CNBC's "Fast Money" Episode Summary
Episode Title: A Big Call On Yields… And Databricks CEO On New Funding Round
Release Date: December 17, 2024

Hosted by Melissa Lee, CNBC's "Fast Money" delivers an in-depth analysis of current market dynamics, featuring insightful discussions with top traders and industry leaders. This episode focuses on the potential rise in bond yields, the implications for the stock market, significant movements in specific stocks like UnitedHealth and Pfizer, and an exclusive interview with Databricks' CEO regarding a substantial new funding round. Additionally, the episode explores merger talks in the automotive sector and challenges in the steel industry, providing a comprehensive overview for investors navigating a complex financial landscape.

1. Bond Yields Surge Predictions

Melissa Lee opens the discussion by highlighting a bold forecast from T. Rowe Price, suggesting that the benchmark 10-year Treasury yield could climb to 6%—a level last seen in the year 2000. The panel delves into the factors driving this potential increase, including a growing federal deficit, tax cuts from the Trump administration, and potential tariffs and immigration policies that may exert further pressure on prices.

Melissa Lee [02:20]: "T Rowe Price is right."

Steve Grasso emphasizes the historical context, noting that similar yield levels during the 2000s coincided with low cash levels in the equity market, drawing parallels to current market sentiments.

Steve Grasso [02:39]: "If yields go to 5%, who knows what the psychological level is."

Tim Seymour and Karen Feynman discuss the fiscal risks and economic indicators that could influence the trajectory of bond yields, underlining the delicate balance between economic growth and inflation control.

2. Impact on the Stock Market

The panel examines how rising yields might affect major stock indices. Despite a slight dip in indices, they remain near record highs. Steve Grasso points out that growth scares could push yields lower, which would be detrimental to the equity market.

Steve Grasso [02:39]: "A growth scare would push yields lower and that's not good for the equity market."

Karen Feynman raises concerns about small-cap stocks, highlighting that higher rates could limit their ability to finance long-term debt, potentially creating headwinds for this sector.

Karen Feynman [05:19]: "Many of them are not able to finance on long-term debt... that could be a real headwind for small cap."

Julie Beal concurs, suggesting that the market might need to retrace a bit after a strong rally, indicating a possible pullback is on the horizon.

Julie Beal [07:05]: "The market probably should retrace a little bit lower."

3. Fed Meeting and Inflation Outlook

With the Federal Reserve's meeting imminent, the panel anticipates discussions around inflation and interest rates. Subhadra Joppa, Head of U.S. Rate Strategy at Societe Generale, shares her outlook, expressing skepticism about yields reaching 5% in 2025.

Subhadra Joppa [10:40]: "Unlikely."

She elaborates on factors like tariffs and immigration policies that could influence inflation and yield movements, suggesting a possible flattening of the yield curve.

Karen Feynman and Tim Seymour further explore how the Fed's policies might adapt based on economic indicators, emphasizing the uncertainty surrounding future rate hikes.

Melissia Lee [09:20]: "If the 10-year yield goes to 6%, that would be bad."

4. UnitedHealth Slides, Pfizer Boosts

Melissa Lee shifts focus to corporate stocks, particularly UnitedHealth and Pfizer. