What a Difference a Month Makes, and Ford’s CEO Lashes Out at the UAW’s Leader 9/29/23

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 September to remember, maybe one to forget. The rapid rise in rates, sending stocks sharply lower this month. And it's not the only one catching our attention. What will it mean as we head into the final quarter of the year? Plus, a new playbook. That is what one China expert says the U.S. needs to deal with Beijing in the months and years to come. You will explain the new X's and O's straight ahead. And later, taking on big pharma shares of this little-known biotech soaring to their latest, to their highest level since going public today, all because of what it is doing in, you guessed it, the weight loss space.

0:39I'm Melissa Lee, coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Carter, Worth, Fado and Eisen, and Steve Grasso. And we start off with the last trading day of the month with a look at just how much things have changed in the month of September. And as we kicked off the month, the yield in the 10-year Treasury was less than 4.1%. It's risen nearly 50 basis points since then, hitting levels not seen nearly 16 years. Oil also in rally mode, jumping nearly 9 % in September, its fourth straight month of gains. Volatility soared 30 % to its highest since May. In the meantime, stocks dropped with the Nasdaq and S &P locking in their worst months of the year.

1:15So as we get ready to kick off what's usually the strongest time of the year for the markets, what should we expect? Tim, what do you expect? Well, I expect there's not going to be a Fed meeting that was supposed to be a nothing burger that turned into a big burger. And I think that has something to do with the volatility we had here. I realize it was late into a month that's supposed to be a bad month and we were already on the move. But I guess what I expect is that sentiment and positioning have already made adjustments based upon how bad September was. And I think they've already started to adjust backwards.

1:47Now, I realize and Carter probably thinks about this all the time, as does Bono when he's into Bono and likes volatility. Carter thinks about technicals. And at the end of the day, those are the things that I think we can predict. and set up. The fundamentals going into the last month of the year are listen to who you want to listen to. Maybe we'll talk about Nike, who last night actually said that their consumer is more resilient. I think it bodes well for back to school. I just think that we're going to continue to struggle with this interest rate dynamic and longer rates are going to try to push higher.

2:16PCE today was better. Inflation is more or less peaked, but it's stubborn. So I'm looking more towards positioning and sentiment, which got very extreme to the negative and are already starting to come back. I think it's going to be okay. I think that's right. It's about money flow at this point because not much has changed in the earnings multiple. Not much has changed in the revisions for the upcoming quarter. But what has been very volatile, of course, has been the currency market, dollars specifically, euro down, the oil market, and rates. And yet, we know when you get to sequencing, when something gets too far one way, it's usually right to play it the other way.

2:49Hard to time, but that's the idea. So consider this. We know that just three months ago, Four months ago, we were at 3.5 on the 10-year yield, and oil was$65 a barrel, and consensus was hard landing. It's coming now. All of a sudden, that's out, and now it's higher for longer because oil is at 95 and rates are at 4.5. It's just extrapolating the current trend. Both are overdone. Dollar is overdone, rates are overdone, and oil is overdone, and we should get some kind of mean reward. You sound bullish, by the way. Well, but that's the thing. So people say, wait a minute. If you think the dollar is going to roll over and rates are going to go down, why wouldn't you think that the S &P is going to go?

3:25Well, there's relationships. There's inverse or they're direct. If it was always so perfect, then the inverse relationship right now with the dollar going up, oil should be on its knees. But it's not. These relationships are spurious. They don't always go the way one would think. Yeah, and then trying to time it to the end of the year is a bit difficult here. So, like, I think a lot of I tend to agree with a lot of the points here being that things have probably ebbed and flowed a little bit too much on the negative side for the interim. But I still think the long term setup isn't necessarily bullish necessarily.

3:56Right. Listen, money has been free for the last 15, 20 years. That's different. And the Fed is telling us that that is going to remain different. So I don't think the playbook of old buying the dips, per se, is necessarily the way that we're going to see this happen. You have, you know, discussion around six month CDs, six month CDs yielding around six percent. What we thought initially was that we should be getting long duration on the end of the curve because things were coming to a plateau. And what you've seen now is a real move on the back end. That, to me, really puts pressure on the equity market because the whole Tina situation that we've had for the better part of five years or so is no longer a reality.

