The Great Rotation Underway… And A Technician Twofer For Apple 7/1/25

0:02Live from the NASDAQ market site in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. The great rotation this year's outperformers pulling back on the first day of July while recent laggards catch bid. What tone will this set to the market in the second half? We'll debate that. In time to buy Apple, the chartmaster has been bearish on the underperforming tech stock for three years. Is he starting now to change his tune? We'll find out what the charts say. Plus, bank stocks on the move as they lay out their capital plans. Casino stocks cashing on some positive data out of Macau in a builder breakout.

0:34out why one trader sees strength coming for the beaten down bunch. I'm Melissa Lee coming to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Katie Stockton, founder and managing partner of Fairlead Strategies. Welcome, Katie. Thank you. And we start off with the seeming shift out of this year's best performing stocks and sectors to some of the biggest laggards. The Nasdaq climbing to new records to close out the first half. Semis far outperforming the broader market. And names like Netflix, Palantir, Coinbase all soared. But today, all those trades were losing steam.

1:05Meantime, the long underperforming small caps, they jumped today. So the defensive health care names, retailers like Target, Insurers and Staples. So what do you make of this broad rotation? What does it say about where to go in the second half of the year? Tim, you said earlier on our call, it was like a switch flipped. It felt like it. And I don't know who flipped the switch. And I don't think there was any major strategy report out there. But it's very clear. We've watched interest rates kind of trickle lower since the third week in May. And yet homebuilders are up four percent today as a group, which are highly sensitive to interest rates, even on a day when rates trickled up a little bit higher.

1:39In other words, this wasn't a big interest rate day. It was a day when I think you saw lagging sectors and sectors that I've really wanted to see follow through and sectors that could conceivably have been rallying with banks and some of the broader stuff outside of technology were not. But health care had a really nice day. Oil services had a really nice day. And that's kind of hard to figure, too. given the fact that now we're in this place with oil where we really don't know where we are. But I think it's a reassessment of where some of those growth trades that were destroyed and just destroyed going into Liberation Day and haven't really come out.

2:12And some of that is very clear. The other thing is, you know, whether we talked about it with Lori yesterday or whether you're listening to any strategists on the street talk about their forward, you know, their forward P.E. on the S &P right now is, you know, 258. I think she said yesterday we're talking about 20, almost 24 times forward. So I think this is a place where people are looking at. I don't think you get too far away from the trades that have worked here to date. But I think some of these trades, yes, it's game on. So we all thought the same thing on the call today was really so notable.

2:42So many industries, you know, so I looked at retail also out of nowhere. Right. So we saw Target up huge, Abercrombie up huge for no particular reason. Other than that, to me, they seem to be attractive because they're very cheap relative to what has been working. doesn't make me want to abandon my MAG7 exposure, but it is notable. How long it lasts, I don't know. I thought the health care thing was interesting. Something like banks did nicely, but I think still staying with that for sure, and we'll get to that later. It was very interesting, though, that just why all of a sudden did that just giant portfolio reallocation.

3:21It was like, I mean, S &P 500 P is 27 or so, right? The XRT, for instance, it's sub 20. I mean, it's sort of like people looked at the evaluation and thought it's time to go elsewhere or at least diversified beyond MAG7. Katie, what do you think? I actually think it's highly related to the fact that we just saw the second half begin, right? So it's the timing of it that I think is reflective of what's happening. I think in the last week or so, we saw this big run up in the S &P 500. Probably part of that was window dressing on behalf of fund managers trying to make their portfolios look better at quarter end.

3:57And then when you remove that phenomenon, perhaps there's still bullishness out there. Obviously, there's risk on positioning, but they might be then saying, OK, you know, I got what I'm going to get out of NVIDIA, perhaps. Now I'm going to source oversold sectors, oversold groups relative to the broader market for opportunities. Yeah, I don't think it's particularly bullish, though, what we saw today. And again, I think to your point, you probably saw a little bit of a markup in the quarter end. The S &P was really not able to make a meaningful new high, closed unchanged on the day. You saw the NASDAQ closed down nearly 1%.

