Wrapping Up a Volatile Week & Countdown to Big Retail Earnings 8/9/24

0:01And live from the NASDAQ market site right in the square heart of New York City's Times Square. This is Fast Money. Here's what's on tap. What a week it was from big losses to big gains. Mark Mark seeing a big spike in volatility, but with even more key reads on the economy coming next week. Where do stocks and your money go from here? We'll get some answers. Plus, Walmart and Home Depot and retail. Oh, my. Maybe the first big hints coming on whether the American shopper is really slowing down. Plus, is it time to go big into big oil? The chart master making his case for one oil giant. And another dismal week for Intel investors.

0:43Is there any reason to own Intel stock? Talk about that, how to trade the desk, all that and more over the hour. Hi, everybody. I am Brian. And once again, for Melissa Lee, coming to you live from the Studio B at the NASDAQ here in Times Square. On your desk tonight, Lionel and Isaac, Courtney Garcia, Carter Worth, and Tim Seymour. All right. Welcome, everybody. Let us start with your macro money today and this week. And not TV hyperbole. It was indeed a wild week. And here's a random but interesting for you. This week, the S &P 500 posting both its best day and its worst day in two years. Dazzle your friends with that at a cocktail party tonight.

1:26Some nice gains midweek. And today, we did end a little bit higher, but not quite enough to offset what happened at the beginning of the week. and get this, the S &P 500 ended down 0.04%, basically Butarski's GPA. The Russell 2000, the big decliner, falling 1.4 % since Monday. But this week was this week. Let's focus on the future and next week. And we've got more big data points on deck. For the Federal Reserve, we've got the CPI and the PPI inflation numbers out. We've got retail sales. We've got another read on jobless claims. We've got consumer sentiment. And of course, still lingering questions about whether we are really done with fears that the yen carry trade unwind could slam stocks again.

2:15Six of the magnificent seven down again this week. Only Meta able to post a game. NVIDIA, Tim Seymour, now down 20 % in a month. Tesla has lost nearly a quarter of its value in about 20 trading days. Do you think most of the damage has been done? Well, thanks for joining us, Brian. Nice necktie, by the way, Friday afternoon. And I think it's a very defensive posture for the market. I think you're a big Kansas fan. It's carry on my wayward son, and I think there's more to go. And I think the correlations to certain asset classes are unquestioned. I think we should be thinking about, But I know rotation is a good and bad word for markets that want to see breadth.

3:00Breadth tends to be positive. I'm sure Carter's got a great view on this. But I think the concern I have is this was a week where we really lost leadership, where we lost leadership of semis to the Nasdaq, where we lost leadership of Nasdaq to the S &P. So let's see where we go. I mean, there are certain parts of the go-go trade that had a tremendous recovery. So obviously, semis were up almost 12 % off that intraday low. Nvidia about 13 percent. Kind of muted, actually, if you ask me. But then you have things like Lilly, who had some great numbers and also a great recovery up over kind of 22 percent off of those Monday lows.

3:34So that's the story of the week. There's no question we have more yen strength to wrestle with, more degrossing. So hedge funds, market participants, I think, starting to understand where they have to bring risk down a bit. It doesn't mean that's necessarily even related to the macroeconomic plan and what we're going to get next week. Obviously, a lot of data. You have to be a little worried about retail sales. Fair enough. And I got to correct you on something for our viewers and listeners on the radio, Tim. I'm not wearing a necktie. That's why. That's what I meant. Yes, I'm sorry. That was called sarcasm.

4:09Yeah, that that that sarcasm, to quote Kansas, went past the point of no return. See what I did there. Bono, what do you think about this week? What a bizarre week it was. It is. And I think it shows the confidence that's not currently existent in the market. If you can have one data point that essentially, I'll argue two data points, both the Japanese and carry trade, as well as the nonfarm payroll number could essentially turn us over. And as Tim mentioned, to completely shift leadership. And prior to that, we had seen this rotation out of the highest of high flyers into more small cap leadership.