4:35It simply is not. And because of that, I think they're all alternative. So even if you're not excessively bearish, just the fact that there is another asset class that will give you compelling yields and returns is enough for me to take at least some of the froth out of the market that we've seen recently. It does seem like it would be too good to be true to be able to work past, you know, free money is dead, that scenario, so quickly, Grasso. And with higher for longer, I mean, the longer rates stay higher, the sort of the burden gets bigger. companies run up against a deadline in terms of they have to refinance their debt at some point, and they are going to face those higher rates.

5:10Same thing with the consumer. Yeah, I think for the large part, though, Melissa, a lot of companies are not in this situation where they have to refinance anytime soon. So if you look at the seasonality of the market, we're at the end of the month, we're at the end of the quarter. And I think the stat is 84 % of the time, if you're up going into the fourth quarter between 10 and 12%, you're going to be up at the end of the year, higher. We're there. So that's your seasonality issue. That's playing for the bulls. The other thing is 30 % of funds actually end their fiscal year at the end of September.

5:54So now they have a clean slate. So there's a lot of window dressing, I would say going into the last week of this month and obviously the end of this quarter. If all the stuff that you entered into the show with, the oil rising, rates rising, throw in the UAW. If any of those things get better, the market should move higher. I'm still in the bull's camp. I think I feel pretty good about that. We should have asked, oh, is the mentalist where we're going to go? He did some extraordinary things last night. The one question we didn't ask him. Well, the correlation between stocks and bonds has been what I think the last couple weeks have been about.

6:39And those correlations are two and a half standard deviation. And what does that mean? It just means that for traditional allocations, a 60-40 rule, Bloomberg's got an index. Everyone's got an index on this. So it's a 60-40 allocation equities to bonds. When you have that kind of correlation, that tends to underperform. And what we're seeing for a lot of people is that 60-40 rule has underperformed in this year. And so while I think the headline numbers are pretty good on the index, I think we have to think about people that might be chasing a little bit going into year end. But that ultimately, I think for allocation, the fact that you can grab medium-term duration and lock in long-term rates is what a lot of investors should be thinking about.

7:22You haven't had that opportunity for a long time. and some of the volatility rates could go higher and you may look at your bond prices and say, oh, no. But you're not really locking in for that bond price. You're really locking in for the yield that's attached to it. And I think that's why this market actually may be a little bit more defensive. Yes. Speaking of yields. So I tend to agree with Steve when it comes to the blue chips. They're not going to be in a position where they have to refi. And when they do have to refi, they're going to get premium rates anyway. But if you really look at the high yield, right, you look at HYG, for example, or if you actually want to look at the the actual index, it's really outperformed and done quite well.

7:55But if you kind of look at the duration of those bonds, those have really pulled back to that three or four year period because those corporates were expecting that rates are going to fall and that they'll be able to refi at a much lower rate. That setup may get challenged in the next few months and years. And I think that that might be the shoe to drop in terms of credit at least widening some. And when you start to see credit widen, And I think that's really when you start to see the hits to the equity market and other risk assets. I mean, ultimately, the big mistakes come from leverage and credit, right?

8:27So we've yet to have a real credit event. But if and as, the nightmare scenario, of course, and it's hard to know what that would be, is if, of course, we really do start to stall on Main Street, right? You get some sort of economic weakness, and yet oil and rates stay high. It feels like we're on the cusp of that right now. But if you get that, that is multiples contract dramatically. Yeah, and that's my view on where I just think discretionary looks challenged, and some of those defensive sectors like health care, like Staples, and I think now energy, I think truly are defensive. And I look at health care and Staples, and they've had a rough run.

9:06I mean, you're at the bottom of essentially one-year range on Staples, and these aren't as big of a range as you're seeing in semiconductors when they move up and down. But I think it's a pretty interesting time for a lot of companies, whether it's a Hershey's or a General Mills, where they re-rated to the upside through COVID in places they didn't belong. And the market has punished them, as they should, especially as their cost base has come down. Those are opportunities here into the fourth quarter and I think into next year. Grasso, can you still be bullish if you think the consumer is going to have trouble going into the holiday season ahead of all the shopping that is typically done in the fourth quarter, including Halloween, Thanksgiving, et cetera?