4:27Obviously, that's the heavy lifting of the MAG-7 or Faithful 8 or whatever the heck you want to call them. But then when you look at the regional banks, you know, the relative outperformance to the major banks, which have been trading pretty well, and then the Russell 2000 up a percent. So I look at that and I just say the money's got to go somewhere, you know. But I just think that the S &P here is getting really overbought. If you look at it in one of Tim's RSIs, right, what do you do, a 14-day RSIs? I'm a non-day guy, actually. Yeah. I'd ask Katie. I mean, there's no one I'm going to listen to.

4:56Don't listen to me. You're like the RSA guy. Well, there's a time and a place. So it's looking a little. Thank you. By the way, thank you. It's looking a little overbought to me. I just want to add one thing that maybe helped this rotation somewhat more is in the big, beautiful bill, there was that AI that states would have the opportunity to have some control over AI, which hadn't been there. That was something new. And I think that sort of added fuel to the fire to the. All right. Let's let's get out of that sector. It's a little too hot right now, especially with this new bill. You could also make the case.

5:28I mean, like, you know, the cryptos are the AI's are. That's like what's his name's butt buddy. That's Musk's. You know, you look at what like what just went on between those two guys. Again, the Trump and Musk. I mean, those guys are going to be out. A lot of those doge guys left. So these tech guys are going to be out. And that was the voice for these industries one way or another. So, again, I don't think that the deregulation that a lot of folks thought that they were going to get by all these CEOs, lining up behind Trump is going to really happen. If you look at just Apple we were talking about yesterday, that DOJ suit, that's not going away.

6:00You know, a lot of these other things. So Google is still in the hot seat here. So I don't think it's a smooth sailing for tech as it relates to, you know, M &A and the deregulation and the like. I have a question here. Yeah, hi. And that is, you know, MAG7 for a long time even critical that it's been a market that's been very narrow. And here we see some broadening out, and it's still not positive. Well, it doesn't matter because there's 30 percent of the S &P 500. You know, you're going to have to have so many things go in concert together, you know, to really make a meaningful new high and establish a new range above this like 6150 level.

6:32At least that's the way I see it. It was remarkable. We had breath at nearly two and a half to one positive today. And the S &P 500 was still down on the day. And that shows how key the mega caps are to the performance of the S &P, which is overbought by all metrics. But the overbought condition doesn't really matter until you see that loss of momentum. We had some sell signals right at the end of May that got blown out in the past two weeks. And so you want to respect that momentum. What we're seeing today are actually some short-term breakouts in those other segments of the market. So if they can hold on to those gains, really just for a few days because these are short-term levels that are in play, I think that would be really helpful for a market that needs that breadth, I think, in order to extend higher.

7:18Yeah, I like it. And I'm not I'm not here to talk about where I think the market's going to be in November or even October. I'm here to tell you where I think I think we're going in the next few weeks. And I think there were a couple of tactical calls. Goldman was out there with a two week call. I mean, this is the best month of the year for equities. Let's not forget that. And and while, you know, on July 9th, we may have some some some not great news out there. I think institutional positioning is still underway. I know sentiment has shifted a lot. I think retail has been very steady. I think CTAs, and this gets a little bit like inside baseball, but I think they are trend followers.

7:51And I think they are, you know, what I'm reading is they're going to put anywhere from$40 to$80 billion into the market. And some of this is into sectors that I think have underperformed. So I feel great about banks. I mean, I felt great about banks before this. I still think banks have a nice way to go. So I think the health care sector and we know that there are Washington headwinds. We know there are lots of exclusivity headwinds. We know there are dynamics that some of these companies aren't that cheap. But, boy, such a difficult sector to trade that I think still looks really interesting.

8:22Price action here gives me a lot of confidence there. Even within sectors, there were interesting rotations within the semiconductor sector. For instance, we saw that drawdown in NVIDIA and the AI-related chip software. Software, too. You saw bids for Texas Instruments and Intel and NXPI. I mean, what does that tell you about SMH? I do think it's the great rotation, right? So the rotation into the relatively oversold. In fact, some of the semis, not NVIDIA, not Broadcom, are oversold already on their monthly indicators. So these are long-term oversold conditions. And semis do tend to lead us out of more difficult tapes.

