Two Big Names Buck Today’s Market Trend… Plus More Bruises For Boeing 8/20/24

0:00Thank you very much John Ford live from the NASDAQ market site right in the heart of New York City's Times Square. This is Fast Money, and here's what's on tap for tonight. Eight is enough. No, not the 70s TV show. The eight-day winning streak for the S &P and NASDAQ is over. So does this mean the rebound rally has run out of steam? We'll debate that. Plus, blockbuster results, new data from Eli Lilly showing its popular weight loss drug reduces type 2 diabetes risks by over 90%. The impact across the healthcare sector straight ahead. And then later on, Boeing's new widebody headache, charting the next move in commodities and Bank of America's new Berkshire Blues.

0:41I'm Dominic Chu in for Melissa Lee tonight here in Studio B at the NASDAQ market site. On the desk, Tim Seymour, Dan Nathan, Guy Adami and Katie Stockton, managing partner of Fairlead Strategies. We're going to begin with stocks cooling off from the recent rally, the S &P 500 and NASDAQ each snapping their eight day winning streaks, as you can see there. Still, two of the year's big winners managed to buck today's breather and rip to all-time highs. Netflix jumping a percent and a half on positive news for its ad business. We got more on that story in just a moment. And Eli Lilly surging 3 % after a long-term study showed its weight loss drug ZepBound slashed the risk of type 2 diabetes by a whopping 94%.

1:27The news hit diabetes and obesity device makers. Think names like Dexcom, Insulate, Abbott Labs, all falling sharply lower. CNBC's own Angelica Peebles spoke with Eli Lilly's CEO, David Ricks, just earlier today. And she joins us now with a recap. Angelica, what can you tell us? Yeah, Dom, this is a three-year trial that's finding that trisepatide can actually prevent diabetes in people whose blood sugar levels are close to that high but are not quite as high as diabetes. Now, trisepatide, of course, is already approved to treat obesity and diabetes, but this could be another step forward and a way for Lilly to reach even more people.

2:06Nearly one in three Americans has prediabetes, so there's a lot of potential here. But the path ahead is a little murky. Lilly CEO Dave Ricks today telling us the company will talk to regulators about next steps, leering skeptical that Lilly can actually get approval specifically for prediabetes, but saying that if it does, that would be a significant opportunity. Either way, Lilly's CEO arguing these results could help make the case for more insurance coverage. Does terzepatide, a dual-acting GIP-GLP inhibitor, actually not only keep you thinner, but keep you healthier? And we're beginning to learn that it keeps you healthier.

2:45So I think we need to argue for that. And both the federal government doesn't pay for these. Many employers don't. They should. This is going to save money for our country in the long term. and keep people living a healthier, longer life. Now, this is all part of Lilly's plan to show over and over again that the health benefits go beyond simply losing weight. So we'll look to hear more from them, Dom. All right, Angelica Peoples with the latest there on a big story in health care. Thank you very much. Our next guest says the results could position Zephbound as a best-in-class weight loss drug.

3:17So let's get more with NBC News medical contributor Dr. Kavita Patel. Dr. Patel, this is huge. 94 % possible reduction in type 2 diabetes risks. Just how much does this resonate with the medical community? Yeah, Dom, it's a pretty big message, not just for the medical community, but as you just heard, one in three pre-diabetics. I would even say that as we expand just pre-diabetes screening, we might even find that that's a higher number. That's pretty astounding. So this is, I've always been a fan, as the evidence has come out, of not just the benefits of weight loss, but we've seen it now time and time again, not just with Lilly's drug, but also with Novo Nordisk around kidney disease, heart disease.

3:55We're also kind of testing it in the area around addiction, memory, prevention for other neurodegenerative diseases. This is truly a game changer, especially if we can prevent people from getting to the very chronic conditions, Dom, that are resulting in not billions, but trillions of costs to the health care system. Hey, Dr. P, it's Tim. Thanks for joining us. I guess my question, though, is didn't we already know this? Didn't we already know there's an adjustable market? Didn't we already know that the pre-diabetes treatment was something that was part of why this has been such a powerful story?

