Weight-Loss Drug Trial Results 6/5/24

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. Climbing the ranks. NVIDIA overtaking Apple to become the second biggest company in the world. It's added over a trillion dollars in market cash in just over three months. Can it keep its spot at the top as the top dog or is there a reckoning coming? We'll debate that. And from dollars to donuts, Dollar Tree looking to prune its family dollar division. What it means for the discount retailer as the stock trades near its lows of the year. Plus, lofty Lulu shares surging after earnings.

0:33Was all the worry overdone? A top roach exact dives into the pharma giant's new entrant in the weight loss drug battle and the return of Traded or Faded, the Chartmaster Edition, how Carter grades the traders' calls. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Steve Grasso, Guy Adami, and Carter Wirth. And we start off with NVIDIA because, I mean, how could we not? The semi-stock that's dominating this market all year long today hit yet another massive milestone. In addition to jumping over 5 % today, Nvidia topped$3 trillion market cap mark for the first time ever, and that move helped it surpass Apple to claim the number two spot in the S &P.

1:12It's not that far away from overtaking Microsoft, who's been at the top consistently since late January. That's a pretty big jump for a stock that was way back at number five on the market cap list at the start of the year. And with a gain of more than 11 % already this week, it might not be long before it jumps even higher. So is there anything that can derail the Nvidia train? And is it just a matter of time before it bumps Microsoft and becomes number one? Guy. It's certainly number one. I mean, we talk about it seemingly every day and justifiably so. And any concern that I've had has been clearly unwarranted, without question.

1:47With that said, the concerns are still there. And it's not in terms of price to earnings, which at 34 times is reasonable given their EPS growth. It's a concern in terms of at 19 times revenue. I mean, historically, this has been a sector that trades at half that type of valuation. Now, if you say to a guy, they're going to be at a$300 billion run rate in the next year and a half or so forth, then we're going to have a different conversation. I just don't think that trajectory in terms of earnings can continue. That's my concern, unwarded as may be. Will this continue? Yeah, because now you have double levered ETFs on the back of NVIDIA.

2:20I mean, the money flow is there. What will stop it? I think when margins start to wane is when people get really concerned. I was going to say, but Guy, there hasn't been a cycle like this ever historically. So how can we compare it to historic PEs or valuations? So you have the stock split coming up. That's obviously a tailwind to it. But let's talk about the passive investment flow. So if you look at the XLK, Microsoft is number one waiting, and they're at 22.5%. Then it's Apple. Then it's NVIDIA. So Jones has been on this, Bank of America. If they surpass Apple, they have to flip. So that means the weightings flip.

3:00So just think about, now I know it doesn't sound like a lot for NVIDIA. It's a$20 to$25 billion event. If that happens, it's not a one-day event. It's a every time someone buys the XLK, it has to be mirrored into whatever the market cap is. I think it's a little extenuated because the stock split. But doesn't that seem like something you do as a pull the fire alarm, last ditch effort? So maybe they're trying to scale out of something that possibly, possibly. No, Tim, I don't mean that it's over. Right. Because I've been I've been bullish on the video since the beginning. But what I think is maybe we're coming to the end of those incredible beats.

3:41$1 ,200 stock going through a 10 for one stocks, but not an$80. Yeah. And it's it's not again, it's not it doesn't have anything to do with being in the Dow. doesn't have anything to do. Like reverse stocks, splits are often very, I would think, very contrived. When you have a story here that also just out of this Computech, I mean, we've gotten drivers over the last couple of days that have had the analyst community to upgrade on top of already extraordinary valuations. And if you think about the$1 ,200 stock, it's even more extraordinary. Think of all the different periods where we've had these outsized moves in NVIDIA, and you can make an argument of all of them, we're in the greatest one of them all.

4:17I mean, I mean, this was a$750 stock on April 19th. It's up 60 % since April 19th. And the thing that's very interesting for the markets here is that the semiconductors as a group, it wasn't just NVIDIA. Now, I realize there's a dynamic here across the board that at least for the AI spend. But, you know, the move in Taiwan Semi was even more impressive today. And they are a close second in terms of the most important semiconductor company in the world, in my view. And the reliance that the world has on Taiwan Semi. and yeah, there's politics and there's a whole lot of other things to worry about.

