The Most Important Stock In The Market … And A ‘Would You Rather?’ For 2024’s Winner & Losers 2/23/24

0:01Live 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. Another set of records on Wall Street. The S &P rising above the 100 market, 150-100 market there for the first time ever, while the Dow added another 60-plus points. The Nasdaq hit the highest level since November of 2021 before the day ends in the red. But will the winners that propelled the week's gains keep the rally running into the new week? We'll debate that coming up. Plus, stealthy staples, the group quietly posting economy-sized gains, and the leading, leading to major S &P sectors this week, even beating out big technology by the time things were done, are these stocks you should, well, you know, stock up on.

0:48And then later on, another Friday night edition of Would You Rather. This time we're pitting this year's big market winners against their underperforming rivals. If you had to pick just one, which would it be? The traders lay out their choices. I'm Dominic Chewin from Melissa Lee tonight, coming to you live from Studio B at the Nasdaq Market site. On the desk tonight, Tim Seymour, Carter Braxtonworth, Bono and Eisen, and Mike Coe, you can see there. But first, we're going to start with what might be the most important stock in the market. And no, it's not NVIDIA. Sure, NVIDIA's had a big week.

1:22The stock touched a$2 trillion market cap level for the first time today on continued follow-through from its blowout earnings. The company's seeing data center revenues more than quintuple in the latest quarter and gave such strong guidance that one analyst raised his target price to$1 ,400 a share. That's over 75 % more upside from here. But a smaller semiconductor stock might be even more consequential, at least according to one of our traders. It produces most of the world's most advanced chips and is opening its first plant in Japan this weekend. Its products are being used in everything from autonomous driving to artificial intelligence.

2:03So what is it? Tim, why don't you tell us? Well, NVIDIA is the most important company in the world right now. But Taiwan Semi, at least for the market, NVIDIA is. But for strategically and almost geopolitically, Taiwan Semi, to me, is one of the companies that I think many folks around the world, especially focus on Japan, where they're going to open their first plant. They're making investment in their second plant. So fabrication. And this is really important for Japan to get kind of back into the semi game where they once were probably a dominant player in the 80s, 90s. But again, as those stats showed, Taiwan Semi is making 60 percent of the global semiconductors, 90 percent of the most advanced ones.

2:40At a time when the U.S. is luring Taiwan Semi to Arizona to help Intel to build plants, fabrication, foundry, that's that's the story. At a time when people are very concerned about U.S.-China geopolitics, people are worried about concentrations. And semiconductors are a strategic kind of asset, a strategic dynamic, certainly around economies. Japan has recognized that. Taiwan Semi has said, by the way, while Arizona buildout in the U.S. is slowing down, what's going on in Japan was record time. It was a very efficient buildout. Both the Japanese and Taiwan Semi are saying, hey, this is a great story for us, too.

3:17And I think there's a lot of competition to lure Taiwan Semi, who, again, is essentially a contract producer for a number of players around the world. I would just make an argument that it's one of the most important companies in the world that obviously people know about. But you have to understand what's going on right now. It's a mad scramble globally for semiconductors. Obviously, NVIDIA was the story of the week, and it should be. You know, if there's anything that we learned during the supply chain crisis, it's that supply chains matter, right? And so Bonowitz, Taiwan Semi, strategically has to be one of those companies.

3:50That's just huge. Absolutely. I mean, I think the overhang on the stock really has been essentially that geopolitical risk with China. I mean, that's really probably weighed the stock. I really wonder where it would be if that weren't there. Up 50 percent, at least, I would probably argue. So, listen, I do think strategically it is like one of those assets. I will say that with the whole geopolitical overhang and the move towards onshoring domestically, I do think that there might be some market share taken. Now, I do think that several years out, the CapEx and development that are going to be needed to build those foundries out for Intel, for example, are going to take some time.

4:26But I do think that people do have their eye on this ball in particular. With that said, up until that time and with data centers and now inference type of computing driving up demand for these chips. I do think Taiwan is in a good strategic place and will be in a better strategic place once they're able to diversify themselves away from Taiwan. So, Mike Ko, can we go to you now? I want to talk a little bit about where you're seeing some of the action. Do you see traders kind of sizzling around some of these technology names specifically within chips? Is this the one? Is NVIDIA? Is Taiwan Semi?