4:27And ultimately, I guess this is maybe our job, but this is in the stock is my view. Right. Tim, you're absolutely right. Yes, we already knew this. However, what I think you can say very safely from trials up until we got this surmount data on pre-diabetes is that so much of it really was on the primary kind of outcome of weight loss, right? We all know that that was in diabetics, but remember, and even in a surmount trial, we're really looking at the clinical endpoint of preventing diabetes, but looking at these surrogate markers as well as kind of the addition of the weight loss. Everybody had said, by the way, this is probably just the weight loss.

5:04I do think that that answer needs to be teased out. You're right. That's baked into the stock. I think what changes here is thinking about this as a preventive drug. Right now for a pre-diabetic, I really have diet lifestyle modifications. At times I can use drugs like metformin and there are some other things that we can use, but we don't have much of an arsenal to give people. So again, I see this, we've talked about this, Tim, it reminds me of statin conversations. For the longest time, that initial indication was really to lower the LDL cholesterol. And it took trials like Surmount and others, the analogous trials in the statin setting to say, hey, there's effects beyond just the lowering of your LDL.

5:40And that can be cardioprotective that can help with metabolic syndrome. I think this is the same path, and that probably is not baked into the stock and probably not thought of in a more clinical, broader spectrum. Think about using this as a preventive drug, not just an obesity drug. Hey, Dr. P, Tim was very clear what we already know. What do we not know? What sort of trials would you get really excited about? This one, again, it's great and the numbers are massive, But what are some other conditions that might really excite you and what sort of trials are in the works right now? Yeah, so we know we've talked about some of the trials that are in the works around addiction.

6:17This is a dual. Remember, with trisepatide, there's kind of that dual mechanism, GIP, GLP. So we have two out of the three main kind of parts of the body that are being like agonized or at least mimicked and trying to trying to decrease the metabolic pathway. So I would love to see this in other conditions that we know are affected by the metabolic pathway. That's everything from polycystic ovarian syndrome. We also know that there is like a metabolic effect in the perimenopausal area. There are so many things. I think the part that's hard is that what I need to see teased out is, is this just the weight loss?

6:50We just heard about the incredible weight loss and even the highest doses of 15 milligrams are into Zepatide. What if you didn't have that weight loss? Would you still see these metabolic effects? Many of us think you might. I need to see that trial data. That needs to be clean and clear. I know that this is exactly what Lilly is thinking about as they're kind of continuing on and monitoring these patients in the surmount trial. But I know that this is part of the future. And don't forget about retitrutide. We haven't even talked about that because we don't have that data, but that's the one that's taking that triple G effect.

7:22And that is another place that I think we're going to see just as strong signals, not just for prevention, but for some of these other metabolic diseases. Again, we need to tease out, is it just the weight loss? And that explains everything. Or are there some other metabolic side effects? And I hope that that's what we can see more data on soon. Dr. Patel, quickly, who could forget about repopetri? I mean, none of us here, clearly. But my question, listen, there's an election coming up. How much of a game changer, I'm assuming this would be bipartisan, would getting insurance coverage mean for these companies and these drugs?

7:56Yeah, I think that you heard the CEO say it very quickly. they need to go after this indication. I'm still pretty bullish on them getting a prediabetes indication. That doesn't mean that it's going to be easy. It just means that they have the data to support that and have the agency have a serious look at it. And then insurance coverage follows that. Don't forget, our very good friends thinking about the Inflation Reduction Act, we just saw those prices come out. The question will be, at what point in time will it take for a drug like trisepatide to hit that IRA threshold where Medicare negotiates on it?

8:26And we can see some changes to the list price. So I think first steps first, getting that clinical and label indication and then seeing insurance coverage. But I think this is why people are going to say, is this just a weight loss drug or is it doing more than that? And we're seeing more evidence that it's more than that. Dr. Kavita Patel, so many questions and so little time. We're going to have to have you back on. Thank you very much. We'll talk to you soon, Doc. All right, Katie, let's trade it. I mean, you look at it. What are the charts showing you? Is this a stock Lily that you want to buy.