4:49But the other side of all of this is the Nasdaq, with all the exposure here, does not make new highs against the S &P. So NVIDIA is now 6.6 % of the S &P, Microsoft 7, 6.4. You're reading all this. These are all numbers you're going to read in the papers tomorrow. You're hearing about them now in terms of the weightings and the size of this company. But the Nasdaq has not really done a whole lot. And that's something that I think folks are looking at the market and wondering, you know, hey, that kind of leadership has been very, very tied to semis, which I'd like to believe I've said for a long time, have been the leader of this market.

5:20And they continue to go higher. But the lack of new highs in the Nasdaq, is that a reason to not be long NVIDIA? Or is that even more reason to be long NVIDIA? It's a reason to be concerned about the broader market, especially when you consider that NVIDIA is up 147 percent this year and the Nasdaq is, you know, not even really totally kept pace with the S &P. For right now, let's just boil it down to NVIDIA. I'm in NVIDIA. Should I be worried about the broader NASDAQ? Or should I say, should I make the assumption that NVIDIA is a little bit more immune to what might happen in the tech cycle when it comes to a pullback in enterprise tech spend?

5:53Because that is more defensive spending. Companies will have to spend on AI, the cutback on other things, as we've seen from the likes of CRM and some of the SaaS names. I think that's fair. I mean, Steve's point about passive investing, we've talked about that for years. I mean, money flows in regardless, and I think that will continue. I don't know. I'd like to think I would understand what's going to derail it. I mean, China, Taiwan's been out there forever. That seemingly is not talked about, although, you know, more and more people seem to be coming around to that sort of framework of thinking that that's the potential existential risk.

6:22But short of that, until valuation catches up, it's all systems go. In March, NVIDIA was a$943 stock. It traded down to$750. So it's not immune. People use it as a cash machine. When people think the market's going down, they sell their biggest buffalo in their portfolio. NVIDIA's got to be one of the biggest things that people have had the gains in. That's going to be the first one to be sold. Well, I'll just say this. One of the hardest things to do in markets is probably short stocks. But one of the second hardest things to do is let your winners run. And when you've had a stock like this, I'm sure there's a lot of people out there that are frustrated that they just haven't let this thing run.

7:00And if you've again, all the different periods we've had, we've had five straight quarters now where they've continued to defy gravity. We've had five straight quarters where they've seemingly upped the ante in terms of the growth cycle. And, yes, this most recent event, when we talk about Vera and Rubin and fascinating names for chips, by the way, I mean, women scientists, of course. OK, why are we not surprised, Tim? I'm about to get canceled. All right. I understand. And those are great names. But I think the fact is what the conversation we had yesterday was, OK, when is this? When are we pricing out right now?

7:33We're just worried about Blackwell or we're not even Blackwell's just starting to get on the radar. But the the the ability they're able to sketch in terms of the addressable market. And it does. I am most fascinated for the broader market about this industrial complex and where, again, NVIDIA is talking about where they expect they are going to change physical dynamic industries. And that is something that I think for this multiple is not necessarily in the price. I mean, remember we had we've had the arc futurist on talking about a great name, by the way. Don't you want to be a futurist? I think I mean, I mean, you're wrong.

8:07Futurist. That's a great name. Deer. Deer as an A.I. play. Every sector. That's the next leg. Every sector is going to benefit from A.I. I get it. I also said that 1350 at NVIDIA. When it was still trading below$1 ,000, it was probably still cheap to some people. Now, was it Bank of America just upped it to$1 ,500? So every sector is going to change, but not every sector is going to change the same way. There's not going to be the same chip types. All right, so let's go to the chart master, because we've got a lot of chart questions when it comes to NVIDIA. Obviously, where the stock is going, and also whether the strength relative to the NASDAQ, is that troubling for NVIDIA?

8:46It's obviously troubling for the NASDAQ, Carter, but what's your take? Sure. Well, before we get to the charts, I think we can all be kidding. It turns out no one has a clue about this stock. It's been so exceptional. Just to make it very clear, one year ago, it was trading at$375 in early June a year ago. And Wall Street had a price target of$462, believing it would go up 23%. Well, here we are, and it's$1 ,224, not$462. It turns out it's just one of these things that's exceptional and very hard to handicap how far it will go, when it will end. But we can look at the charts and try to figure out at least maybe the next hour or two.