4:46And we thought that was going to be the narrative. If you saw that trade reverse itself within a matter of 24 to 36 hours. So I think the fact of the matter is that we really need to get back to what the cadence of the Fed is, which is being data dependent as opposed to data point dependent. And the fact that we're having such volatility around a singular data point does, to me, raise concerns about the ability for this market to continue to march higher. I think us having this singular spike in the VIX, I don't expect 65 clearly to continue. But seeing this tick up in volatility, to me, underscores the uncertainty that is currently in the market.

5:20And we will likely be trading and moving from data point to data point. Courtney, are you getting more questions about the Fed? Or are you getting more questions about the yen carry trade? Or maybe see both? Definitely both. I mean, I think most clients had no idea what the yen carry trade was until this week. But it's everything we're talking about. And I think that is what's interesting is when we saw last week we had an unemployment tick up and the markets went down. And now the narrative is likely a lot of that was due to this carry trade unwind. And I think the good news is, is that we're seeing the markets recover this week, which is a little more indicative that probably a lot of the volatility is due to that trade unwind as opposed to data that we're going into recession.

6:01Because if we continue to see an economy deteriorating, a recession upcoming, that's worse news for the markets going forward. This is more of a technical unwind. I don't think that's anything to be concerned about other than probably a short-term buying opportunity. But next week when we get some more data on the economy, I think that's going to be indicative of what this actually means going forward. So I'd keep your eyes on that. I think the key is the volatility. And you started with that. You used the superlatives. Biggest one-day up move in X number of weeks or months. Biggest one-day down move all this week.

6:28So we know that leading up to this give back of the past three weeks, this sell-off of some 10%, We had gone one of the longest stretches in the past 15 years since the financial crisis without a 2 % down day or up day. And now you're getting quite a few of them. What that is indicative of is a transition, right? When you're in a persistent bear market, you don't have volatility. You're just going down. When you're in a persistent bull market, you don't have volatility. Volatility happens in transition moments, meaning when a market is bottoming, like the 0.9 low, you're going through the throes of a reversal or when you're topping.

7:01This kind of volatility, which is a spike in the VIX that's almost unprecedented, big 2 % and 3 % up days and down days back to back, it's like a fever. It's symptomatic of a problem. It's not a bullish thing at all. And in principle, the hope was, oh, well, all the money's going to come out of these magnificent seven, but it'll go into the small cap. Small cap gave it all back, as you all said. Regional banks gave it all back. There's very little to rely on here. Earnings are basically out of the way. There'll be a few more. Fed's kind of out of the way. Cutting, is that what we're hoping for?

7:32They've been cutting or talking about cutting, and now all of a sudden the market doesn't like it. The market's not in a good spot. But I feel like, back to you, I feel like we should have had some clues because going into Monday, I use a stat that with Monday, we had the three worst trading days of the year in a nine trading day span. July 24th, last Friday, and Monday. It was like a boxing match where nothing happens. You know, you're just kind of throwing jabs for eight or nine rounds, and then all of a sudden, boom, boom, boom, boom, boom. But that's what happens when you go from a complacency or complacent moment to something other than that.

8:09The point is, when you're transitioning, when you start something or end something, there's a lot of volatility. Start a new job, a lot of volatility. A new relationship or ending a job. Anyway, there's always, at a moment of transition, great throws or spasms. This is a transition, and if someone thinks it's market bottom, that would be weird. And I think it's spilled over into the fixed income markets as well. The same volatility that we're that we would be accustomed to seeing over history in the equity market. You're seeing that also in the fixed income market. And I think the volatility across asset classes and then you want to lump in the crypto markets as well, which is much more of a new entrant.

8:44I think you're seeing volatility across the board as it pertains to risk assets. And to Carter's point, you know, I think it's just tough to have a continued bullish case when you're seeing that. That is speaking to the to the unease. We've tried to have a rotation. We've tried to have a shift in leadership. And ultimately, what we're getting is correlation still approaching one as everything kind of rolls over. Yeah, Tim, I mean, we got Bitcoin on the board and we just did. Don't quote me on the numbers. I don't have I'm not looking at them right now, Tim. But I think we had about a twenty thousand dollar swing in Bitcoin over a couple of days.

9:17So the volatility was not limited to equities or to option spread vis a vis the VIX. That's what to me was so striking about these really these last week and a half. Well, I think we saw that the higher risk asset classes and certainly the less strong hands were not hodlers. I mean, there's no question with the kind of speculation that's in a handful of asset classes. But but how do you explain that gold was even being sold on the day when it's every reason you line up to buy gold? So I just think it's it's indicative of risk off. It doesn't mean it has to be wholesale. And there was a lot of different ingredients to it.

9:55This is what we went through on Monday night. I mean, it wasn't purely Bank of Japan coming in there, but it did trigger at least a bunch of dynamics around the technicals of the market. Everybody over-assessed one payroll number, everybody. And, you know, it's not just one payroll number. There was economic lead up to at least people looking at a terrible payroll number in the context of where we've been and saying it's now a hard landing. I think you just have a dynamic where Carter's been nailing it every time he's used the word complacent. That's the market we've had. Passive investing has won and it probably will win at some point again.

10:31I think in the meantime, you have a dynamic where we're also in the middle of an earning season where it's not as simple as just rewarding hyperscalers for spending more money on AI. I actually think we're hearing over and over again, not just about the consumer, but more about where we are at peak margins. And I think that's really the issue for the equity market as much as anything. I think if we have the soft landing that is debated right and left, the reality is that I think you're going to see minimal downside to this market. But right now, the market doesn't know that. And so anyway, it was a fascinating week.

11:05But I would stress that I think it's a week where we have to watch that leadership that was so critical to the market going higher. And, you know, you won't know until it's over. But so far, the trend on the NASDAQ to the S &P and the semis to the NASDAQ is not good. Well, for all the hodlers, as you say, hold on for dear life out there. I got to, I'm not wearing a hat, but if I was, I would tip it. Because, Courtney,$20 ,000 swing, it is confirmed, 69124 to 49 and change. Imagine having a$20 ,000 swing. in the price of one of your investments in like two days. Yeah. Yeah, and I think that ultimately leads to fear and that risk-off rally.

11:49I mean, I think everybody's been waiting for the second shoe to drop. That's why you're seeing these cash levels at such highs, because everybody's just saying, okay, is there a recession coming? Everybody's waiting for some sort of bad data. They were hanging on that unemployment report that came out last week and saying, oh, this is it, and you're getting that selling. You added the additional institutional selling pressure, seeing things go down, which is confirming that bias, and you're getting additional selling. So, you know, I don't know if this is going to be long lasting and I don't know if we will know until we get PPI, CPI and especially those retail sale numbers.

12:16I think those are ultimately really important to see is the consumer holding in there. What does the economy look like? Well, amazing transition because that's exactly where we're going here. I think Bitcoin takes what do they call it? Technical intestinal fortitude, Carter. Yes. All right. And since the economy may drive the Fed, which, of course, the Fed may then drive stocks. Let's talk about all of it. On set with us tonight is RSM Chief Economist Joe Bersuelas. Joe, good to see you. We've got to stop meeting like this. I know. It's been too long. Our first interview was like 20 years ago.

12:44We were talking about that downstairs. I don't know what that says about either of us. Either way, to Courtney's point, we've got retail sales. We've got some retail earnings, CPI, PPI. I know you watch it all. Yep. But if you had, you know, that's game time. If you had to pick one, the most important, what would it be? It would be CPI, and you want to go deep into the report this time. Markets going to ignore those top line numbers because they're going to look a little bit like they have for several months, more benign inflation. But what happened over the last couple of months is housing inflation finally turned over.

13:14After that year lag that the Fed widely advertised, well, it showed up. And if we continue to see that improve owner-occupied housing consumption, well, the Fed's going to feel more comfortable that they're going to get to that 2 percent inflation target. And then the onus will really shift to, hey, the bias of risks is moved towards employment and we need to start cutting at every meeting. I think what you're saying is very important and we should probably reiterate that. You effectively and again, don't want to quote you back to you and tell me if I'm wrong. Are you saying to ignore the headline number?