9:39But if the consumer is paying higher gas prices, higher heating prices for their home, higher prices at the grocery store, you name it, higher prices all around, can you still feel good about the markets? Well, yes, up until you went off on that litany. But when I look at the consumer, you can't have it both ways. We've talked about that the consumer is becoming more and more strapped, yet the economy is way too strong. So it's one or the other. I think that the consumer's resiliency has shocked and surprised the economy. I would think that it's probably going to continue. I think oil prices are going to be dropping.

10:25And if you look at oil futures, a year from now, they're pricing them at$84. So it's in backwardation. So if you're going out, the market sees that this is not a true supply-demand issue. This is a Russia-Saudi Arabia issue, which means that it's quasi-temporary. And if you look at student loan payback, no one's going to be forced to be paying back student loans because you still have an administration that said that they're going to push for forgiveness. So there's a lot of reasons to be bullish and have faith in the consumer. Well, as markets wrap up a messy month, the chart master here is homing in on three areas of the market that are hoping to shake off an ugly year.

11:06So, Carter, what are the three areas? Right. So rather than picking them myself, I just sorted by what is the worst. Let's look at the caboose, the rear. So the three worst areas of the market, of course, banks, utilities and precious metal stocks. And you can see it here very clearly. You have the market up 11.7, and then in descending order, gold miners, as represented by the Philadelphia Gold and Silver Index, down 11. Utilities, the Dow Jones utility average, over 100 years old, of course, and then the KBW banks bringing up the rear at 22. Let's look at the chart of all three of these areas or themes.

11:41There's not a one that's good, which is to say I think even these that are the most beaten up go lower still. So you can see on the screen here converging trend lines. You can interpret however you want, but it's broken through to the downside. That's the bank index. Take a look at utilities as measured, again, by the Dow Jones utility average. We've just taken out those lows of almost a year and a half ago, breaching the lower band. And then finally, of course, and you can see it here, is the Philadelphia Gold and Silver Index of important mining stocks and the pressure bills. All really quite similar in terms of what they've done.

12:16So big disparity with the market, and yet one might think, well, we should bottom fish, but I wouldn't. That's interesting. And what utilities and banks tell you is rates are going higher. And they tell you that we're worried about credit. We're worried about alternatives to utilities and some of that yield income. And actually the pressure that's on utilities to have the kind of free cash flow that they're generating. With precious metals, to me, it's more or less a pretty simple, hey, the dollar kicked butt in the last six weeks. And essentially rose 6 percent off of a level where people thought it was actually going a lot lower.

12:49The correlations there are extremely high. Everything that we're saying about this setup sounds like a world where, especially if inflation is kind of peaking, sounds like the time you want to buy gold. And I think forget the industrial uses of gold. Think about the monetary policy dynamics here. I think you're buying GDX here. But I also think if you look at some of the other resources, I actually think that resource names look pretty interesting here as well, even integrated miners. And I actually think oil is going higher. Like an Alcoa or a BHP or Rio. Yeah, and look at iron ore prices. They've really started to rally.

13:20It's not like China's been given that big of a shot in the arm, but I think we're seeing that across the commodity complex. If China shows a little sign of life, then that could be a lot in terms of the turns here in multiple. Yeah, for commodities, I tend to agree with you spot on in terms of precious metal companies. I mean, the dollar setup really has challenged that there, but I think that fundamentally that's probably where I would like to be. Banks, I'm not sure if that yields are going higher or if that credit is going wider. I would expect especially high yield credit to be wider given what we've seen in rates.

13:51Yeah, rates have moved higher, but that spread has kind of remained pretty tight, and I'm not exactly sure why. Steve, would you dare to bottom fish an area that the chart master says not to bottom fish? No, I trust the chart master on that premise that he's making. That he's making on it. But, you know, there's so many correlations. Carter likes to talk about correlations. And when you look at that, when you look at gold, I can't help but look at Bitcoin and you can't help but look at crypto. And then when you look at gold, do you do the miners or the commodity? And I think that we've talked about this long enough on the show for, you know, a decade and a half now that when you think gold is going to be moving, miners actually have a two or three to one ratio.