8:57So we often the catches that we see after that initial oversold, we see a retest oftentimes. So we have not seen that yet. So that gives me a little pause in chasing the short to intermediate term up moves. We do feel that we have enough evidence that a pullback will at least present a better buy-in opportunity for those that have broken out. All right. Meantime, President Trump's budget bill clearing a major hurdle in the Senate. Our Emily Wilkins is the very latest on next steps. Emily. Hey, Melissa. said, well, yeah, now it goes to the House where Speaker Mike Johnson, he's trying to tee up this mega bill for a vote as soon as tomorrow, but it's not clear that he has the support to actually pass it at this point.

9:38Remember, he could only lose three Republican votes if everyone's in attendance, and some members estimate that there are at least a dozen no's right now. And some of those, there are more centrist members who are worried they could lose their reelection over Medicaid and snap cuts. And then on the other side of the equation, you have your fiscal hawks who are upset that the Senate violated their agreement that would balance spending and cuts in the$3.3 trillion package. Congressman Ralph Norman told me that he is a no, and then he added that the spending provisions on this thing are massive and we will blow up the deficit.

10:13We can't keep mortgaging our future. Another congressman, Congressman Marlon Stutzman, tweeted saying that we cannot in good faith passable through our chamber that hinges on cut corners and earmarks. The American people won't stand for it. Now, the House does plan to start tomorrow morning with a procedural vote before getting to the bill. And really, the key here as you think about these negotiations is that no additional changes can be made to the bill at this point, unless it's going to have to go back to the Senate. Senate's going to have to vote on it, potentially have it ping pong back and forth.

10:48that will clearly miss that self-set July 4th deadline and push potential passage of this later into July. So lots of moving parts here, guys. Obviously a big win for Trump and for Republicans that this cleared the Senate today, but it's not to the finish line yet. Melissa? All right, Emily, thank you. Emily Wilkins in Washington. Our next guest says the budget bill could push the dollar even lower after its worst start to the year since 1973. Let's bring in former Bridgewater chief strategist Rebecca Patterson. Rebecca, great to see you. Great to have you on the show. In addition to the spending bill, there are other factors why you see a weaker dollar going forward.

11:24Yeah, well, let's start with the spending bill. We're not at the finish line, as we just heard. But if we get a bill something like what we're seeing today, we're looking at a debt GDP ratio in the U.S. that's going from a current 100 percent, which is already incredibly high, to something closer to 125 % of GDP or beyond that in the next decade. What that means is that we're going to have to issue more and more treasuries to cover these budget deficits along the way. And so if we have more bond supply without the same increase in demand, we're going to have higher borrowing costs and higher borrowing costs are going to slow the economy.

12:04A slower economy, all else equal, is not going to make the U.S. a very attractive place for capital. And that's going to mean less foreign money coming to the United States and less demand for dollars. So you can tie what's happening on the Hill right now in part to what could happen going forward with the dollar. As it relates to the markets, I guess there's a near-term way of looking at a weakened dollar, and that is good for multinationals, good for the stock market. But longer term, obviously, slower growth is negative. So how do you sort of parse this out in the context of we are at record highs in the S &P 500 and we are looking a little bit oversold at this point?

12:41Over, overbought, excuse me. That's OK. So, yeah, the dollar on a trade way basis. So it's against a basket of counterparts is down about 10, 11 percent year to date, more so against specific currencies. So it's it's weakened a lot already. I think it started from an overvalued place. So there's more it could fall before the dollar becomes absolutely cheap. You're right to say that historically a weaker dollar has been good for multinationals. I would caveat that a little bit, though, because the big companies have very sophisticated hedging programs. They try to remove as much as possible of currency swings so they don't affect their earnings one way or another.

13:20And there's also a causality issue. Historically, yes, earnings per share growth speeds up with a weaker dollar. However, you have to think about what's causing that. If the Fed is cutting interest rates and that weakens the dollar and lifts growth sentiment, that could also lift earnings per share growth sentiment. This time, that's not what's happening. The dollar is weakening a little bit on Fed expectations, but mainly because of a reallocation out of U.S. assets by investors. And we see that in the flow data that's getting reported for the last couple of quarters. So it's not the same cause of dollar weakness that historically has been good for growth sentiment and good for U.S.