5:00Which ones are the ones seeing the most action? Well, NVIDIA is definitely seeing the most action. There's no doubt about that. And in fact, you know, we use that as an input as a part along with some of our fundamental analysis when we're trying to pick what stocks to be in. And we're actually in NVIDIA. So, you know, I'd obviously have to say, although I have to admit, I'm also getting a little bit antsy here. We've obviously had quite a run. It's feeling a little bit parabolic to me. And so it's easy to be kind of like a long-tailed cat in a room full of rocking chairs when you get this kind of action.

5:31Taiwan Semi, to Tim's point, I mean, this is also kind of, I think it hasn't really got much play, is a remarkable growth story. I mean, we are talking about 20 % annualized EPS growth. And this is another one that trades probably 100 ,000 contracts a day. That's the equivalent of 10 million shares. So you're definitely getting some bullish flow in there. And it's seeing about double the call volume over put. So there's bullish sentiment, for sure. All right, let's talk Carter momentum. Long-tailed cat, though. So I want to do this. I was picturing that. Well, you've got a long bill. I think he got a vision on that one.

6:00And there are rocking chairs everywhere. It could go badly for you. Should they worry, though? Do people feel like they're long-tailed cats with this tech trade and chip stocks in general? Hard to know. But I think one thing that's important, that Taiwan Semi and ASML are the two sort of big non-U.S. names that are very, very important to the whole space. Not to say there aren't others, but these are the two. And Taiwan Semi just this week was able to eke out all-time highs, the actual Taiwan Semi in Taiwan, versus TSM, of course, which is the ADR denominated in dollars, it's still some 10 % below its all-time high.

6:33And the presumption is it plays catch-up. So let's talk a little bit more about why it's so important for this trade and everything else. Tim, is there something to be said for whether or not this thing is overdone at this point? Well, you know what? I'm not going to get in there and say overdone. I mean, the numbers speak for themselves. The valuation, if you're doing it on a revenue basis, but based upon the growth, they've said. You guys have been doing this all week. I'll just point out that I think there are other parts of the market right now that are saying it's not all about NVIDIA. And if you look at where we are, in fact, I would make an argument as the Dow hit all time highs.

7:07Dow has certainly held serve against the S &P over the last six months. And we always want to talk about this broadening. At least we want to see broadening of the market. And the dynamic, what you've seen, is we know about Disney's numbers. We know about GM's numbers. Walmart had great numbers this week. They talked a lot about the dynamics around higher ticket charges where they have inventory back. So, you know, to me, I look at other parts of the market, industrials, financials have outperformed the S &P. So if you took away NVIDIA, and that's a big takeaway, and this was their week, it's a very interesting market here because I would make an argument that we have gotten some of that broadening.

7:44And also it's important to say this, the semis, despite their fantastic performance, remember, they still have not recouped their relative losses from the dot-com peak to the tech sector. So it's been great, but you still are not able to overcome the losses associated with the dot-com peak to present versus the entire tech sector. It's interesting, Mike. The other point here as well is a lot of traders look at semiconductor stocks as a leading indicator for tech and by proxy the entire market. Just how important will this tech trade be specifically with chip stocks to this narrative if there is a bull one going forward?

8:21So I think actually the point that Tim was making is a really important one. You know, people complain that the market has been led by a relative handful of stocks. And that's largely been true. And then, of course, he pointed out that, you know, I mean, Walmart obviously has been a well-performing stock and they have good results. You know, we saw 8 percent, 12 percent better numbers on revenues and EPS there. But the interesting thing, of course, to me was actually Home Depot, which also reported on Tuesday morning before the open. And this is a name where we've seen four sequential quarters of declining revenues.

8:54But what's interesting here is that despite that, the stock actually caught a bid. That's a name that we also own. And I think what that indicates to me, when you start seeing people buy news that isn't really all that great, thinking maybe the worst is behind them, I think that's kind of a positive sign. OK, Bono, one other place in the market that has seen some of this outperformance over the past week. is materials, while energy itself has been a huge underperformer. Do we like the fact that materials are part of that broadening out story that we're seeing? I think thematically we do. When you see, you know, inflows into materials, you're essentially saying this is like a bullish bet on the economy.