8:55It's already the most valuable, by the way, pharmaceutical company in the world. You know, I think we talked about it last time I was with you all, and it's a very strong long-term uptrend. However, short-term, I mean, it looks as overextended now as the major indices. So after this very strong run-up over the last couple of weeks and right up against final resistance, 966, and after a 63 % run-up this whole year, I think, you know, maybe it's a better sell. All right. What do you think? Guy? Well, Katie's been spot on. I'll say this. You know, If you look where it traded down to earlier this month, we traded down to the prior highs of about 760 or so, which was a high back in March.

9:32So technically, it did everything it needed to do on the downside. But to Katie's point, now it actually needs to prove itself on the upside against those prior all-time highs from, I think, late July or earlier this month. This stock gives you the ability to trade around a long position. And I think this is one where you might want to be taking profits on the back of it. We don't talk about Lilly without talking about Novo Nordisk. And again, you know, we might start to see some other trials as it relates to this. Novo is a much cheaper stock than Lilly. And maybe that has to do with some of the foreign aspects of that.

10:02And so to me, I think it's a two horse race right now. That's pretty obvious. And I know we spent a lot of time on some of these biotech upstarts that are kind of getting into the space. But maybe they're acquisition targets more than competition. So Novo looks interesting to me, still off of its highs and a more fair valuation. They're not competition. I mean, the market's saying they're not competition. And that's the ultimate issue. You mean the upstarts or no? No, I think you're right. Those are acquisition targets. But this is the debate here. We all know what Lilly's going to do for the next two years.

10:32The question is, is there anyone competing on the kind of scale? Is there anyone, you know, even 18 months behind? Because the valuation at Lilly tells you right now that nobody's close. And right now, nobody's close. All right. Right. So an interesting trade for sure. No doubt about it, because of the dynamic with just a, in essence, two horse race right now. I wonder, though, if you take a look at some of the other mega cap pharma, biopharma names, they've been left out of the conversation right now, much because of this GLP one phenomenon. Who's going to play catch up among the big guys? We know that Viking is one of the smaller guys that could be in that space as well.

11:09But, you know, Pfizer and Merck, they're trying. They've tried. Some of them have even failed and given up. Where is the opportunity there? Is there a catch up to be had anywhere else? I think the catch up is not to necessarily say I'm playing them for GLP. The catch up is in Pfizer. First of all, they may have an oral treatment. The bottom line, though, is you're getting their entire pipeline of drugs that actually they invested 30 billion after getting windfall profits from from COVID. And, you know, that's the story here for Bristol Myers, for Pfizer, to some extent for J &J. But that's somewhat idiosyncratic because of their talc overhang.

11:43But again, you're talking about companies that have done zero in the last few years. In terms of relative to themselves, those are valuations that I think are a lot more interesting. All right. Record highs for Lilly, by the way. Another company that has also hit record highs today is Netflix. This is all after the streaming giant closed its upfront ad sales period with 150 percent increase in sales versus last year. Netflix's advertising president said in a note that the increase in sales was in line with expectations, that the company brokered partnerships on a host of upcoming projects, including Squid Games, Wednesday, WWE Raw, Squid Games.

12:18Squid Games. Squid Games. And Happy Gilmore 2. Happy Gilmore 2, amongst others, Dan. Well, we've been talking about the ad business for a long time, and a lot of folks have said that this was a huge about phase. They talked about never doing this sort of thing. And, again, there's been a lot of, like, you know, kind of volatility around their subscriber growth. And if you go back and look at the last five years, That's really what's driven the stock. We know that they're going to stop kind of giving that sort of data. But if you think about this ad supported model and you think about their crackdown on password sharing, it's just pure margin.

12:50Right. And so, again, at a time where a lot of the studios have pulled a lot of their content back, you know, it is kind of an interesting juxtaposition that you have these new models, you have an ad supported model. And to me, I think it makes sense. You know, the stocks come back all the way here. It is very few mega cap tech stocks that have also done that. I'm sure Katie would say it's a bit extended the same way that the indices and a name like Lily is. What do you think, Guy? Look at Netflix. Go back. It was the fall of 2021. That's when the last time Netflix was at these levels had that ridiculous sell off.