9:23So let's do that. The formation, the setup, the event that has occurred is that breakout, news related. And now the stock is up some 25%, 30%, having moved from the high 900s to 1225. Let's keep that and then look at this same on a longer term chart. And let's keep that formation and look at it again on a longer term chart, a third iteration. And so the question is, is there any way to tell if this breakout has run its course? Now, final chart, this same time frame, and let's put the channel on. And so simply, were we to get to the top of the channel, you're talking about 1 ,400. Now, I have no clue whether it's going to go there, but momentum like this is dangerous in terms of doubting it or fighting it or certainly shorting it.

10:11It happens to be an exceptional moment for an exceptional stock that will, of course, one day have its reckoning. But right now, the buyers are in the ascendancy. The money is moving in. So it's dangerous, Carter, in your hunch is that it goes to$1 ,400? I would say, I mean, I would be, if you had to press and say, you must be shorter, you must be long this stock for tomorrow at 930 and the next day at 930, I certainly wouldn't be short. So it's either stand aside and marvel at it or participate and be long. All right. Well, as the market cap continues to soar, so does the options volume. Mike Coe joins us for a look at how the traders are playing the world's latest$3 trillion company.

10:51Mike, what do you see? Yeah, I mean, this thing overtook Tesla. You'll remember, Tesla was always the busiest single stock option. That has changed. It became NVIDIA a little while ago. And that hasn't, you know, it's just actually the volume continues to build. And it's important to remember, too, that as the volume builds and the price increases, the notional value of these options positions are also getting bigger and bigger. It traded over 2 million contracts today. Four of the top five most active contracts were calls. Actually, the top four were all calls, all expiring at the end of this week.

11:25And it's interesting that Carter was saying, you know, forget about what it does three months from now. What are we worried about it doing tomorrow, the day after, and the day after? And they're trading mostly weekly options, and they're all trading upside calls. So the 1200s, 1220s, 1215s, 1250s, and the 1300s for this week were the most active contracts. And basically saying, look, I mean, if you're going to play this thing, ride the momentum. So, Mike, you mentioned activity to the end of this week. And, of course, the end of this week captures the stock split. What does it look like beyond this week in terms of the bets?

11:59And is there any sort of inkling that people think this rally will cool off when the stock actually splits? Well, I mean, there was over 800 ,000 puts that traded. So there are some people who are betting against it. But the number of people who are betting to the upside outnumbers them by about 50 percent. So there was one and a quarter million call contracts purchased. And you bring up an important point. For those people who are trading options, what's going to happen to those? And I think there are people who believe that a split is a positive. Each contract will become 10 contracts and the strikes will get divided by 10.

12:35And, you know, so there will actually in the short term be an even larger spike in options volumes in strict contract terms. Although what we have seen in the past is that when those splits took place, more people started migrating back to the stock because they were able to. That's very interesting. Mike, thank you. Mike Coe. So Carter put out two possibilities that he thought you should entertain, and that is stand back and marvel or belong. What's your answer, Steve? I've been standing back and marveling. I'm going to wait until the split and see if I want to jump back in. Stand back and marvel or be long?

13:11Well, at this point, I have to be one of the marvelous marvelers because, you know, getting long here for me would be, you know, just throwing in a towel, which I'm unwilling to do. And Tim? Stay long. I mean, I just don't know why you're fighting stuff that I'm sure it's going to pull back. But, again, it depends on how you invest, what's your time horizon. You're not timing this thing. And, again, letting your winners run. Yeah. What a rip. Now let's get to Lululemon soaring after reporting better than expected earnings and revenue. The company also announcing a$1 billion stock buyback program.

13:41The athletic clothing company has beaten on EPS 20 of the past 21 quarters. CNBC.com's Gabrielle Von Rouge covering all the action joins us now to break down these results. It wasn't just a beat, Gabby. They also raised their guidance for the full year. They reaffirmed their guidance for the full year. But they actually, their Q2 guidance came in lower than expected. So this uptick in the stock, I mean, I'm attributing that to the buyback. That's obviously going to be great for investors. And then also the international growth. You know, this feels a little bit like window dressing, right? You've got the buyback and you have Calvin McDonald on the call talking all about international.