9:37So clearly, I think all sectors want us to have an economic robust type of forward looking thesis. With that said, there are still other parts of the market that do give me pause. small caps, for example, if we are going to see this real economic follow through, you would expect to see a lot more flow in there. And I do understand that they have a certain amount of exposure to the banking system. And I understand that they have their own credit challenges and access to capital challenges. But to me, that will be the real telltale sign that people have bought in fully into the economic narrative.

10:09All right. So one top money manager suggests it's hard to fight NVIDIA's bullish force in the market. Ben Emmons is the senior portfolio manager and head of fixed income at New Edge Wealth. Ben, you've heard the conversation so far. Is NVIDIA the most important stock on planet Earth? I think that's what Goldman's trading desk called it earlier this week. Yeah, it is a really good acronym. I think, you know, if you think, step back from a macro perspective, you take NVIDIA as its impact on the broader market. You know, it's beta to the markets like over two to one, right? So it has a real impact, as we saw.

10:42And as that's happening, the financial conditions are starting to loosen now quite a bit. I mean, in fact, that financial conditions index is at the 2021 high when we had apparently a bubble in the market. So that financial conditions is going to affect the economy. And I think happening and maybe to Bonham's point and to Carter's point, like you're seeing other stocks reacting now that are the real economy. So I think there's something going on from NVIDIA spilling over to the broader market and then to the economy. But there's a balancing point, right? You have NVIDIA stock doing what it's doing, but you've also got interest rates, both medium and longer term, continuing to go higher.

11:22That's tightening, right? So in your fixed income and equity hat, how does it all play out from a balanced perspective? So this is really interesting that one stock can actually affect interest rate expectations. Because I was looking at that, like how NVIDIA changed the stock, what's happening with the rate cuts being priced in. So over the last sort of, say, two weeks that NVIDIA has really exploded, we've had taken out roughly about one rate cut out of yields. So now that's not all NVIDIA, obviously, but it's the idea of that NVIDIA as being the important stock to the economy currently, affecting the economy, I guess, through financial conditions, that therefore yields are starting to rise.

12:00And look, we've broken out of the 100-day moving average on the 10-year, 435 today. That does open to, I think, a next move higher if the next rate cuts can be priced out. So I think eyes are on the video and the effect on the economy, and rates are paying attention. Yeah, we're doing nothing on interest rates in terms of expectations, really, out now through almost July. And I guess, Ben, good news for stocks has been good news, and that's great to see. One of the news stories that caught my eye today is that the Dutch central bank had a minus 660 percent year over year loss. And whatever that really means, the point is that central banks are issuing at much higher rates and have an interest expense that is far exceeding where they are in terms of interest income.

12:45The dynamics here to me are that the rest of the world is going to continue to see higher interest rates. And that's going to pull up rates here in the U.S. Japan is rumored to be going in the March meeting to probably really officially moving away from interest rate and yield curve targeting. Just thoughts on because I agree with you. I think yields are going higher. And at some point, I think equities are going to pay for it. But right now, it feels very orderly and it feels interesting. Indeed, it's like an orderly move. And the position in interest rates is not so stretched currently. But I think to your point that it's happening globally.

13:17Let's pay attention a little bit to China. right? They finally started to rally. There's up, I think, about 10 % at the start of the month. Does that stimulus start to maybe affect their economy for real? And so you're getting this bit of emerging market dynamic here, too, of economies starting to come alive, PMI data getting better. So global rates are starting to move up. And I think what we're dealing with is a situation where these rate cuts being priced in were clearly overextended when we started the year. They've been taken back. Now the scenario is on the table that we may not have any rate cuts at all this year.

13:47And if I listen to the Fed over the last 24 hours, they're getting quite doubtful about that they can actually cut rates this year, right? So that's not only... It should be. Right. And it's not only here, but it's in Europe, too. So yes, I agree with you. We're probably in a phase here. There's good news driving up yields. Obviously, at some point, you get to tightening, and that's not yet happening. What is driving? I mean, at the end of the day, I mean, look, it's always this way where people are expecting something. It's not what happens. We've heard 5%, what happened? It drops to 3.8 on the 10-year.

