The Next Great Rotation… And Wall Street Sours on Coreweave 7/8/25

0:01Live 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. A big bank breakdown. The money center's dropping as earnings season draws near. Did the names get too rich and our regionals prime for a rebound? We'll debate that. And an energized trade after a slow start to the year. Oil stocks in rally mode today. What to make of the gain and how much longer it can last. Plus, why analysts aren't so confident in Corweave's latest buy. BABA gets a bounce and boosts a couple of our traders acronyms. And we're heading live to Sun Valley, Idaho for the Allen & Company Conference.

0:33What we can expect to hear on streaming, dealmaking, and much more. I'm Melissa Lee, come to you live from Studio B at the NASDAQ. On the desk tonight, Karen Feinerman, Dan Nathan, Guy Adamian, Danny Moses, founder of Moses Ventures. We start off with what might be the next great rotation. Capital flushing out of the big banks, JPMorgan, Bank of America, Goldman Sachs all seeing big losses today after HSBC downgraded these names. Citi and Morgan Stanley down as well. Meanwhile, some recently struggling sectors of the market also catching a bid. Small caps, health care, Our airlines all rising today.

1:04So what do we make of the shift in the markets? Guy. Hello, Melissa. Welcome back, Guy. We missed you, Guy. Did you miss me, Mel? I did. To be honest, Mel. No is the answer. Of course I did. To which I say I have feelings, too, to which you say yes. I know. Exactly. So now that we're over that, it is nice to be back. I think it's, well, the rotation out of banks, maybe a little profit taking in earnings next week. That could be part of it. I mean, some of these, and Karen can speak this better than I, But J.P. Morgan at one point was trading close to two and a half times book value, probably 2.6 times at its peak tangible book, which, again, levels we probably saw pre-financial crisis, which maybe it's justified.

1:41I don't know. Maybe it is different this time. But I think the run of these banks has been amazing. I also think people are taking money off the table in earnings next week. We were at highs just on Thursday, and we're not too far off of them at this point. I mean, in order to justify another move higher, do we have to also justify a re-rating of banks from here? Maybe. I mean, they traded up on a lot of good news, right? The hope of the market improved. So everything goes along with that. So in credit quality being better and more activity, we start to see an IPO market open up. Maybe a little bit of M &A and all the market moving hires are so good for asset wealth management business, which the big money center ones have.

2:20So I hate when they run up so strongly into earnings. Deregulation, right? So we had new, the CCAR adjustments, that was very positive for banks. So they kept going up on the same good news a number of times. I think it was overdone. I think that piece was well-timed. It doesn't say they're bad. It just says a lot of the good news is already priced in, which I agree with. Always good to separate the Wall Street banks from the regionals, right? So the Wall Street banks benefit from higher stock market. I just think the market's very rich at these levels. is taking a breath. But with all this rotation we've seen, I actually think it's pretty healthy to get into other sectors for sure.

2:54And we did see that rotation, as you mentioned. The regionals were higher today. Yeah. And you don't see that too frequently, I don't think. And so if you look at like Zion and you look at, you know, Citizens Finance, some of these names in the KRE, the Regional Banking Index, I mean, they trade at like one times book, you know what I mean? So, you know, we were talking about this last night. And, you know, a lot of folks, I think, in a market environment like this, where they think they have the all clear, you're happy to let stocks run. You're happy to let like a JP Morgan, for instance, get to a level from a, you know, listen, the valuation is what it is, right?

3:24But like we have historical norms going back to what Danny just said. And certainly later, you know, you have big winners. And I think what happened is a lot of folks, you know, headed for the door at the same time. And when you think about what are these stocks discounting or what are they not discounting when they're trading like this into their earnings, you know, it just kind of makes some sense, in my opinion. And especially if you look at the back half of the year, I mean, yeah, there is a backlog for IPOs, but if you can't bring them right now with markets at all-time highs, you know, you're going to get through Q3, and then all of a sudden, there better be a rush in Q4, or these stocks are trading at valuations that don't make sense relative to the backlog.