13:48I am because you're going to get a 0.2. It's going to be a weak 0.2. But what the Fed's really focused in on is if indeed that inflation that stemmed from housing is really turned over. If it is, then we're not really worried about inflation. Now, what we're worried about is how quickly the labor market will slow. We think the labor market is going to add about 120 ,000 jobs on average to the remainder of the year. That means a little bit of pressure to the upside on the unemployment rate, but nothing that's going to break the economy. Joe, thanks so much. So you mentioned the owner equivalent rent.

14:22I kind of want to drill down a little bit there. I would argue that my argument would essentially be that that portion of the inflation reading is a lot slower moving. You're not getting rents that are being reconfigured on a month to month or day to day basis, as you are seeing a lot of the other issues. Is that enough to mask volatility in other areas of the of the CPI reading? Because the weight of housing is over one-third in the entire CPI. It will offset not only the base year effects, but that month-to-month fall elsewhere. That's why policymakers and economists are focused on that like a laser as we head into the fall.

14:58Because we all do expect just the economy, hiring, and overall inflation to continue to cool back to a much more sustainable rate. Or the word you guys like to throw around, normalization. Industrial commodities collapsing, right? You've seen nickel, zinc, copper, a broad basket down some 20 percent since May. I think that also speaks to what's going on in yields. The market is ahead of the Fed. Well, I'll let you guys talk about all the technicals, right, because that voodoo that you do so well, it's not my thing. What I can tell you, though, is that we're going through a profound regime change over the last 20 years.

15:31Anybody who entered the business only really knows zero interest rate policy lower for longer. The shocks of the pandemic finally cleared the deck. We finally had a recession that cleared the market. And now what we're going to have is, well, no more leverage like we've had. We're going to have higher interest rates for longer, higher inflation, higher rates, structural changes around how we acquire goods from the external sector. Therefore, the areas of the market that have relied on massive leverage, like we started to see in wine this week, are all going to have their day of adjustment. Commodities, oil, private credit.

16:08It's going to happen because the economy is going to get a lot more sturdy or less fragile. In order to do that, we just got to go through this transition. It's going to take us a couple of years. And unfortunately, we're probably going to have another couple of weeks like we had this week. Look, a carry trade that notionally is$4.4 trillion. Leverage that up seven times. You're around$30 trillion. It started to unwind in early July. We probably got a couple more weeks. And we're probably going to have a couple more stronger, you know, difficult days. But in those commodity areas, I think that's one of the risks around the market going forward as that leverage gets, well, unlevered.

16:45Tim. Hey, Joe, this is kind of a philosophical question, but, you know, in your economist sphere, it's important. And seeing as all we are is dust in the wind, I think we can get a little philosophical here. If you think about Paul Volcker, it was all about breaking the psyche of inflation. Why does the Fed need to move as quickly as I think you think they should move or is going to move? I can tell you as a consumer, I see prices going up on everything now. In other words, there's been inflation. But I see everywhere I turn, whether it's my parking garage, whether it's my local deli, whether it's my insurance, whether it's my mortgage, at least forget the mortgage, more even around just rates against maintenance on housing and whatnot.

17:26But to me, the whole idea of inflation is something that becomes systemic. And I feel like it's still systemic and there's no rush for the Fed. And what's wrong with a little bit of recession? Is that crazy? It's a recession we don't need to have, I think is what it is, Tim. Look, the price level is not going back to 2019 levels. In order to do that, we'd have to engineer a pretty steep recession and pretty high unemployment rates. My sense is, is that 2.5 percent PCE is functionally price stability. Therefore, the reason why the Fed's going to move is they want to preserve and protect the soft landing.

18:02Now, you guys out there who trade, to be honest with you, are at the front lines of this. If we have a recession, it's traders who get hit the worst first. Then you get the American household, you know, precisely down market workers who tend to get laid off. Well, I hear what you're saying, Tim. We shouldn't fight the last war. This isn't Volcker's inflation war. and there's no need to choke inflation out of the economy and create a massive wave of disinflation. To me, that just doesn't make sense. And the tradeoffs are worth paying. But I do get your point. Joe, love having you on. Thank you.

