it, but it definitely screens out well. Well said, Eric Bayrich. We appreciate it. Sound income strategies. Eric, have a great weekend. Thank you very much.

19:04Juliet, listen, I know you're out there in L.A., OK? But there's Macy's out there. You get sort of my point. I don't know why we're talking about Macy's, except that Google paid$2 billion for a block-long building, what, like a decade ago? That's basically the same size or smaller than Macy's store nine blocks south of here. Or is that whole real estate thesis just bunk? No, I think there's a lot of value to thinking about the underlying assets. You know, even on our short book, we have to think a lot about what tangible assets companies have that can give you some comfort. For quality investors, it's hard to really get confident about something like a Macy's.

19:39But at the end of the day, Howard Marks says this, there's no asset that's so awful, it's worth nothing. And there's no asset that's so great that valuation doesn't matter. Valuations really do matter, and they have to be relevant. I think for long-term investors who are a little bit more risk-averse like myself, Macy's isn't a really comfortable bet. I'm more comfortable in something like a TJX. But I recognize that there is underlying value to this business. They do have, you know, a customer base that, you know, cares about them and wants the products. Well said. We shall see. By the way, fun fact, Macy's first day sales in 1858,$11.06.

20:17For the whole day. Well, back then, I was like 200 bucks, maybe. I don't know. It's not bad. All right. We got a long way to go. On deck. The semi surge, the full check on chips. And let's have even more fun after that and talk cars and buckle up because the gears are shifting on the classic car trade. Robert Frank is going to show you some gorgeous hardware and more from Monterey when Fast Money returns. You're watching Fast Money here on CNBC. We'll be right back.

20:56All right, welcome back to Fast Money. Semiconductors surging. They had their best week since March of 2023. Random stats for 400, Alex. The SMH ETF gaining almost 10 % since Monday. Well, every member of the fund was up. NVIDIA, who else, led the gains, rising nearly 19%. Intel actually managed a gain, but only about 5%. Although if you're an Intel shareholder, Tim, you're probably happy that Intel went up at all at this point. Your take on this massive snapback, an 18 % jump for NVIDIA? Yeah, and no comment on the Intel shareholder front, by the way, Brian. When I look at the moving semis again, if you take that intraday low on Black Monday in Japan, October, excuse me, on August 5, they're up about 23%.

21:47I would, again, go back to when they peaked, which was July 11th, right before that CPI number. And that was a wake-up call for the broadening of the market. It was a wake-up call for rotation. It was a wake-up call for, hey, do these valuations really make sense? And NVIDIA certainly has performed fine in line. But I think that's really part of the backdrop here. Are they going to continue to provide that leadership? Remember, as long as semis were outperforming Qs, which were outperforming spies, that was a formula for a year and a half that told you markets were going higher. Right now, that jury is still out.

22:20AMD, as I tried to point out a couple of times, because I just think that the relative underperformance there has been notable, if nothing else, a case where I think investors have been at least questioning whether the product line is ready for prime time and the dynamic that over six months, it's underperformed the SMH by 35%, even though the snapback trade, it's actually, it's held serve against the entire sector. Well, Tim, what do you think is wrong with AMD? I just think it's a dynamic where people question whether they really have the growth in the product line that can begin to encroach upon the moat that NVIDIA has.

22:55And again, evaluation that, at least on a trailing basis, is 177 times. We don't really know where the multiple is going forward. We do know that the earnings, as I think Eric even pointed this out, the jury is still really out whether these companies can live up to those multiples here. Mike Coe, your take on semiconductors? I mean, just an incredible snapback today. You know, I'm reminded a little bit of what happened in the outset, essentially, of the tech wreck. I'm not going to compare what's going on right now to then. You know, we have companies that are actually really growing and are making real money.

23:31But I think it's important to remember that as the crack started to emerge that time, one of the things we started to see was this kind of increase in volatility, both downside and upside. Right now, the SMH is, what,$246-ish. That's, you know, give or take off about$30 off of the all-time highs that we saw earlier this year. It's cheaper, but it certainly isn't cheap. And I don't think we're completely out of the woods, as Tim was suggesting here. I think we have some more volatility ahead. And I don't think this is a rally that you want to chase, actually. Not a rally you want to chase. You heard it there, folks.

24:04All right. We've got a lot more fast to come. Here's what's coming up next. The Olympics are in the books, but the Fast Money traders are going for gold as the yellow metals rally shines on. The seemingly unstoppable climb it's seen this year. Next. Plus, a housing sector shakeup as a big change in realtor commissions is about to hit the market. What it could mean for housing and buyers waiting in the wings. You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.