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CNBC's "Fast Money"
2025 IPO Predictions, Tariff Risks 11/26/24
00:43:52
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- [00:00]
Melissa Lee
This episode is brought to you by Merrill. With a dedicated Merrill Advisor. You get a personalized plan for your financial goals and when plans change, Merrill's with you every step of the way. Go to ML.combullish to learn more. Merrill, a Bank of America company What would you like the power to do? Investing Involves Risk Merrill Lynch, Pierce, Fenner and Smith Inc. Registered Broker Dealer Registered Investment Advisor Member SIPC At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu Live in The Nasdaq markets 8 on a day when the Dow and S and P close at fresh all time highs, this is fast money. Here's what's on tap tonight. Trump's new tariff threat. The President elect set to levy massive new tariffs on Mexico, Canada and China on day one of his new administration. Is this part of his dealmaking strategy or a true attack on our biggest trade partners? Plus obesity bummer Amgen, the Dow's worst performer after disappointing results for its experimental GLP1 drug. We'll talk to one analyst who still thinks this stock is a buy. And later, a technical take on the move lower in the VIX inside Best Buy's bad day and quarter and why the recent surge in small caps could help fuel an IPO boom in 2020. I'm Melissa Lee, coming to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Dan Nathan, Guy Domi and Katie Stockton. Affair lead strategies and we start off with Trump's latest tariff threats. The president elect warning he will place a 25% tariff on all products coming from Mexico and Canada on his first day in office until drugs and illegal immigrants stop moving into the country. He also plans to raise China tariffs an additional 10%. Stocks were sluggish out of the gate but rebounded by the end of the day. The S&P 500 and Dow closing at fresh record highs. But some areas of the market were hit by Trump's threat. The ETFs of Mexico and Canada, for instance, falling today. The Mexico and Canada ETF sinking 1 to 3%. The dollar also climbing against the Mexican peso and Canadian dollar. CBC's Eamon Jabber. He's here to take us inside the details of the story. Is this all just tough talk?
- [02:11]
Eamon Jabbers
Eamon it is tough talk and the question is how much substance is behind it. The president elects Flurry of social media posts Monday night are raising the question of what he's up to here because the bar he's setting for compliance by foreign countries, almost unattainable, to stop all illegal IMM all fentanyl into the United States. So what is this really about? Well, Trump took to social media to complain about that human migration and drug trafficking, suggesting that he'll impose tariffs on Mexico, Canada and China until the flow of fentanyl in particular has stopped. In a truth social post, Trump wrote that drugs are pouring into the country mostly through Mexico, and until they stop, he will charge China an additional 10% tariff. Now, the Chinese embassy in Washington responded with a statement saying no one will win a trade war or a tariff war. The idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and realities. So what may be going on here is an attempt by Trump to speed up a renegotiation of the U. S. Mexico trade agreement that he signed back in 2020 that deals up for renegotiation in 26. But Trump may be calculating here that he can bring all sides to the table earlier using the leverage of these social media posts about the tariffs, Melissa, one question here is his strategy is sort of a seesaw, right? If in theory it works and you put the tariffs in and fentanyl trade declines, then you have to pull the tariffs off in response to that. So what Trump really wants, I think, is both tariffs and an end to the fentanyl trade. And he set up a seesaw dynamic where he doesn't get both in theory. We'll see whether this is reality when he takes office or whether this is an attempt to bring all those folks to the table.
- [03:51]
Melissa Lee
And Eamonn, you outlined the response from the Chinese embassy, but Mexico's president also responded saying that they will basically open a tit for tat. So Trump levies tariffs and they will also impose tariffs of their own. So it seems like this time around, Trump 2.0, some of these countries are willing to actually stand up to these tariffs.
- [04:10]
Eamon Jabbers
Yeah, that's the problem with the trade war, Melissa, is that the other side gets to fire back, you know, and this is not just a unilateral decision by the president of the United States. This is a question of whether you want to get into cycle of these tit for tat responses and see how far that takes you. And who wins in that scenario is an interesting question. That's, you know, the Chinese statement says nobody wins in a trade war. The president Elect clearly believes that the United States can win and he will win in a trade war, and that's why he's doing this.
- [04:40]
Melissa Lee
Eamon, thank you. Amen. Jarvis in Washington for us. Should we be worried? Should we trade off the threat of tariffs?
- [04:47]
Eamon Jabbers
Guy, I think you can trade the bond market off it. Clearly the equity market is not worried, but I think the bond market should next year we have $1.5 trillion just in interest to service the debt. Think about that. And then that's on top of all the issuances have to be done in 2025. Now, this might be the right course of action, without question. But again, I think it's inflationary and I don't think the bond market at 4.3% to 10 years of pricing it in at 4 and a half percent two weeks ago, I don't think it was pricing it in. So for me, the way to play this is through the bond market thinking yields will go higher.