14:02stocks. Rebecca, it's Tim. How much of this dollar weakness is also just concern about Fed independence and broader kind of systemic U.S. stuff? And I guess, you know, we've just kind of talked about this. So lead us, though, into who benefits? And you've been investing globally forever. I mean, is it game on for EM, which has underperformed for 15 years? You know, if we have a weaker dollar and we have worries, to your point, Tim, about putting as much capital as investors have for the last 15 years in the United States, you are seeing some green shoots in places like Germany and Europe more broadly.

14:37Not surprisingly, their stock markets are doing much better than the U.S. market year to date. And we did hear from the European Central Bank today that if the euro keeps strengthening to, say, 1.20, that would start to create some concern for them. So I think there are winners in this to a degree. Too much currency strength can be a bad thing. But right now for emerging markets, Tim, I think we have been in a pretty good place. There are some challenges, though, like countries like Taiwan. The Taiwan dollar strength has created headwinds for the country. They're intervening the other way to try to limit it.

15:12In Switzerland, Swiss franc strength has led the central bank there to cut interest rates to zero. Hong Kong is intervening to try to protect its currency peg with the dollar. So, yes, there are some winners, relatively speaking, but we have to be careful. If the dollar weakness continues, and especially if it's quick, you can lead to some stresses in currency markets that could spill over to other asset classes. I don't think we're looking at a currency crisis tomorrow, but I would keep it on your radar screen that these stresses could build and become less of a winning combination and more of a global instability situation.

15:49Hey, Rebecca, it's Karen. Thanks for being on. So what do you think with the whole picture, including the data we got today and we have the president telling Jerome Powell he's a moron or whatever it is, what do you think the Fed is going to do and how does that fit into your picture? Yeah, I think that Jerome Powell has done an excellent job of just sticking to his mandate and ignoring the noise around him. And I think that's what the Fed should be doing. And right now, you know, we have payroll data out this Thursday. The labor market is moderating, but we still have a relatively robust job picture with an unemployment rate around four point two percent.

16:25So from that standpoint, the Fed feels no urgency to cut rates and inflation, while it is moderating, is still quite a bit above the Fed's target. So I think they're right, personally, just to wait and see. And I think that's what's going to happen in July, unless suddenly the data picture changes markedly. Could we get a rate cut or two by year end, which is what's priced in the market, perhaps? But I do think, going to your point, Karen and Tim's earlier, that if we do get a quote-unquote nomination for the next Fed chair earlier than the normal process, so sometime early this fall, for example, or even late summer, It just it's another small nail in the coffin of perceived institutional strength in the U.S.

17:08I think that only adds to the risk that less capital comes to the U.S. And that adds to the probability that we have a continuation of this weaker dollar trend. Rebecca, great to see you. Hope to see you here at the Nasdaq soon. Absolutely. Y 'all take care. Rebecca Patterson. Katie Saxton, what do you see in the charts for the dollar? You know, it's actually very interesting. The dollar index. You can draw an uptrend channel all the way back to 2008, and it's being tested that lower boundary right now. We do have signs of short-term downside exhaustion to suggest that we'll see a bounce. But I wouldn't get excited about a bounce unless it takes the dollar index above the 50-day moving average, which has been in resistance for months now.

17:50So we're watching the support level very closely. The momentum's obviously to the downside longer term. So it does increase the likelihood of a breakdown, which would then put the next support around 95.2 for the dollar index. Wow. Yeah. I mean, this could also be much ado about nothing. If you go back and look at the last five, six years or so, we've had 15 percent drawdowns in the dollar. Go back to 2018, 17 into 18, 20, 20, you know, during COVID. And so here we are down about 15 percent over the last or a little less over the last few months or so. I mean, maybe there are some very technical sort of things.

18:24You saw that unwound. Look at where Japanese yields are. I mean, like that's not something we were able to say for a very long time. You're at three percent. And here we are with Fed funds at four and a half percent with the idea that they're going to go down to four percent by the end of the year. So, again, I think we spent a lot of time talking about the dollar. But, you know, during COVID, it's 89, the Dixie. You know, we're near those like pre-COVID levels. I'll just say this. I mean, Germany's debt to GDP ratio is half of the U.S.'s. They're the best. They're the largest creditor nation.

18:50They have the largest current account. and they've just done budget spending that actually is GDP positive. So I think that our performance is going to continue. All right. Coming up, bank stocks on the move, how the names are deploying capital after the recent stress test and what it means for investing in the space. That's next. Plus, a jackpot in the casino trade, the new data out of Macau, sending these stocks surging. Do not go anywhere. Fast Money is back in two. This is Fast Money with Melissa Lee right here on CNBC.

19:27Welcome back to Fast Money. Several big banks releasing their capital return plans in the last hour. Leslie Picker's got more. Hey, Les. AML, yeah, the five biggest banks we track increased their dividends by at least 7%. This is a pretty significant hike after last week's stress tests, which were perceived as being much easier than in recent memory for these tests. More recently, we got the news from Goldman Sachs about its dividend. That firm plans to increase its common stock dividend by 33 percent from$3 per share to$4 per share beginning July 1st. Wells Fargo is increasing its dividend by 12.5 percent to 45 cents per share.

20:10Morgan Stanley increasing its dividend by 8 percent and also reauthorizing a multi-year repurchase program of up to$20 billion. J.P. Morgan increasing its common stock dividend by 7 percent and also authorizing a new repurchase program of$50 billion. And Bank of America increasing its quarterly common stock dividend by 8 percent to 28 cents per share. We're still waiting on news from Citigroup, but those are at least five of the biggest U.S. banks on their capital return programs following those stress tests last week. Mel. All right. Leslie, thanks. Keep us posted on Citi. Leslie Picker. The stocks you saw there, really not much moving in the after recession.

20:51Maybe not entirely a surprise given where the banks have run, how they've run. I mean, J.P. Morgan. Right. This isn't a surprise that, you know, things have improved and they're going to have more capital. We all knew that. But I think, you know, the market's been good. So that's great for the asset management business. We're seeing some deals, you know, IPOs. We're also seeing a couple of little deals. So things seem pretty good for the banks in general. So this is nice, but it's not like a part of the thesis. I mean, Jeffrey's just last week when they reported, you know, they have that sort of off calendar year situation.

21:24So you get a read into and they're they're very bullish in terms of the second half of the year and the cadence of business coming in. Leaving, without drilling into the core areas of business, I'll just point to the fact that I thought banks, when we go back to where we were kind of in May of 23 when we had the blowups and Silicon Valley Bank, et cetera, banks were well on their way to re-rating. They were well on their way to starting to pay more back. The fact that the Supplemental Leverage Ratio, or SLR, is allowing a lot more perspective on how much more they can give. And I'll say again, I think European banks have an even better regulatory tailwind, and they pay significantly higher dividends.

22:08I think their balance sheets are better. Yeah, it's interesting, though. The S &P is up, what, 27 % off the April lows. And you see some of these Morgan Stanley's doubled that performance off the lows, up 60%. You had Goldman up 50%. You had J.P. Morgan up 43%. I mean, it seems a little, you know, like a lot. I mean, a little too much. You know, I don't know. I mean, that sort of outperformance, if you believe those moves are commensurate with what's going on in the economy, then great. But I just can't imagine that they're off to the races from these levels. I think the valuations, aren't they getting a little hefty on some of these?

22:39Well, I mean, some of the promise here has been deregulation. So we're starting to see that a little bit. But I still think there's more to go on that. And the overall market's higher. So they have a much lower PE, higher than they used to have. Steeper yield curve. I mean, look, the interest margins, I mean, where do banks really make money? It's blocking and tackling. I mean, the yield curve steepened, and I think it probably steepens more. Yeah. Katie, what do you see with the banks? You know, the big ones that you mentioned do look a little overstretched short term, but they're like new all-time highs, and there's nothing wrong with that.

23:08So I think those are good holds in any portfolio if you can live through a pullback. What's interesting to me is as part of today's rotation, we did see KBE, the ETF, representing the bank sector, and KRE for regional banks, both up nearly at the highest of the day among the groups. So with that, we have short-term breakouts in sort of the broader sector that might be worth a look. So if you look down into these ETFs, they're more of like an equal weight type of position that they're taking in these banks. So it might be worth looking under the surface for opportunities. There's a lot more Fast Money to come.