18:37And get ready for a big week next week as well. All right, guys, we've got a news alert right now on Starbucks tracking the attention of a hedge fund that likes to, shall we say, shake things up. That's right, Brian. Well, Starboard Value has taken a stake in Starbucks, according to a report in The Wall Street Journal, which said the size of the position and the exact demands could not be learned. Now, this, of course, comes shortly after fellow activist Elliott Investment Management took a stake in the coffee chain, proposing a settlement that would involve board expansion and governance improvements, but allows CEO Luxman Narasimhan to keep his job, according to people familiar with the matter.

19:15Now, Starbucks has faced multiple quarters of falling sales with steep declines in China and the U.S., And that has pressured the stock this year. Now, Elliott, Starboard and Starbucks declined to comment. Those shares, Brian, taking higher here and extended trading almost three percent. All right. Starboard in. Pippa Stevens, thank you very much, Tim. I know you got a take on on Starbucks. What do you make of this move by Starboard? Well, from it. Yeah, it's great to see it from a trader's perspective. Obviously, they already did their buying to the extent that there have been management issues.

19:47There's been a real problem being able to even forecast a core business that that on some level is a very sophisticated business. That's concerning. I think there are macro headwinds that I'm not sure they can do a whole lot about at activist funds. I'm happy to see them push some change. I think there's been chaos both in the stores and in the in the C-suite. I think there's ability to certainly try to put the brakes on where margins have pulled back dramatically. But I also think you had a unique and almost a once in a lifetime dynamic for Starbucks in terms of where they could raise prices and where they had the sweet spot of COVID and post-COVID reopening.

20:22And I think that's something that investors are going to have to wrestle with. I like Starbucks. I think I'm going to own it lower. And I don't think you have to be greedy, but it's going to be a six handle. Wow. Going to be a six handle, which is something for a 77 and change stock. That's a ways down. All right. We are just getting started here on this Friday and coming up on Fast Money. Chipotle shares sizzling. One big bank getting even more bullish. Talk about that and more upgrades ahead. Plus, the chart master with the one big oil stock that is looking really good to him right now. You're watching Fast Money here on CNBC.

21:00We'll be right back.

21:08All right, welcome back to Fast Money. Just when you were hoping that gasoline prices would go back down, that's some bad news for you. Crude oil having its best week since March, up nearly 5 % since Monday. With oil prices just kind of frustratingly hanging around the mid to high 70s or even low 80s for a long time, the chart master says one company you know may benefit Carter Worth with a look at ExxonMobil. You got it. Well, before we look at the charts, of course, you've said it exactly right. Oil is just sitting here doing nothing, right? It gets close to 70. No, it's not. It's printing people money.

21:45But as a price per barrel, it drops to 70, and all of a sudden the buyers come in. It gets to high 70s. It's a pair of twos. But let's look at Exxon. I've got three identical charts. Then we'll look at a relative chart. But what we know is this was a big winner coming off of the COVID low. and then after almost a five-bagger, it has spent the past two years consolidating, grinding sideways, doing nothing. Now, another way to annotate it, second chart, whether you call this sort of a range or whether you call it an ascending triangle, third chart, you can name your patterns. It doesn't matter what it is.

22:19Some people would call this a cup and handle, and you'll see this here on the third iteration. But the point is this kind of setup, after any big prominent move that is long in duration and magnitude, And after an equally important rest, typically the rest or consolidation resolved in the direction of the preceding advance. Not always, but that is the bet you make. So a big up, a big rest, and now in principle setting up to breakout. Final chart, it's all about alpha. Its relative performance is just now starting to turn. That's a function of, of course, how it's doing relative to the S &P. But that has all the elements of a bearish to bullish reversal.

22:54And then finally, of course, for those who do care about dividends, This is a company that has paid an uninterrupted dividend for 140 years, going back to 1892, and they've raised the dividend every year for the past 45 years. The dividend is good. If you want 3 % plus, you can get it here. And actually, to jump onto that, what I really like about them also is we're talking about Brent crude prices in the 70s or 80s, and they really only needed to be in the 50s for that dividend that you mentioned to be valid. to be valid. And I think that's something you really want to look at here is they have really their balance sheet has gotten consistently stronger, especially after COVID levels in 2020.