- [05:19]
Guy Adami
You hear about it like on the headline pushing back against Trump and against the US who is the biggest economy in the world. Mexico right now recently overtook China as being the largest source of imports into this country. A little over 15%. It was only 12% a few years ago. So Mexico has been picking up steam. And the question is, if you're Mexico, do you really want to take the US On? I don't think so. Having said that, you can't look like you're just going to fall down. And I think if you look at certain sectors that were most hit today, the auto sector specifically, it's argued that, you know, some 97 billion, I'm quoting actually Emmanuel Rossner at Wolf, who said 97 billion worth of auto parts are shipped to the US from other countries, but specifically through Mexico and Canada. So there are places that are particularly, well, you know, I think hurt more than others. Gm, which had also been riding very high coming into today, I think that partly explains some of that move. But look, I think we've, we've speculated now for weeks. We had a day yesterday. This is why this is fascinating stuff and why this is a trading show because yesterday we had Scott Besant, new Treasury, at least secretary proposed is someone that says, hey, look, I'm going to do my best, or at least it was thought he's the moderate voice in the room and the room that's going to be worried about deficits and probably not push as hard on tariffs. We'll see.
- [06:33]
Dan Nathan
I think it's a lot of bluster. I mean, we have four years to Kind of see what happened in the first administration. We've heard lots of tweets over the last four years. And you think about it, I mean, he has to kind of try to follow through with some of the promises he made on the campaign trail. I go back to September, when he threatened John Deere, a great American company with 200% tariffs for equipment coming in from Mexico. Well, at the end of the day, 5% of their sales come from Mexico.
- [06:55]
Melissa Lee
Right.
- [06:56]
Dan Nathan
Three quarters of their production happens here in the US So I guess at the end of the day, a lot of US Companies are probably not going to make any big moves as it relates to manufacturing based on these threats. Because I think that if you look at all the nominations, I think a lot of folks, to Tim's point, look at a guy like Besson and they say these folks are going to have some pretty decent influence, not too different than Gary Cohn in the first administration. So I just don't think you're going to see too many big decisions by US Manufacturers based on these threats right now.
- [07:25]
Melissa Lee
And overall, the markets are acting fairly well. Taking all this in stride, Katie.
- [07:29]
Katie Stockton
Yeah, I would agree. I mean, we have very positive momentum, of course, behind the major indices, and it shows optimism around the administration. So we got to stay with the momentum, really. The relative performance, US versus international, especially Mexico, maybe to a lesser degree. Canada is still very positive. And we want to stay on the right side of that trade, at least as long as it's working. And it's still working.
- [07:52]
Melissa Lee
Yeah, and I guess that's a, that's a question here, guy. You can hear all these headlines that may sound inflationary, bad for the consumer, all of these negative potential impacts on the economy, and yet we have a market that wants to go higher into year end, no question. Do you embrace that?
- [08:05]
Eamon Jabbers
I don't embrace it, but it's not about me. I mean, the market is embracing it. The money flows are embracing it, clearly. And there's an enthusiasm. I think what people believe is going to happen in 2025, the math suggests otherwise. If you start looking at things again. Valuations are not timing tools, but the market's gotten itself extraordinary expensive in a short period of time. We talk about Warren Buffett and his $325 billion that he's raised. He's clearly looking at something. His indicator is north of 200% at 23 times next year's numbers. The market is historically rich. I mean, there's a lot of things to be concerned about. And we can say that it's all bluster. And that might be true, but you know what? President Elect Trump hears that as well. So enough people have said that this is just a negotiating tool, that maybe it's not a negotiating tool, maybe there is a line in the sand. And I don't again, I don't think at 4.3% in the 10 year we're pricing that in.
- [08:54]
Guy Adami
And I think there are sectors that really benefit from this and we've talked about some that don't. And it also comes at a time when the market as we've said, is broadening into a place where the move in the consumer and the retail stuff over the last three or four sessions has been extraordinary. And I don't know that it's necessarily tells you exactly the health of the consumer, but it does tell you a dynamic. And this is on a day when we got Fed minutes that they kind of look back at their, their last meeting and ultimately the mindset is that the Fed really doesn't know where neutral supposed to be. We have liquidity at all time highs in my view. In other words, we've been coming out of a tightening period and seemingly we're still restrictive yet look at where credit spreads are, look at where the equity markets are, look where banks are I think starting to throw money around. So get back to stocks and I like it. I mean I like the fact that semis have underperformed and the stock market's going to all time highs. I think it's bullish and I think there actually is going to be funding coming from the Mag 7. It has been coming from the Mag 7 clearly into this broadening and I think it continues.
- [09:49]
Dan Nathan
It seems pretty obvious that the economy is in good shape. I think that's something that a lot of folks kind of believe that, you know, for better part of this year we had GDP prints that were 2.8%. I think expectations are now 3%. You haven't seen unemployment go up meaningfully over the last, let's call it, I don't know guy or you're tracking this like in the last few months. I mean we haven't seen that sort of thing. And so the markets are kind of pricing that in. So I guess the question is you just mentioned banks, Tim. You know, the banks in particular are pricing in a rip roaring economy next year.
- [10:17]
David Wu
Right.
- [10:17]
Dan Nathan
And so at some point the rubber's got to hit the road a little bit. S and P is up 4% since the election. I don't think that is like some overwhelming sort of vindication of the policies and that sort of thing. And the only thing I'll just say is like, you know, you're going to have to prioritize all of these threats. There's been a lot of them over the last year, you know, and I don't think that they thought that they're going to have to deal with them all so quickly. But at the end of the day, the financial ones at least are in the best hands for right now. And I think you're not going to see something come apart. I just don't think we're going to see these tariffs on day one.
- [10:47]
Melissa Lee
All right, for more, let's bring in David Wu of David Wu Unbound. He formerly oversaw emerging markets fixed income strategy at bank of America. David, great to have you with us. Thanks for joining us.
- [10:57]
David Wu
Thanks for having me.
- [10:58]
Melissa Lee
What's your take about the latest talk about tariffs? And, you know, we have the benefit of having learned what the impact of tariffs could be from the first Trump administration. So what are your conclusions?
- [11:09]
David Wu
I think the most important takeaway from the announcement last night is the fact that China was only hit with a 10% tariff versus 25% for both Canada and Mexico, which is actually very surprising if you think about this. But then again, if you think about it, it's not that surprising because guess what, the biggest basically tariff, whatever you call it, warmonger lighthizer, has not yet landed a job in the White House. He should have been the first appointment and yet he has nowhere to be seen, in my view. What this tells me something obvious, which is very likely. Trump has already begun the engagement with the Chinese. I bet you informal talks are already progressing. Let's think about this. The second most important person in the Trump administration is going to be Elon Musk. Elon Musk has this biggest factory in the world in China. He's building the second biggest factory in the world in China. China is the second largest market for Tesla. So from that point of view, I don't think Elon Musk wants to see a blowout between the US And China. On top of that, given the massive escalation in the Ukraine war, given what Biden is doing to provoke Putin to declare World War three, Trump probably has to now reach out to Xi Jinping, probably who's the only person who's got some leverage over Putin to basically help Trump to bring him across the line. So I would argue everything being said, I think actually what the announcement yesterday has nothing to do with tariff, has nothing to do with anything. In fact, probably just Means that the administration is making a lot more faster progress than you might imagine when it comes to doing a deal with China.
- [12:40]
Melissa Lee
So you think there's actually a floor to how bad the relationship with China could get then, which would be sort of counter consensus at this point because you know, people on Wall street are thinking the worst. I mean, if you're talking the big number 60% tariffs and I know 10% is the opening salvo, but if you're thinking ultimately it's 60, then that could be terrible. Right. So if you're saying that there's a floor because Elon Musk is going to. Let's.
- [13:01]
David Wu
Exactly, let's. Let's remind your viewers on numbers. In 2018, when Trump declared trade war on China, China accounted for 23% of total US imports. Today, China only accounts for 13% of US imports. In other words, even with 60% tariff, you're not going to hurt China that much. You're not going to raise too much revenue and you're not probably not even going to balance the US Trade deficit. And I guarantee you what Scott Besson, who is telling Trump is that you know what, you can hit China with 60% tariff, but long term interest rate is going to go up so much it's going to make it counterproductive. You're going to raise less money by hitting China with tariff, then you're going to lose by paying out more interest payment, which is now at $1.1 trillion. So I think from that point of view, to me what Trump is after is not the tariff. Trump needs the Chinese to create jobs in the U.S. i think there's a much more obvious deal that they're talking about on the table which is lifting restriction on foreign investment for the Chinese in the US to allow the likes of BYD to basically come into the US Create jobs, build factories and make cars and sell to the Americans, which is what the Americans did for the Japanese 40 years ago, the Koreans 20 years ago and the Germans 10 years ago. You think Trump really can. I mean he gives a damn about whether it's the Japanese with a Chinese car. Whatever for Trump is only US versus them and them is the same. So I as long as the Chinese are willing to build cars in the U.S. i think that will be the win win.
- [14:32]
Melissa Lee
Going back though to Elon Musk being the second most important person in the administration, allowing BYD into the country and Neo and all the other Chinese EV makers for that matter, in that could really hurt Tesla. So how does that happen in your scenario of Must being very important.
- [14:47]
David Wu
Let's just think about this. Musk recently said he doesn't want to build a cheap basically EV car anymore. The Model 3 has sort of abandoned the idea because I think he's bracing for this idea. What I'm proposing, in fact, from that point of view, Elon Musk could basically stay competitive at the high end, focus on autonomous driving, which is something the Chinese are not going to be able to actually entertain because the whole ban on connectivity. So from that point of view, you know what, you know, BYD is going to probably hurt Toyota, Honda, Hyundai and so on and so forth. American car manufacturers anyway, not really that big an ev. They're basically sell trucks for a living. So from that point of view, let the Chinese take market share from the Japanese, the Koreans and everybody else. To me, it's not obvious that Elon Musk is going to be a big loser here. He could actually end up being a big winner. Remember, Elon Musk has already said a number of occasions his factory in China is the most productive automobile factory in the world. And he says that they produce the best, highest quality Tesla. That is much more important to Elon Musk in terms of his basically aim to become a global player.
- [15:54]
Melissa Lee
David, great to speak with you. Thanks for your time.
- [15:57]
David Wu
You're welcome.
- [15:58]
Melissa Lee
David Wu. David Wu Unbound. That's perfect bound, right? I mean love, love his bank of America for decides. Yeah, for a long, long time. A lot of interesting, provocative.