3:58I just want to say, having said, I think the setup going into earnings isn't great. I am still long. I have a lot of JP Morgan. I have a lot of Citibank. I think there is still the promise of how efficient banks could become, how they're such a good target for AI, and that margin improvement in expenses could be so important to the bottom line. I am assured some upside calls. I'm not going to sell it just because they've had a nice run and pulled back. I still believe in the longer-term story over time. Are you hedged in any way? A little bit. Sold some upside calls. Our crack staff in EC just put a Citigroup up, so you might as well put it up again because that's one I still think makes sense.

4:31And last week when the stock was close to 90, that was a 17 – I think it was like a 17-year high-ish in Citi. Don't at me if I'm off by a year. But you get my drift. And, you know, when it's trough, it was trading 60 percent or so of book value. And that's a stock that I think it's reasonable to suggest it could get back to those levels, which is somewhere between 95 and 100. I know that's not a big move from here, but I still like Citi. I think in general, the large stocks, you know, across all the sectors, I think people feel confident owning them if they have decent fundamentals valuation out the window.

5:02I think that's not a reason to necessarily sell them. I think people take comfort in that. I think we're going to see that in the quarterly reports. We've seen that time and time again across that. I mean, industrials, for one, you know, pockets of discretionary when it comes to Walmart, for instance. Nobody's questioning the valuation of Walmart here, you know, at these levels and for the big banks. So do we need that comfort? Do we still, you know, with markets close to record highs going to the second half of the year now, do we pay up for that comfort? Well, you know, it's funny. We say this all the time.

5:29Nobody cares about valuation until the market cares about valuation. I'm not trying to be funny, but that's just sort of the way it works. and on the way up, people look past it. When something happens, they miss a quarter or they say some guidance that might be sort of iffy. That's when everybody starts to look at valuation again, and that's when it matters. Right now, seemingly, it doesn't matter for the banks. I will tell you, and this is going to sound somewhat incredulous, but I think Walmart's reasonable at these levels for a myriad of different reasons. I know it's historically expensive to itself, but that stock sold off last quarter.

6:01It's gotten almost the entirety of it back. Not a huge move, I know, but it's hanging in there despite valuation. Yeah, 37 times trailing. I mean, the stock, someone hit the sell button today. It was down 2.25%, and the thing has been stuck in the mud. It has not confirmed the new highs in the S &P 500. And if you think about all of the uncertainty that we're seeing, and I know we've talked to a lot of folks and say, well, listen, if we push these tariffs out, it's going to be pretty good. I think you've got to focus on the investment. So, Karen just mentioned, like, the efficiency that this industry, meaning, like, financials, might get from AI.

6:31Well, if you don't have clarity about, you know, your business going forward because of this tariff situation, you're probably going to invest a little less. And I think that's something that could be a story in the second half. And then, you know, when I think about a Walmart, you know, going back to COVID in the post-COVID era, they had some issues dealing with inventories and the like. And if we're seeing a consumer that's kind of strapped, we've been talking about this trade down. Well, the trade down went below Walmart down to the dollar stores, you know. And so I think at some point people are going to start to focus on valuation.

7:00There is a tax bill, though, that incentivizes investment in terms of expensing and R &D. So that could be an offset in terms of the uncertainty and pausing plans here. So as it pertains to Walmart, I think in the short term, this tariff could be headwinds. But I think in the longer term, it's a positive. I mean, if you think about who can compete with them, not very many. Amazon, of course, obviously. But if you look at Target has struggled. I know the stock's bounced back recently. But it's been a tough go. And I think they'll just continue to get more efficient and gain share. And if they can deduct more expenses, they have the pocket to do it.

7:36So I'm long. It's a little bit of an uncomfortable multiple, but I'm staying long. Massive economies of scale. Customers that come to Walmart are not going to leave. I think they continue to take market share, I think, from the higher end as people drop down. So this notion that we're seeing this rotation even within sectors, I mean, even, for instance, semiconductor. We talked about this a week ago when it was happening, when this sort of rotation was happening within semis. I mean, you pointed out Intel on the call today. Intel was an outperformer relative to a lot of the other ones. So the non-AI sort of chip plays.