14:42ratio they move more than gold both up and down so if you think it's going higher by the miners miners or the metal uh miners uh i mean i i agree with that analysis on the beta uh i think miners i say this a lot about a lot of different types of miners i just think these companies are run differently than they used to be i think there's been a capital discipline in fact that's part of my argument why copper prices stay stubborn i mean dr copper is an economic barometer but if there's been such a lack of investment in copper mines and infrastructure, and I think across the precious metal space.

15:14We also don't see that M &A mania in the space that I think has forced these companies actually to do their job. So I like GDX. I like silver over gold, and I continue to think uranium goes higher, too. I have a question for you, Carter. Do you ever override how you read the charts with your fundamental belief in something? Never, never. Because then what would be the point? I mean, you've got to stick to your discipline. Unless you can get a magic trick going, like, that's fine. Then, you know, all that's wrong. That wasn't magic. It wasn't magic. He knows, man. He was in our heads. Plus, he doesn't have a fundamental belief.

15:48Dangerous place to be. It is. Let's move on to a developing story here. The deadline to avoid a government shutdown just hours away. CNBC's Emily Wilkins has the latest from Capitol Hill. Emily. Well, Melissa, lawmakers have spent all week voting on different spending bills, and they are no closer to finding a path to ending a government shutdown that is set to begin on Sunday at midnight. A stopgap measure that was backed by House Speaker Kevin McCarthy went down on the House floor today with 21 Republicans joining Democrats in defeating the measure. House Republicans are actually meeting now to discuss a path forward, and it's just not clear what that's going to be.

16:24Some members are pushing to keep the government shut down for weeks while they pass all remaining long-term spending bills. Others have talked about teaming up with Democrats to force a vote on the floor. Honestly, the quickest way to end a shutdown would probably be for the House to take up a bipartisan bill that the Senate's expected to pass on Monday. Senator Chuck Schumer called on McCarthy to bring the bill to the Senate. Listen to what he said this afternoon. The Speaker needs to abandon his doomed mission of trying to please MAGA extremists. And instead, he needs to work across the aisle to keep the government open.

17:00Things seem to be getting worse for the Speaker rather than better. And it's time for him to try bipartisanship. McCarthy has said that he will not bring the Senate bill to the floor unless it contains something on border security. And senators are trying to work on an amendment, but they actually need to have one that's going to get the support of both Republicans and Democrats. And that's going to be really, really difficult. So at this point, we absolutely look headed into a shutdown. The question is how long it's going to last. The longer it does, the more of a hit this could be to the economy.

17:34Melissa? Emily, thank you. Emily Wilkins. Hit to the economy. We also won't get reads on the economy because economic data won't be released. So we'll be sort of blind in line a little bit. Maybe that's good. I mean, you know, at times it hasn't. Just look at the chart. There you go. It's amazing to me as a guy that spent a lot of time in emerging markets where, you know, a government shutdown and political wrangling and political dysfunction is usually what causes sovereign CDS and spreads in these places and obviously their government bond yields to go skyrocketing. We've heard from every credit rating agency, and some have been more focused on the banks, but we've heard, and it started with Fitch, but we've definitely heard Moody's late last week talk about sovereign credit in the context of a government shutdown.

18:18I'm not saying that they should. I'm not saying that they shouldn't. I'm just telling you that's not been part of the calculus. I think that actually has a lot to do with some of the last, you know, 10 to 15 basis points of bond market. I mean, it underscores government dysfunction, right? Sure does. When they put us on credit watch negative, Grasso. Sadly, government dysfunction is not likely to go away or get much better anytime soon. Yeah, I mean, we've had, what, somewhere around 20 different shutdowns since 1980. Both parties have held responsibility for them at times. It's probably pretty evenly split.