- [16:10]
Dan Nathan
I don't get the Tesla thing. I mean this goes back to January. Elon Musk said if their trade barriers not put up on Chinese EVs. He said this on his conference call. It's going to demolish the industry globally. And you know, when you think about he just said Wu that you know, like he's going to focus this is Elon on the high end. Model S and Model X are a small percentage of their production right now. They are very focused on this kind of 40,000 range car. If BYD comes in here, the average BYD car I think at a much bigger range, it's like $25,000, you know what I mean? So I think there's no way to spend any of this. We just talked last night about these EV credits. It seems like Trump is on a different page than Elon Musk about a lot of this. So it's going to be very interesting to see how this shakes out.
- [16:53]
Melissa Lee
The whole idea though, that there's going to be some sort of deal and what Trump really wants is the Chinese to come in and make jobs for Americans. I mean, that's sort of a very interesting. This is at a time, of course, when China's economy is on its knees. I mean, they had to be a little bit more pragmatic about how they engage with the Trump administration versus the first administration.
- [17:12]
Guy Adami
That's what I was going to say. I mean, David Wu, who I loved a lot of things he said because he refers to a pragmatism that's going to take over in this administration and that Scott Besson and Donald Trump. I mean, that there's a pragmatism to understanding where tariffs don't work. Look, we saw this for the US steel industry and Trump 1.0. It's also very important for US companies that China's economy does better. Doesn't mean we're necessarily going to worry about stimulating China's economy. But at the end of the day for the markets, if you look at a lot of the consumer discretionary and a lot of things that have been beaten up on China weakness, there's a huge rally in a lot of those names. Also dollar strength pragmatism. If that takes over, nobody wants a strong dollar.
- [17:48]
Eamon Jabbers
It's great to be pragmatic, but the numbers don't lie. And you don't start with a clean slate. When you walk in office on January 20, whatever day it is, you walk in with what you've basically inherited. And that is an extraordinary balance sheet in terms of the Fed. And interest rates, I think are going to continue to go higher. He mentioned 1.1 trillion in interest payments. That's this year, accelerating one and a half next year. I mean, you have to address that at some point. Tariffs don't do that.
- [18:11]
Melissa Lee
All right, now to the volatility trade, the VIX today trading below 14, dropping nearly 40% just this month. And Katie thinks this chart is hanging around key support levels at this point. What are you looking at?
- [18:20]
Katie Stockton
Yeah, we definitely have to keep a close eye on it. We believe, and I know Guy agrees, that we've been in this high volatility regime since July thereabouts, per the vix. And the VIX can be seen as a gauge of market sentiment. When it's relatively low, it's considered more complacent. And that is a market risk. So we're right at the support level for the vix, which has been somewhat range bound as part of this high volatility cycle. And we feel that as long as this support level holds that there still is that risk of a corrective phase, something that Maybe we don't sell ahead of, but rather get some sort of dry powder to put to work in January, in February to take advantage of that. So we're really watching this very closely. It's around 14 and a half for the Vix and if we were to see a breakdown, we would require two weekly closes below that level to confirm a breakdown. Then guess what? It looks like we're probably moving back into a lower volatility cycle which is more market positive and the next floor for the Vix is back near 11. So it's really a critical level for the Vix and really also the broader market. Just given the negative correlation, something resonates.
- [19:28]
Eamon Jabbers
So Katie was here in June, July and she said that we're about to enter a period of heightened volatility and it typically lasts 9 to 12 months. Ish. If I'm putting words in your mouth, I'm sorry. But by August 5th we saw what happened. The volatility index. I think a lot of people think that was it. I think that was sort of a precursor. Not to suggest we're going back there, but I think there's me another round of volatility. These levels are critical. I think it's going to hold.
- [19:51]
Melissa Lee
Coming up, a lot of after hours action to bring you a lot shares. Adele CrowdStrike, HP Autodesk and Workday all on the move after reporting the details and numbers out of those quarters straight ahead. And Wells Fargo still operating under an asset cap put in place after their fake account scandal. But could the growth restraints be on the way out? The hurdles they still need to clear what it could mean for the bank's next move. Don't go anywhere. More fast money into what does it.
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- [23:40]
Dan Nathan
Coming out and saying there's insane demand for it and again, so does Nvidia?
- [23:44]
Eamon Jabbers
I know.
- [23:44]
Melissa Lee
But no, they all do.
- [23:45]
Dan Nathan
That's what I said, so I don't hear insane demand from their customers for the high end, you know, next generation. So there are a couple things going on here. I think that was the takeaway with Nvidia's beat and raise last week is that the beat and raises are getting less and less and then you keep hearing more about the transition to this higher end. So, you know, I mean like Dell is a great example of a company that keeps talking about AI demand, but they keep saying the rest of their business is weak, which is not too different what we heard from asml. So it sounds like the PC business is weak right now and you're going to have lumpy demand that, that's what they said.