8:04Yeah, global boundaries. AMD has caught a bid. I mean, I think that you're seeing some more discretion about, you know, the way people want to get exposure to this kind of theme going forward. And I know that the semiconductor trade has been very narrow. Obviously, NVIDIA, some of these custom Silicon names. But, you know, we've seen Mike Rondroi the party as far as memory and the like here. So I don't know. I think people are, like, kind of trying to have this trade broaden out a little bit. But we've seen this before over the last few months, and it really hasn't stuck. So it'll be interesting to see how Intel, if it's just really this value play with a little bit of restructuring.

8:37We've seen like 10 restructuring the last few years. Katie Stockton was just on the closing, I believe. The Overtime. The Overtime. I get those shows confused. The Overtime is after the closing. Well, I'm not that bright as you know. But she was talking about how a lot of those names are now fully broken out in terms of NVIDIA. That was the last thing she mentioned. And she says she likes it. You know, you can hear a lot about golden crosses now and those types of things. But clearly there's something going on technically as well. All right. Let's get more on the banks with Chris McGrady, head of U.S.

9:03Bank Research at KBW, a Stiefel company. The firm announcing just in the last hour that he is taking over coverage of large cap banks, upgrading several names, including Morgan Stanley and J.P. Morgan. Chris, great to have you with us. Melissa, good to see you. Let's start off with the upgrades or the move hires in the ratings with your initiation of coverage. JP Morgan, for instance, we were talking about in terms of the valuation, do you need to see a re-rating of banks in order to justify an overweight basically here at close to record levels? You are seeing a re-rating, right? This re-rating has been occurring for the past couple months, right?

9:42Deregulations being built into earnings estimates, upside scenarios, blue skies. And the reality is the upside scenario is becoming more of the base case scenario. So So you've seen the universal, the largest six banks lead the charge. We've gotten a lot of positive news on deregulation. And that's one of the three themes with this launch is deregulation. The other two themes are scale and consistency. And any way you check it, the largest banks have all three and the relative winners. That doesn't mean you're not going to see a catch up on the small and mid-cap banks and the regionals because they've lagged so much.

10:14But there's clear moats around the largest banks. So, for instance, J.P. Morgan, which is now at a 2.4, roughly 2.37 price to book, what kind of price to book would you see? I mean, historically, that is high relative to itself. It is. It's high. It's a premium and it's well-earned, right? The company through the cycle is talking about a 17 percent return on equity. Last year, they did 20, right? So, this is a company that's going to generate a high teens return on equity, And that's even before the windfall from capital, from deregulation. So the book value multiple definitely is expensive. But if you look at the earnings multiple, it's trading at a 10 percent premium to peers.

10:55Over the past three years, it's trading at 12 percent. So great companies trade at good valuations permanently. And I think JP Morgan at a 10 percent relative PE premium is quite reasonable. Chris, it's Karen. Thanks for being on. So I'm long, but I'm just going to play devil's advocate for a little bit. I understand the premium isn't so high on J.P. Morgan, but the absolute number at 15 with the market at, I don't know, 21, too, that's kind of a high ratio. I know banks have always traded cheap relative to the market. Does that concern you at all? Or is the chance that we could break out from that longtime trend of trading at a big discount to market multiples?

11:29Yeah, the absolutes are something we watch. We watch the relatives a lot closer. Right. If you think about the largest banks, we're trading, you know, in the low 50s to the S &P. So the S &P is at high valuations. The long term average for the banks to the S &P is closer to 60 if you go back 10, 15 years. And so the absolutes are something we're watching. The momentum is something we're watching. There's a lot of momentum in the large cap banks. Sure, they could pull back. But again, a mid-teens P.E. multiple for the earnings. J.P. Morgan's a growth company. It's the largest bank in the country.

12:00But if you think about the revenue growth this company is delivering, they're generating solid revenue growth and positive operating leverage across its business. Chris, Jane Frazier seems to be turning the city around. I mean, all of our plans, all the implementation seems to be working. I don't think they're getting credit for it yet. Do you agree with that? I mean, the stock's 80 percent a book, so there's not a lot of good news priced in, Guy. If you think about their guide, their 10 to 11 percent ROTC guide for next year. They took that down earlier this year, so the bar has been lowered.