14:18Basically, isn't this the sweet spot for rates? Who cares if it's 5 or 4? You drop to 2, something's wrong on Main Street. You rally to 7 % yields, you've got to change your DCF model and your assumptions for price targets. But sitting here at 4%, 4%, 4.25, it shouldn't matter. Yeah, I guess you're right, Carter, that you have, like, say, rates are at neutral, quote, unquote. Yes. Meaning, right, you know, the economy is growing above potential. Inflation is trending slowly down. So rates are kind of reflecting that sort of neutral level. And the Fed is at five and a half. So, you know, some people say you're probably a little tight with the Fed here.

14:52But, you know, I think that long term, if you're going to go back to the Fed's neutral rate of the two and a half percent that they still have in that dot plot, then we're in an economy that's far weaker. So I guess we're sizzling nicely here with rates. You could probably go back to five percent just for the technicals that we're highlighting, but we're not really, let's say, overstretched. So the 7 % scenario seems to be unlikely. It seems to be more like ranging here in this four, four and a half, up to five. So the focus here seems to be squarely on rates, and one could argue rightfully so.

15:24But what about the dynamics in the credit market? We're speaking about that a little bit in the green room, and we haven't seen that credit blow out. And to me, I would argue that's at least, if not as important secondarily, too, in terms of how the market's going to react and what sectors are going to be in or out of vogue. So can you speak a little bit in terms of what you're seeing in the credit space, both public and private, and what those implications are for the market and perhaps even the MAG-7? Yeah, so in credit itself, high yield spreads and investment grade spreads are really tight.

15:54And I think that's really a function of equity. If equity continues to appreciate value, high yield spreads get tighter and tighter. But what you're mentioning in the private credit market, as we had a big move of money going into that, as companies cannot access anymore the syndicated bank loan market, those rates are really high still. I mean, you talk about private credit, roughly about 10 % to 15%. High yield yields are roughly around 7.5%. So I do think there's a stress point there, that eventually if those companies cannot refinance or having trouble, that you're getting an issue there in that segment.

16:29But the public credit markets seem to be signaling more about if this equity market has this type of momentum, spreads are not going to really correct to the upside. it's actually going to likely get tighter. All right. Ben Emmons, New Wedge, thank you very much. Thanks for taking time on this Friday. You're welcome. Thank you. All right, guys. Meanwhile, it's not just the S &P and Dow at record highs. The MSCI All Country World Index is now higher than the all-time highs. It set back in January of 2022. The chart master, Carter Braxton Worth, what are the technical saying for the international emerging markets and major indices here?

17:03Well, in the sense that obviously there's a milestone. Milestones are important. The MSCI All-Country World Index is some$70 trillion versus the S &P, which is almost half that. This week was able to get back to its former high of January of 2022, which is to say global equities as of now have finally recouped all of their losses associated with the 2022 bear market. And so the question is, obviously, we saw that the Nasdaq deposit, you mentioned that, Don, is also just now back to its forces, the S &P, which is 5 percent higher. From here, is it right to double back and find small cap and look for value or cyclicality?

17:44Or is it right to stick with growth? Because that index, the MSA All-Country World Index, while it's dominated by U.S. stocks, still is not the same growth aspect that the S &P. Let's look at a chart or two and maybe discern it together. And so what you'll see here is the index, which, again, is from 24 developed and 24 emerging, comes about 3 ,000 stocks, and again, 70 trillion versus the S &P at 37, 40 trillion, right back to a former high. Let's put some lines on there. Let's annotate it. And what we know is it drops substantially, 29%. It's up 40%, but that's how the math works. that simply gets you back to the former high.

18:26And so in principle, I would expect a lot of backing and filling here. Before exceeding a former high, typically you contend with it. But as a milestone, and this is the point, it's not been as good as the picture of the S &P, as the picture of MAG-7. All equities, as measured by this index, as by its market cap, have only just this week recouped their losses of two and a half years ago. What do you feel like, Tim? I feel like the international is going to continue to run. I've loved Japan and Japan. Also, this was the week of Japan also set new records. And I think it's also the Idevo is the international ETF I work on.

19:03And as someone's been investing internationally, the dynamics here with a Fed that's peaked, with a dollar that's peaked, with inflation that, at least for the near term, has peaked international growth. You had a decent week for EU PMIs. You had decent numbers out of Japan exports. You've had China picking it up. I think it's a great time to be investing. Mike Coe, what do you think? Yeah, I like emerging markets in particular. EU is in my acronym, BRAVE, at the beginning of the year. And in the emerging market space, I like India best of all. That hit a 52-week high today. I think that's probably going to benefit from some shifts that we're seeing in where globalization benefits flow.

19:36All right. Here we go for the international trade. Coming up on the show, thanks, guys. Sturdy staples, the sector riding high since its October lows. Is there more room to run for that sector? We'll debate that coming up next. Plus, Carvana shares putting the pedal to the metal in a big way today, soaring more than 30 percent. We'll look under the hood at this name right after this. You're watching Fast Money here on CNBC. We'll be right back.

20:09Welcome back to Fast Money. While so much attention this week has focused on, of course, tech and under the radar sector has actually outperformed big tech. It's consumer staples. Names like Colgate, Palmolive, Costco trading at all time highs, Coca-Cola and Walmart up soundly as well. And XLP at Neville's not seen since August. Are these stocks investors should be shopping for? Maybe Bono and I'll look at you first because it's cap weighted. Walmart's probably the biggest influence on this. They had a big day, obviously, this week. So is consumer staples a place you would want to be? To an extent, certainly.

20:47I mean, you can't be completely concentrated in NVIDIA and Microsoft and Apple and Tesla and the rest of the cohort there. So, yeah, I do think particularly if you kind of have an anti type of view that you want something that is going to give some margin of safety. Now, there's an argument to be made that the valuations have reflected that perceived margin of safety. And so the upside isn't there. You just have to be understanding that you're investing here because you want a lower beta type of pocket in your portfolio. But you need to be willing to understand that you're giving up upside for that.

21:20So if you're willing to make that trade off, yes, I think it makes sense. If you're expecting this to outperform the MAG 5, is it now? MAG 6? I think it's shrinking every day. Then I do think that's a bit of a fool's errand. All right. So, Carter, there's been a lot of buying activity, some decent runs and names we know. Sure. Would you believe it? Well, obviously, individual stocks can always do well or not do well. But as an area of the market, this is an area that has low growth or no growth, both at the top line and on an earnings basis. And we know the sector itself is 6 % of the S &P, and yet Procter, what, Costco, Coke are probably a third of the entire sector.

21:57And if you look at relative performance, which is what alpha is all about, right, relative performance peaked basically in 08-09 when the market was crashing. And it's been going straight down ever since. We made new sort of 10, 15-year relative lows this week. And so while there always can be a day or two while this is good because Apple's struggling, it's just we should be able to do better, right? We should be able to work hard and come up with something more timely, more dynamic, with greater growth prospects and greater sort of things ahead than these very defensive, classically defensive stocks.

22:36In fact, and I'll end with this, when we talk about defensive, people say, well, health care is defensive. Remember, health care didn't exist 150 years ago. That was bite the stick and we'll saw your leg off. There was no health care. What it was was soap and cereal. We have biscuit companies and soup companies. They're 200 years old in this country. And these are very dull businesses. Soap and cereal. Tim, here's a thing. There you go. These guys are dividend payers. They are. And the interest rate picture and relative attractiveness of those dividends maybe is in question. At different times, right?

23:05In a lower rate environment, those dividends meant a lot. And if you think about different periods of cars, absolutely right. Think of the windows you've had to really love staples and hate staples. Coming out of COVID, certainly COVID, staples had a great run. They had pricing power, the ability to really pass stuff on. People were cooking at home. All this stuff that we know about. As we got into the boom boom days going into the end of 21 before the Fed started percolating, they were underperforming. Where did you want to be? You wanted to be back into growth. But for all of 22, staples were a fantastic place to be.