- [24:21]
Guy Adami
But is that a reason to sell Dell? I mean, I kind of feel like if you're going to let any business be weak, you want that one to be weak. I mean that's the lower margin business. That's the old school business, the ESG business. So the infrastructure group is the one that has gotten a lot of excitement around enterprise and again multipurpose data servers. And I think that's, that's the story. It comes back to this. I mean, first of all it's been a roller coaster ride. If you've been playing Dell, Karen's been doing a great job. It's first of all, you went 90% up from February to June. You went down 90% from, from June to August 5th or that low and you're up 60%. It trades it about 15 times forward. It's not expensive with a pretty sexy growth business. And it's growing around 10. 10. Yeah, around 10% a year. So I think you can own it here. Even though this isn't the kind of a name that I would like to be chasing, but you know, I feel like you are.
- [25:06]
Melissa Lee
Do you like the chart, Katie?
- [25:07]
Katie Stockton
You know, with a 10% downdraft, it basically comes back into its rising 50 day moving average. So I feel like that's maybe opportunity for it. The long term momentum is positive there.
- [25:18]
Melissa Lee
Let's get to CrowdStrike earnings now. That stock is lower following its latest results. Kate Rooney's got the latest on that. Kate, Melissa. So despite that global tech outage this summer, it was a pretty Strong beat for CrowdStrike, at least. In Q3, the cybersecurity company raised its full year guidance as well. Revenue for the quarter topping $1 billion. That grew 29% or so year over year. It did see some strengths in subscription revenue and Then profitability with 19% operating margins for that quarter Q4 EPSO the guidance at the midpoint was rain of that range was light and then same with its revenue forecast that appears to be weighing on the stock after hours. The global tech outage was the elephant in the room going into this report. Street had expected lower growth because of some of the potential delays in renewing contracts. Total air outperformed at topped expectations at 4.02 billion. 153 million of that was net new arrival, which some analysts are excited about. CEO George Kurtz on the call that's going on right now, said they were tested, as he put it after the outage and responded with speed, care and resolve. He called out CrowdStrike's performance in its first full quarter since that incident and 97% net retention rate. He said it was down less than half a percentage point. Also says through all that they remain laser focused as he put it on innovation. Mel, Kate, is there any evidence that they had a discount in order to hold onto those contracts? Were they contracts already signed and so therefore for the retention rate stands at full margin? That was one of the big questions heading into the print. So far on the call we haven't gotten any indication that this was a result of discounts and saying, hey, stick with us because we're going to lower cost, we'll keep an eye out for that. And that was one of the expectations. But it seems like most of the metrics outperformed AR as well, so it didn't bite into results as the way you would expect if they were giving massive discounts. So no evidence of that at this point. Mel. All right, Kate. Thanks, Kate. Rooney guy, what's the trade?
- [27:09]
Eamon Jabbers
All time high from 400 to 200 in a month over the summer. We know that it basically got the entire thing back. Now they beat by 12 cents. They guided full year up by 12 cents, which suggests the next quarter is going to be sort of, I don't know, pedestrian at best at a big valuation. Given the run, I mean it makes sense that the stock is lower. I think it should be lower than it is now given the valuation. So it was a fine quarter. Guide's not great. I think the stock trades down, there's.
- [27:35]
Melissa Lee
A lot more fast money to come. Here's what's coming up next.
- [27:39]
Seth Rubin
Is the punishment over how the asset cap on Wells Fargo could be lifted.
- [27:44]
Melissa Lee
And what's changed at the bank since.
- [27:46]
Seth Rubin
Their fake account scandal. Plus hefty losses not enough to tip the scales.
- [27:52]
Melissa Lee
The latest data out of Amgen's obesity drug trial and why Wall street was.
- [27:57]
Seth Rubin
Expecting even more outsized results. You're watching Fast Money live from the NASDAQ Market site in Times Square. We're back right after this.
- [28:12]
Melissa Lee
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- [28:43]
Seth Rubin
Once a destination for powder hounds, now a money making powerhouse driven by money power envelopes.
- [28:50]
Melissa Lee
Faith Cities of Success Salt Lake City premieres December 10, 10 Eastern CNBC, Sirius XM112 welcome back to Fast Money. The Dow and S&P 500 closing at fresh record highs. The S and P also notching its seventh straight day of gains. And the Nasdaq also higher up 610 of a percent. Shares of Procter and Gamble up today now in a 10 day winning streak, its longest rally in 17 years. And some more after hours action workday Urban Outfitters Autodesk Ambarella posting earnings and revenues that beat expectations. Ambarella with a big move higher after upping revenue guidance for the fourth quarter. And shares of HP lower after reporting earnings in line with estimates. And do not miss the CEO of HP on Mad Money. That's 6pm Eastern right after Fast Money here on CNBC. And take a look at revision. Receiving conditional approval for a loan of up to $6.6 billion from the Department of Energy to build its production facility in Georgia. The EV maker pausing development of the plant back in March due to concerns about its capital position. And Wells Fargo may be nearing an end to its asset cap punishment, the constraint put on the bank back in 2018 after its fake account scandal. But now the bank is reportedly in the last stages of passing regulatory tests to lift that growth constraint. According to this report, the punishment could be removed as early as the first half of next year. Coming up, heavy losses, but not enough to carry the weight of the stock. How Amgen's latest obesity drug data isn't meeting Wall street expectations and what it means for the entire weight loss drug space. Last Money is back in two. Welcome back to Fast Money. Amgen closing nearly 5% lower, well off its worst levels but still the biggest drag on the Dow. The company out with phase two data on experimental obesity drug Maritide showing patients lost up to 20% of their body weight on average at 52 weeks without plateauing. But the results seemingly not enough for the street. CNBC's Angelica Peebles joins us now with more. Angelica?
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Katie Stockton
Yeah, Melissa, the street was looking for 25%. So that 20% reduction, disappointing right there out of the gate. But the bigger concern today was the side effects. Amgen saying that 11% of people dropped out of the trial because of any adverse events and 8% dropping out because of GI issues like nausea and vomiting. Now, of course, these side effects are not new for GLP1s, but am to describe pretty high rates and they didn't give a detailed breakdown of the severity, just generally describing them as mostly mild. Now, they did say that the side effects were typically after the first shot and they're planning on starting with a lower dose in the phase three. And on that phase three, Amgen not saying whether they'll go with a once a month dose or once every other month. So stay tuned there. And also today, the Biden administration proposing Medicare and Medicaid cover obesity medications that would give about 7 million Americans access to these drugs. The current administration, though, they won't be able to implement that policy before January. So it'll be up to the Trump team to decide what they want to do with it. Melissa?
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Melissa Lee
All right, Angelica, thank you. Angelica Peebles, let's get more with Piper Sandler senior research analyst Chris Raymond. He reiterated his overweight rating on Amgen after the results crossed. Chris, great to have you with us.
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Seth Rubin
Great, great to be here. Thanks for having me.
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Melissa Lee
You know, there was an assumption after this data came out that, you know, it won't get better in phase three. And yet as Angelica had pointed out, there wasn't plateauing at the end of 72 weeks, which indicates that perhaps there could be more weight loss to come which could actually then surpass Tirzepatide. So what is Wall street not sort of, you know, taking into consideration in evaluating the results so far?
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Seth Rubin
Right? Well, yeah, I think you hit the nail on the head. You know, the data showed clearly that the drug's efficacy effect was not plateauing at 52 weeks. And you got to understand we're comparing 52 weeks to tirzepatide, which had its data and essentially spot on in terms of weight loss, 20% for both tirzepatides was at 72 weeks. And if you look at the curves that Amgen presented today, clearly it's headed even higher. So I think from my perspective, just hold on a few weeks here, we'll get longer term data and I think the superiority will be a lot clearer.
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Melissa Lee
Getting people over the hump, though, in terms of not dropping out because of the severe side effects so early on, that could be an issue. Do you think that resolves in phase three? Do you think it resolves if you start people off at a lower dose?
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Seth Rubin
Yeah. Tbd, you know, the company rightly is being a little bit cagey on their phase three design. It's a very competitive market. They did present some interesting data with patients starting at a much lower dose and they didn't give us the numbers, but said it was much lower than what they presented. But a little perspective, you know, we're talking, you know, you know, essentially a 6.7, you know, discontinuation rate for tirzepatide versus, you know, the 11% overall number that we saw, you know, with Maritide. So we're kind of in the, in the, in the same ballpark here in terms of discontinuation rates. GI related, there are a couple of percentage points higher for maritime, but the trade off, again, you've got much faster weight loss and you also have essentially a game changer in terms of being dosed once monthly versus once weekly.
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Eamon Jabbers
Chris, we're talking about a company, and I'm leading the witness, 13, $14 billion drugs probably trades at, I don't know, 14 times. Next year's numbers coming off what I thought was a great quarter in late October that's probably priced in this news on the back of the sell off the stock has seen over the last couple of months. So at a certain level, you just have to sort of close your eye and buy this thing, I think.
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Seth Rubin
Well, yeah, or you could keep your eyes open, you know, and look at the potential value of this drug. You know, we're talking, you know, a segment that I don't think there's really much debate. This is ultimately going to be approaching $100 billion of revenue. You know, the obesity GOP market. So it doesn't take a ton of share to have a real needle mover, especially for a company like Amgen. So I do think this is, you know, not just an overreaction, but, you know, a misplaced reaction.
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Melissa Lee
All right, Chris, great to have you with us. Thanks for your perspective. Chris Raymond of Piper. And a quick programming note here. Once you've recovered from your Turkey Day binge, don't say that. We're bringing you special coverage of the weight loss industry. Fast Money's Obesity Week starts off next week, Monday, December 2nd. Bringing together top CEOs and thought leaders in the industry. That's right here at 5pm Eastern every day next week.
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Guy Adami
Not very nice to obesity week after Thanksgiving. Come on. I mean people go back later stuffing. I mean it's, you know, it's what you do.
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Melissa Lee
It just, it just happened to be that we picked next week. Okay. Nothing to do with Thanksgiving. Tim. Have a big role obesity week or anyway the charts. Novo has. The chart is not great. With Novo, it seems to me the performance has not been good.
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Katie Stockton
So I'm actually intrigued by Amgen in a way because when you see a big gap down after a downdraft, the stock was down about 25% at today's low after the midyear high. It's intriguing when you get a heavy volume gap down following the decline. The last time that happened for Amgen was a short term low on August 7th. Of course, the market was bottoming too. But it does tend to be climactic.
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Melissa Lee
Right?
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Katie Stockton
So if folks are looking to exit their longs at a very minimum, they should probably wait.