12:31But if you look at where expectations are, right, the street and we're in the low to mid-nine. So there's a big gap between low to 9s and to 10 to 11. So if they can get that right, it's the cheapest stock in the group. They've got a buyback catalyst. It's very accretive when you can buy your stock back below tangible book value. And so this deregulatory environment for Citi is hugely helpful. Now, they put the pieces. The reason the ROE is so low is the expenses have had to play catch up. That investment phase is done. And so what the company is doing now is they're generating revenue. They're generating positive operating leverage across their businesses.

13:04And if they can get the macro to settle in a bit, this is a company I think we can rewrite quite a bit. Chris, I know every bank is different, but how are you thinking about corporate credit, consumer credit, and then kind of rates on the long end of the curve and how that plays into your theme? Hey, Danny, the higher rates are good for a lot of our calls. But again, higher rates to a point, right? You don't want to see the long end. And that was a fear in April. The long end was getting out of control a bit. And you started to see the credit discussion leak back into the narrative. Now, the long end has calmed down a little bit.

13:35Credit's been pretty good. You know, spreads have compressed a bit. We're not as worried broadly about credit. And again, you know, we may see some reserve building this quarter. That's possible. The banks have told us that. J.P. Morgan did it last quarter. Citi's likely to do it this quarter. But again, the balance sheets are in such a great spot from a credit perspective today versus what were preconditioned from GFC. see. Chris, I'm just curious in terms of, you know, as you look out across the sector, is there more upside in the smaller, in mid-cap sort of banks, regionals, as opposed to larger banks?

14:09And if you, you know, if you had a bunch of cash to put the money to work today, where would you put it? I think you can pick your spots, right? So the smaller banks, the regionals, they're cheaper, right? They're cheaper because they don't have the scale that the largest banks have. Their business models are more concentrated, and they're more dependent on the yield curve. So there's plenty of great big cap banks. EastWest is a great company. It trades at 11 times earnings for a 15-hour week. Great company. But there are scale disadvantages that these companies have. Now, that playing field may get leveled a bit from deregulation.

14:44You might see more creation of trillion-dollar banks in the next couple of years to give the larger banks a run for their money. But we've seen the rotation. We're seeing a rotation now into the stuff that's lagged, right? The small banks have lagged by 1 ,000 basis points year to date. We've seen a 200 to 300 basis point catch up as some of the money is coming out of the universals. But again, it's time, you know, positioning is important going into the quarter. It's possible this comes a little bit further. But in general, we like the largest banks given the scale. Chris, great to have you. Thanks for your time.

15:13Great. Thanks so much. Chris McGrady, KBW. Where would you go? Bigger, smaller. Bigger in the forms of Citi. I mean, I agree with him. I think Citi, listen, I thought 60 % of Booker was too cheap. I think at 80%, it's probably too cheap as well. I think it's reasonable to think it could get to par, if not a little bit higher than that. But if you want to go sort of downstream or look sort of outside historic or sort of, I guess, I don't know, traditional financials, look at the chart of Carlisle Group, CG, over the last couple of months. That stock's been seemingly on autopilot, flirting with its all-time high.

15:43They report in August, I think, you'll own CG here as well. Chris said it well. Credit spreads are the be-all, end-all for the Wall Street banks. And if consumer credit starts to dive, regional banks will suffer. But I believe there will be a ton of M &A at that moment. So I think that that's going to be the long-term secular play here at the banks. Yeah, I mean, if you believe the economy is OK and that deregulation is on the bank side, wouldn't you want exposure to the smaller end of the cap scale in banks? I'd rather go bigger. I would. So that's how I'm positioned. I mean, a truest maybe, but I'd rather be in Citibank.

16:17Yeah. All right. President Trump announcing a 50 percent tariff on copper imports at today's White House Cabinet meeting, also teasing more sector-specific levies in the weeks ahead. Megan Casella is here with the key headlines out of Washington. Megan. Hey, Mel. So that's the key headline here, that even while those country-specific tariffs have been delayed now to August 1st, these sector-specific ones are moving forward. So besides copper, which we do expect to be formally announced as soon as later today, the president also said at the cabinet meeting that he's considering tariffs of up to 200 percent on pharmaceuticals.