14:14They had sales up 35 percent in the region. China was up 45 percent. Rest of the world was up 27. But what people, what investors need to keep in mind here is that North America was flat during the quarter. That's its biggest market. So those are volatile regions to bank on. So you don't buy this 12 % pop. And have they addressed at all the chief product officer leaving and what happens after that with their lineup? They did. They did address that. And, you know, of course, when that was announced, you saw the stock drop. Investors were really concerned about what kind of impact that's going to have on Lulu's product lineup going forward.

14:46Calvin McDonald did speak about how they had their succession plan in place. They had somebody ready to go. He's going to be reporting directly to Calvin now. They're not going to actually replace the position, but they have reassured investors that this isn't going to cause an issue. Gabriel, great having you on set. And, you know, a guy who's a fashion plate and is often a leading indicator of fashion said nine to 12 months ago, watch out for skinny leg jeans and denim's coming back. I'm actually I'm going into flares. Wide leg, Tim. Low rise, wide leg. Whatever. Tim's going into flares. So why?

15:16Belly button showing. Why is this really an issue? I mean, don't all of these companies adjust and adapt? And as much as I recognize competitive landscape, I think they are losing market share. I do think there's saturation. Why do we continue to hear about this? You know, that's what investors have to keep in mind. Fashion is fickle and it's cyclical. These things are always going to change. Think back to the 2000s when true religion was one of the hottest brands on the market, right? You had celebrities wearing the wildest jeans. And you know what killed denim? Athleisure. And now denim is back with a vengeance.

15:47And Lululemon is never going to sell jeans. It is an athletic apparel company. So there's no really room for them there. You had true religions. I bet you any and I have money. So my response to that is who didn't? First of all, I didn't. Second of all, it's great having you here. And I'm sorry you have to endure the low ride. Did you even say that? You're thinking of stripes. I mean, who knows the right terms. You're on it. Flares, right? But are you skeptical of this pop in the afters? Yeah, I am. I'll tell you. Well, listen, this is the good news. Inventories were down almost 15 % year over year against sales growth of a 10.5%.

16:22Very good. and margins were they beat, but still down year over year. All very good things. But as Gabrielle said, America was flat. I mean, that's still the big kahuna there. And the second quarter guide wasn't great. They're trying to get you to believe the full year guidance is going to come in better than the street was expecting. So the billion dollar stock buyback doesn't do a whole lot for me. I think it's a relief rally. I thought we'd trade down to the June 22 lows of 275. We didn't get there. But I think you fade this move. Yeah, I take it as if the puck's going to denim, then you've got to buy Levi's.

16:52And Levi's chart actually looks really good. It's up 46 % year-to-date. And not only is there denim, get a Q-tip, there's stretch denim, right? So that's the next leg. It's not just regular denim now. And it's not the stretch. Huh. It's not the yoga pant denim. It's a real jean. Is that sport coat you're wearing, stretch denim? It should be. It should be. It should be. So I think that that chart's good. And if you get another one, Ralph Lauren, that chart looks good as well. Yeah. Abercrombie & Fitch, American Eagle, Gap, they're all well positioned to capture this denim trend. And it's also not just about the wide leg and the low rise.

17:31It's a head-to-doe denim outfit. Oh, head-to-toe. You had Caitlin Clark wearing a full denim jumpsuit, totally on trend. But it's denim jumpsuits, it's denim jackets, denim shirts, Levi's. Denim jumpsuits? Yes. And put in country music and it all fits together. I got it. I've got to get moving here. Tim's going to go to shopping this weekend. We can go shopping. I'll show you what to do. Thank you. I'm going to need some help. Thank you. Coming up, Europe may be getting ahead of the U.S. The ECB nearing its first rate cut since 2019. While yields here at home continue to drop. What the front running could mean for global markets next.

18:06Plus, branching off, Dollar Tree dropping as the company looks to sell off its struggling family dollar business. How that move could impact the stock when Fast Money returns. This is Fast Money with Melissa Lee, right here on CNBC.

18:28Welcome back to Fast Money, a key interest rate decision coming tomorrow. The ECB expected to deliver its first rate cut since before the pandemic, that after the Bank of Canada cut its rate by 25 basis points today, its first move in four years. Meantime, more softness in U.S. Treasury yields with the Federal Reserve's policy decision one week away, the 10-year at its lowest level in more than two months. So what does this all mean? Let's get some answers from CNBC on-air editor Rick Santelli. Rick, last time you were here, maybe not the last time, but the last time when you set the internet on fire with your prediction for the 10-year yield, you said that rates would go, I think it was like north of 15 percent.

19:07That was the prediction? I think it was 10. Ten? Fourth of ten. Whatever it was, wildly higher from where they are now. You throw in the towel on that? Yes, double digits. Double digits, yeah. Double digits. And I said it was a possibility, and I still certainly believe that, and I'll tell you why. It's an election year, and what's going to happen in this election year? Tax policy, tax cuts, implement, remove them, how that affects deficits, static versus dynamic scoring. We're going to galvanize the public to all the issues that interest rates are definitely going to be held hostage to. And in my opinion, tomorrow, there's not going to be any surprises with the ECB.

19:47They can't afford it. The engine of Europe, Germany, is sputtering. Why? They can't even afford the energy costs of the industrial base. Their energy price keep going up and hold that thought. It's not going to be much different here. So in my opinion, I could see a test of under 4 % with this move. We have five consecutive days where the 10-year has had a lower low than the previous day. We've had five consecutive lower yield closes. It is building momentum, all because of the Fed. But the reality is, is that every week or every other week when we have big coupon auctions, we redirect investor focus, and interest rates go up.

20:25We redirect them more towards the Fed and central banks. Interest rates go down. I'll tell you what's important. Here's what's important. The federal interest payments are now, boom, approaching$1 trillion. And, as I said, if the Democrats win, it's going to be get rid of the tax cuts. They'll use static models. But that doesn't make any sense. Why? Here's federal revenue starting in 1980,$517 billion. Then we popped over$1 trillion in 1990. 2000, we popped over$2 trillion. And the tax cuts happened, what, in 2017? In 2015, we had$3.25 trillion of income. In 2020,$3.42 trillion. In the last year,$4.44 trillion.

21:08Does that look like we have a taxing problem? We have a spending problem. And we can all have pretty talking, blah, blah, blah, about central banks. But I will tell you this. Look at the spread between tens and boons. Today, it's hovering around$175 trillion. It's the tightest it's been in four months. How do you think that's going to react tomorrow? What does that underscore? It underscores the U.S. is going to have to pay up to borrow, and that's going to end up raising the price of poker for all the countries, China, the Eurozone, the U.K., as they all have to come to the well because their economies are not going to look as good next year as they did last year.

21:47Rick, I show your concerns. Jamie Dimon has said similar stuff. So I'm with you. You have these conflicting forces without question. But what's sort of the cat like debt to GDP is approaching 130 percent. That seems to be the line in the sand. No developed economy seemingly can recover from that. You know, what are your thoughts when this part of the equation, the supply side becomes more important than the slowing growth side? Well, that's where you have your possibility of double-digit interest rates. I think if that makes one feel uncomfortable or it feels too crazy to be true, then look for steepeners.

22:23You know what's going on right now? We're getting more inverted as we rally. We're hovering, what, around 45 basis points minus 45 in twos to tens. We had periods where it was in the low 30s, even looking like it was going to go into high 20s. But it backed away. I really do think that we have a two-speed interest rate scenario. We have one where it's going to be central banks and they're going to be pressuring the short end. But the rest of the long, mid to long end is going to be focused on supply and all the issues of politicking as we get closer and closer to the election. And in my opinion, inflation is that third stool.

23:02OK, here's what we have in third leg on the stool. Growth. Growth is definitely slowing, guys. Employment, labor definitely seems to be slowing, and its continuing claims don't point to it. But there's many other better metrics, whether it's quits or job openings. All those issues are definitely moderating. The one thing that I don't think is moderating enough is inflation. The Fed will find a metric it likes, whether it's a PCE, whether it's a deflator, whether it's X Energy. But I'll tell you what, you don't need to be a rocket scientist to figure out how many trucks are on the road when you drive.