13:23It's gotten the entire thing back over the course of the last two and a half, three years. You're up against past resistance. Now, again, it's Netflix's world. We've said it for a while. Everybody else resides in it. But when you're up against a level like this, you're betting that we're going to have this breakout to the upside, a new level. I would submit we probably stall here for a period of time. All right. I mean, Tim, from a valuation side of things, we're talking about 33 times forward earnings. That's not out of the realm of reason in the mega cap tech media and telecom space. Well, it's not, especially when you consider they're the only one that has anywhere near this kind of scale and free cash flow.

13:58And what we heard from them and their earnings is that they're going to spell spend 17 billion for content and some OPEX. But what we're concerned about across mega cap tech is this spend. And Netflix doesn't have that dynamic. They're going to grow mid teens. They're going to double earnings essentially from 22 to 24. So that to me is why you're spending it again, growing mid to upper teens right now in a world where I think the argument from the analyst community is that they're less exposed to some of the cyclicality. Obviously, the ad market, we're only talking about it because it's been a recent business, but that their broader business is seen as being somewhat more resilient, even if the consumer weakens a bit.

14:35I think they're right. I think you pay this for the stock. I think they're all right in terms of the chart, but I think it's going higher. This is a chart that's higher highs and higher lows. If you just look at it, it doesn't take a rocket scientist to figure it out. But every time there is a pullback, it's not slight. It's a decent size pullback. So it's not without volatility. It's remarkable. It's lifted just more than$100, right, over the course of just two and a half weeks. So I do think it's at a proving ground, as Guy mentioned, that resistance around$7.01, it's a big hurdle for it. If it spends a couple of weeks up there, I'd feel better about it, like it's released from that resistance.

15:10As it stands, in a market that has seen a pretty significant pickup in volatility, and as we get into a seasonally weak period, I think it's a real challenge for it. May I ask you a question, Dom? Yeah, what's up? I'm not familiar with, what's the game? Squid games. Look, I've never seen the squid games. I've never had either. It's a huge phenomenon in Korea. I get it, but I've never seen one episode. I mean, but is it like some survival of the fittest type of thing? It's a survival game, I think. It's a dark one. So if Tim and I were in the game together, who do you think would emerge victorious?

15:41I don't know. I might have to go with Guy on this one. And why is that? Let's go there right now. Let me bring it back here. So this is pretty fascinating. You know, Netflix, their market cap is nearly double that of Disney. Disney in their last quarter just talked about streaming being profitable, but what's holding them back is all the other crap, right? It's the parks and the networks and stuff like that. So it's pretty interesting, back to what Guy said. I mean, they are such a pure play on this, and we've spent so much time after the last 10 years going through all of these different iterations of all these major communications companies, whatever, entertainment companies, and what they're doing in streaming, what they're paying for it.

16:18And it really comes down to Netflix. That's it. I'll leave you with this kind of overriding thought about Netflix. It's original content for those guys. There's no doubt about it. But it takes a huge amount of science to curate a library and pay for that library economically to get people to want to use that as their central streaming hub. And I think a lot of people have done that with Netflix as opposed to, say, Disney Plus or Paramount Plus or, you know, whatever else is out there streaming. So it's something to pay attention to. Well, the scale is huge. It's 500, essentially, if you look globally and in terms of if you add in the ad supported.

16:54And that's the story. It's become a cash flow machine. And I think you're paying up for it. All right. Well, coming up on the show, Toll Brothers is on the move after reporting its results, the numbers from that quarter, and what it could mean for the housing sector overall. That's next. Plus, stocks are snapping their strongest eight-day winning streak in 21 years. But is this just a breather from the recent rally? Or could there be some pain in store? We're going to debate. And if Fast Money returns, we're back in two. You're watching Fast Money here on CNBC. We'll be right back.

17:36Welcome back to Fast Money. We got an earnings alert on Toll Brothers. The homebuilder is higher after hours on a top and bottom line beat. And joining with us for that story is Steve Kovac in the at least 1 % maybe-ish gain. Steve, what's going on? Yeah, about 8 tenths of percent, and that's because Toll Brothers beating on the top and bottom line. Let me give you the results real quick. EPS is a good beat here,$3.60 compared to$3.31. Revenue, a very small beat, though,$2.72 billion versus$2.71 billion. Also, a company raising its full-year guidance on deliveries and pricing with one quarter left to go in its fiscal year.