16:51He did say he'd give those a long runway for implementation, potentially a year and a half or two years to give companies time to adjust. Commerce Secretary Howard Lutnick then later told CNBC that the copper tariffs will likely take effect later this month and that the investigations into pharmaceuticals and semiconductors, two of the six other ongoing national security investigations, should be completed by the end of the month. Tariff announcements then would follow shortly after. And you can see here a reminder of just how many of those investigations are ongoing. And then as for ongoing talks with two of our largest trading partners, the president said today that he's about two days away from sending the EU a letter telling them the tariff that he'll place on their exports.

17:33It suggests talks there might not be going so well. Lutnick also later said that he, Treasury Secretary Besant, and the U.S. Trade Representative Jameson Greer will all be meeting in early August with their Chinese counterparts for the next round of trade talks with China. So potential progress on that front. Melissa? There had been some hope surrounding an EU deal, correct, Megan? There was a report earlier this week, yesterday, that there would not be a letter sent to the EU. That's right. They said earlier this week there wasn't going to be one. There's been news out of the EU that they're still optimistic that a deal could be coming.

18:06I should say the president said today there was a quote, I think it was, let me be clear, a letter means a deal. But even in the letters, it still says that if you strike a deal, you might see a lower tariff. So it doesn't necessarily mean there isn't a deal coming, but it's sort of his way of trying to prompt things along. Maybe it means that he's not seeing something from the EU, not some sort of concession that he's been waiting for. Right. Megan, thank you. Megan Casella in Washington. Today, we really didn't move on any of the trade headlines. We're not going to move on them. I mean, like, listen, the only way this happens is a full out trade war.

18:38And, you know, let's just call this what it is. It's a joke. Right. And they know what happened in April. They know what happened to stocks. They know it happened to, you know, like interest rates and that sort of thing. And they're not going to let it happen again. And maybe they're playing around a little bit because they think they have a little leeway with the stock market back at prior all-time highs. But it's just not constructive. I mean, they're trying to negotiate all these bilateral deals. No one's rushing to the table. Japan's not. South Korea's not. The Mexicans are not. The Canadians are not.

19:05The EU is not. So it's a bit of a joke. Taco Tuesday, right? That's what we're doing here. So why copper? Right. It goes into everything. It's home builders. It's autos. Right. It's semiconductors. It's everything. I can see from a defense perspective why they want to build up a lot more resources here. But it's just counterproductive here. And if you want the Fed to start cutting race and you're trying to browbeat them and no, inflation's not here. This is directly inflationary period. End of story. So I'm not sure why. I think it's a lot of noise. I'm with Dan on that. But Taco Tuesday. You can make an argument that copper is the most important commodity out there, maybe not named crude or maybe more important to crude at this point to Dan.

19:40And if you look at the chart of copper over the last month or so, of Tim Seymour here, he'd be talking about as well. It's making all-time highs. It's absolutely breaking out. And it's probably doing it for some of the right reasons fundamentally and some maybe not right reasons on the back of these tariffs. But Freeport, McMoran, FCX, I mean, that stock continues to be lower left, upper right, Mel. Coming up, oil pumping higher as the OIH ETF sees its best day in months. The name's feeling that jump in how our traders are handling the moves. And it's not just energy climbing. Shares of Alibaba getting its own bounce.

20:10A check on China tech ahead. Do not go anywhere. Fast Money is back in two.

20:18This is Fast Money with Melissa Lee right here on CNBC.

20:32Welcome back to Fast Money. Apple announcing a transition in its C-suite. Steve Kovacs got the details. Steve. Yeah, big shakeup here, Melissa. Apple COO, Chief Operating Officer Jeff Williams, he's stepping down from his role at the end of the month and replacing him is Sabi Khan. He's the exec currently in charge of operations. By the way, that's the job Williams used to have before he was promoted to COO. Now, Williams, he's going to stay at Apple until the end of the year when Apple says he will formally retire and leave the company. And in the meantime, he's going to continue to run Apple's design team and health division.