18:54It's not going away. It's only more contentious. And the truth is there might be an 11th hour where the speaker has to actually bring something to the floor where he can get Democrats to vote for it. That would probably be a death nail for his speakership. And I think it's going to get a lot more murky. But when you look at the average time span, Melissa, of these shutdowns, they're probably on average eight days long because they're widened out for that extra long one that we've had recently. So let's just hope that we don't see one that lasts, you know, more than a week. Coming up, a new weight loss drug that could potentially enter the arena.

19:36Structure Therapeutics soaring after good news for its answer to Wigobi and Ozempic will give you the skinny on why investors are so excited. Plus, new trouble for the big three. The UAW announcing another wave of strikes as negotiations stall. We'll bring you the very latest straight ahead. Fast Money, be right back.

19:57Welcome back to Fast Money. Tesla wrapping up the quarter in the red. The EV maker down nearly 5 percent, but still riding its high for the year, just about doubling in 2023. And as investors await Q3 production delivery numbers, options traders are plugged in and charging into the name. Mike's got the action. Hey, Mike. Yeah, this is often one of the busiest single stock options. And it was again today and actually traded above its own very high average daily volume. Single busiest stock. It represented about 14 and a half percent of all single stock options volume today. And the bulls and bears are pretty evenly matched.

20:29But I think the bears just took it, beating out the number of bullish bets by about one percent. One of the examples that I have here, the October 240 puts a buyer paid$795 for$1 ,000, risking about$800 ,000 in premium, betting that Tesla could drop 7 % or more over the course of the next three weeks. Yeah, there are a lot of planned factory, you know, downtime, shutdowns, etc., factory into the Q3 numbers. Carter, how does the chart look? You know, I have to confess, I was not paying attention. Can you tell me what it was? Oh, it was Tesla. Okay, good. Because I heard my phone go off and it was making noise.

21:03It was bothering me. I didn't want to bother anyone else. Well, by the way, my phone bothers people all the time. It happens. It happens. It happens. It happens. The answer is it's a pair of twos. It's a pair of twos. The truth is it's the same price it was three years ago. It's acting a little better than the market, but is it really something you've got to push into or be short? No, just leave it alone. Yeah, well, I mean, listen, I tend to agree it's a pair of twos, but I feel like I always say that, and the stock continues to move, right? I think given where we are right now with the UAW, I would tend to think that you probably want to play this one for the long side, dare I say it, intermittently.

21:36But I do think this is, if there's a time that I'm going to jump in, it would likely be now, probably for like a month or so trade. I know you don't like it. Well, like his phone ringing? No, he likes the phone ringing on TV. Well, it wasn't ringing. I was worried about it ringing. No, the stock. I don't like the stock from a valuation perspective, and I don't really have a strong view on the chart, but I do have a view on those delivery numbers, which is that I don't think they matter. I mean, we know the Shanghai shutdowns, they matter, but we know they're going to be lower. We know the Shanghai shutdowns are a big part of it.

22:08And therefore, I don't think it's that relevant. I mean, the street's already downgraded from 515, 520, 530 down to 450, 470. There are people out there that also think that the price cuts are really all about them sweating other people. And we've seen from the competition that it's going to hurt them if they have to cut margins. Now, again, no, I don't like the stock. And I've typically been very bearish on the stock. I do think that they have a earnings profile that every other competitor would like to have. I do think, though, that it feels like the setup where if they beat on the numbers, there's a huge pop to the stock, Rosso.

22:46Yeah, 100 percent. And to Tim's point, I think he's dead on. They were sweating other people up until the last couple of months now, where they know that the other other car makers that are trying to dabble in there in the EV space are hemorrhaging money. Now they have UAW problems. They don't have either one of those. And I think they're back launched to the best position. And I'm not long the name right now, but I am long Rivian. And Rivian is actually starting to make a move in the charts, too. And they're definitely second place way, way, way distant behind Tesla. All right. Mike Coe, thank you.

23:22Good to see you, as always, coming up. New strikes out of the UAW and one auto CEO barking back as negotiations hit a snag. More on the war of words next. Plus, the mixed signals Beijing is sending to the U.S. Should investors hope for a thaw in tensions? Or are things about to get even more heated? The details when Fast Money returns. Missed a moment of fast? Catch us anytime on the go. Follow the Fast Money podcast. We're back right after this.