18:11The report shows folks are watching for a, this report rather is what folks are watching for a read on the high-end housing market, especially ahead of that expected Fed rate cut next month. That's why we're seeing that guidance go up. CEO saying in the earnings release and laying out the momentum he's seeing, saying net signed contracts are up 11 % year on year. Mortgage rates are the lowest in a year and expected to go lower from here. And what he calls a quote, imbalance in supply and demand, saying also those trends are expected to continue into next year. That's all we're going to get for now.

18:44As far as CEO commentary, though, the earnings call is tomorrow morning, Dom. All right. Thank you very much, Steve Kovac, for the update on toll. Tim, let's talk a little bit about whether or not we have. Let's talk. We're going to talk about this. Why do we think that the toll results are important? And are they indicative of the broader housing sector? Well, I think there's a couple of dynamics with toll. First of all, for the last five or six quarters, they've been beating on gross margin. But one of the elements they've guided here is that the second half, at least some of the specs that they've already preannounced, are going to be lower margin sales.

19:17I think for this entire group, it's really what you want to spend. If you look at where this stock trades relative to its five year, it's actually kind of expensive. It's probably 15, 20 percent expensive. If you look at it to its 10 year or longer, it's actually pretty much a buy. I just think that the homebuilders have had a tremendous run that's been as much tied to some of the macro around interest rate sensitivity. And I think you're chasing here. And I think they've kind of run out of gas. What do we think, Katie? You know, I'm looking at it. I feel like the signs of upside exhaustion are there for the sector here, at least in the intermediate term, maybe for the next six to eight weeks or so.

19:53So a pause to refresh, maybe. Secular uptrends are obviously in place. But I don't think now is the time to be adding exposure, but rather maybe reduced or on the sidelines. Yeah, I'm with them. I'll say this. In terms of their average selling price, basically$975 ,000-ish, right? So this is obviously the upper end, which means the unemployment rate is probably going to affect them last, but it will affect them at some point. And I think if you have the belief, which I am, that the unemployment rate is going to surprise people to the upside, all these home builders at some point are going to run out of gas.

20:23Maybe Toll Brothers last of the three or four of them, but they will run out of gas at some point soon. All right. Interesting result there from Toll Brothers. Thanks, guys, very much for that. Coming up on the show, stocks are snapping their longest winning streak of the year as investors wait more earnings data. And Jay Powell's comments from Jackson Hole, what to expect and how to position, that's coming up next. And yet another altitude change for Boeing. Shares are lower again as the aerospace giant halts testing for its 777X plane. So what the latest black eye means for the company as this company's new CEO settles in.

20:55You're watching Fast Money live from the Nasdaq market site right here in Times Square. We're back after this.

21:07All right, welcome back to Fast Money. As we mentioned earlier, eight is enough. The market is snapping its longest winning streak of the year. The Dow and the S &P, the Nasdaq all closing a fraction of a percent lower today. And one of today's notable laggards is Lowe's, down more than 1%. The home improvement retailer cutting its full-year outlook, citing expected weakness in sales. It comes a day before reports from Target, Macy's, and TJX. Meanwhile, the dollar is falling to its lowest level since January. WTI crude seeing its fifth negative day in six. And then gold settling yet again at another record high.

21:42Katie, what's the take? You know, we've had such a good relief rally. I think it's a gift from the market in a way. The damage was done, and it was done even before volatility spiked in the way that it did. There was a loss of intermediate-term upside momentum, and it positions the market for a seasonal corrective phase. So for the first time today, we recommended to our clients that they start to reduce exposure, but concentrated in stocks that have broken key support levels. We're waiting to see the loss of short-term upside momentum more meaningfully than just today to say, OK, well, now is the time to get hedged to some degree.

22:16whatever's comfortable, to manage risk through a potential correction. Bigger picture, though, we moved to a long-term neutral bias for the first time since late 23 very recently. And we did that because of long-term indications that it's slowing. We don't have that indication yet from price. I mean, we're still up right near the highs for many, many securities. And yet we do think that a range-bound environment is highly likely over the next six months or so. And it's a harder environment to navigate in that we have to become shorter term, perhaps, maybe positioned for those intermediate term swings within the context of a range.