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Melissa Lee
Right? The other differentiating factor between this drug and the others is that it's once a month. So imagine once a month as opposed to once a week.
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Guy Adami
Look, I'll leave it to the pharma experts on GLP especially, but you know, there are other elements of this analysis that say you're going to have higher weight loss in part two and this is fine and that this is to sell the news events. It sounds like this is a group that would be buying this weakness. I would be right there. That bounce off of 260 is a reset back to one year.
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Melissa Lee
Lows coming up, more after hours action this time. Nordstrom shares on the move after reporting results and numbers from that quarter next. Plus the morning retail earnings that had Dix, Abercrombie, Kohl's and Best Buy in the red. The details and the trend keeping that space in the clearance section when Fast Money returns. Welcome back to Fast Money. We've got an earnings alert on Nordstrom. The department store stock at after hours lows following its latest results. A call is underway. Courtney Reagan's got the latest court.
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Katie Stockton
Hi, Melissa. Yeah, so much going on here today, but Nordstrom earnings here after the bell with earnings revenue, comparable sales actually coming in all better than expected. Comparable sales up 4%. That was much stronger than the.07% growth that was consensus. Now Nordstrom only taking up its bottom line of the sales glide slightly adding sort of to this general conservatism from a chorus of retailers about the holiday quarter regardless of how strong or not the third quarter might have been. And while Nordstrom saw strength and apparel in shoes off mall department store, Kohl's reported weakness for both of those categories. Now Kohl's put up its 10th straight quarter of declining comparable sales and announcing a new CEO. Clearly a lot of work to do. Abercrombie, Dick's Sporting Goods again both outperforming expectations with continuing sales growth and guidance raised streaks. Meantime, Best buy logs its 11th straight quarter of comp declines. CEO Corey Berry pointing largely to external factors like macro uncertainty, distraction in the run up up to the election, customers waiting for deals as basically what was to blame for the results. Now, she did say comp sales are up 5% in the first three weeks of November, but that's just about 20% of the quarter. Back over you guys.
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Melissa Lee
It feels like Kohl's Courtney has had a lot of CEOs in a very short amount of time and that this quarter was really the result of just sort of miscalculation when it came to private label and amping up sort of the brand name items.
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Katie Stockton
Yeah, absolutely. I know that the CEO comment is an interesting one. When we got the news yesterday, I sort of went back to the timeline myself. I think it's the third CEO since 2018. So it was Michelle Goss and then she left kind of surprisingly, Tom Kingsbury took over and now Ashley Buchanan is going to take over over him. But yes, I mean, clearly I don't think the Kohl's story has anything to do really with the consumer. I don't think it's talking about weakness of the consumer. And I don't even necessarily you can even point to the categories because Nordstrom had strength in the exact categories that were weaker. Kohl's, you may argue they're different customers, but Wal Mart also saw some strength in some of those general merchandise categories for the second quarter in a row in a different customer, I would argue than typically. Is that Nordstrom? So I think to your point, I think it was a lot of missteps by, by Kohl's operations. I mean comparable sales down 9.3%. That is significant and significantly worse than the street had expected.
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Melissa Lee
Yeah. Court. Thanks.
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Katie Stockton
Thanks.
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Melissa Lee
Courtney Reagan. Where do you want to shop?
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Eamon Jabbers
Look at you, Nordstrom. So there, I think one of the reasons it sold off it was a $22 stock a week ago traded up to 25. That's a big move. But look at the quarter. 4% comps against what the street was looking for is great. Their Margins were better. Merchandise only up 5.9% year over year is not a disaster. I think it was the full year guide that was in line. They're sort of sandbagging. So I think you buy Nordstrom's here.
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Guy Adami
I think their numbers are solid. I think there's a floor under the stock with the take private bid. I think there's a real surprise. I think Rack is Rack proud. I mean, it continues to be the place to go.
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Katie Stockton
You know, I am interested in the chart. It looks like a long term turnaround phase. So pullbacks could be entries in that kind of setup. And if you look at xrt, the retail etf, we do have some sort of signs that it's breaking out from this big range. So I'm encouraged by the action. It's a little bit early. We'll see.
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Dan Nathan
Yeah, speaking of Rack, I want to go to Dix here because I just thought that quarter was really interesting. The stock gapped up and it looked like it was actually going to test the high end of that range over the last five or six months ago. But some of the commentary that you heard from a Dix or a Best Buy doesn't leave you feeling that great about the retail environment. It seems to be very promotional. We know that a lot of this started, you know, about a month ago or so. So to me, I just think there's a really hard time for these retail dollars to report and kind of give their guidance. But again, it doesn't feel particularly strong.
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Melissa Lee
Coming up, small caps driving the action. How the Russell 2000 record gains could fuel a resurgence in the IPO market and where our next guest sees the best opportunities. More fast Money into. Welcome back to Fast Money. Small caps having a banner month. The Russell up almost 10% in the last four weeks. The index now less than 1% off its record high hit during yesterday's trading session. And our next guest thinks the Russell's record gains could help revive the IPO market. Seth Rubin is Stifel's head of Global Equity Capital Markets. Great to have you with us.
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Seth Rubin
Great to be here. Thanks.
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Melissa Lee
Where are you expecting the newest companies to be minted? Which sectors?
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Seth Rubin
Yeah, well, I think the. I do think, by the way, your comment on the small cap rally is hugely important to the market because that's really where the heart of the market is. The heart of the US New issue market and the IPO market. Look, I think we're going to see a real pickup in activity across the board. I'm most focused right now on tech and fintech because you guys know, you know, we've been averaging, had been averaging about 40 tech IPOs a year for the last 10 years and there's been fewer than 40 over the past three years combined. Right. So there's just a huge backlog of really high quality companies. Fig we're excited about. I think it could be the biggest beneficiary of deregulation in terms of what's going on in the broader market and then in health care and we talk about the ups and downs on a, on a day to day basis in healthcare and in particular in biotech. But innovation and AI driven drug discovery is really accelerating companies to market and frankly public markets are the best place for biotech companies to be able to continue to raise capital to fund trials. So I'm excited across the board.
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Dan Nathan
Ruben, you just mentioned 40 IPOs in the tech market over the last three years. What do you think private companies have Learned since the 2021 period where we saw a lot of companies go public via SPAC that probably shouldn't be in the public markets?
- [42:41]
Seth Rubin
You know, I think most importantly they've learned that they have to perform as public companies. Right. We, it might be a cheesy line, but we say it all the time when we price IPOs, we say welcome to the starting line. Right. And that's where it begins. So, you know, I think companies are being a lot more thoughtful and a lot more conservative about the type of guidance they put out, making sure they can beat and raise and really having great visibility into the next 6, 8, 12 quarters so that they know they can get out there and they can perform as public companies. I think this next wave is not going to be about top ticking valuation on the way in. It's going to be about raising enough capital to really grow the business and then be able to perform for a number of years and get investors in at the right prices and give them an opportunity to make money along the way.
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Melissa Lee
Does the trade banks seth off all of this? I mean that's a bottom line, right? I'm sorry, that is the trade off of this belief that there's going to be a wave of IPOs is the trade banks?
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Seth Rubin
Yeah, look, I, you know, I think you know our views and we cover the bank sector and we're hugely bullish on banks and regional banks and the brokerages that are involved in the activity of the IPO market, the M and A market. So like I can only speak to our pipeline and what I see there on the street, but I think we're all gearing up for a really active 25 and 26.
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Melissa Lee
All right Seth, thank you very much for your time. Seth Rubin Stephen or the trade.
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Eamon Jabbers
First of all the great Ruben of all time is Ruben Kincaid. Yeah Partridge.
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Dan Nathan
Quick, quick apology. I don't I Ruben in the brain.
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Melissa Lee
But Seth, that's fine.
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Eamon Jabbers
Number two the NASDAQ was the place to go. I think it was just initiated Outperformant William Blair I mean they stand to win made a new all time high today It's NDAQ Mills small cap index.
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Melissa Lee
How does it look?
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Katie Stockton
You know it's new highs essentially. So what we're watching is resistance around 2360 for the Russell 2000 index. That's a key level if it can hold above their confirmed to break out we're not buyers right here. It's pretty overstretched short term in our opinion but it could be a major breakout.
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Melissa Lee
Yeah do you think there's an IPO pipeline to be had next year?
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Dan Nathan
100% I mean I think there was like three or five tech IPOs last year. There's a huge pent up demand just as Seth just told us.
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Guy Adami
Well this this all tells me equities are going higher. I mean there's so much liquidity out there. There are a lot of private equities getting exits teed up. The M and A market is going this is part of the backdrop for equities that I think and this is what people are expecting it's going to happen.
- [45:02]
Melissa Lee
By the way calling Seth Rubin Rubin is really not too bad. I remember when when the sea of Bob Evans was on that was completely.
- [45:12]
Dan Nathan
Tim Apple that didn't go so so.
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Melissa Lee
Many other Michelle like 100 times. Right whatever. Charles Schultz of next final trades time for the final trade Tim Seymour that.
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Guy Adami
Amgen opportunity doesn't have to be tomorrow but this is a company I think both on valuation guy talked about what's overall in the pipeline I think this data was something new.
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Melissa Lee
Goodbye Katie Stockton A fair lead strategies.
- [45:49]
Katie Stockton
I think everyone should check out Genesco the ticker is GCO got a great.
- [45:53]
Guy Adami
Face breakout what do they do I'm just kidding.
- [45:57]
Melissa Lee
I don't Great to have you Katie.
- [45:58]
Dan Nathan
Yeah I see what you see in the Russell the IWM but I wouldn't be chasing it here looks like an epic what guy double top.
- [46:05]
Eamon Jabbers
Yeah we were just saying before during the break that Tim and I were saying that Mel wouldn't have liked us in college.
- [46:12]
Guy Adami
Not much.
- [46:12]
Eamon Jabbers
I mean I don't know you said what we don't like you now. So I mean, it's just we have.
- [46:16]
Guy Adami
Feelings that truth and I think they pick on the ones they.
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Eamon Jabbers
I agree with that. I agree. I think the market's picking on them now. Unjustifiable.
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Melissa Lee
All right, thanks for watching Fast back here tomorrow. Bye for more Fast Hump day. Gobble gobble. Thanks. Mad Money with Jim Cramer starts right now. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.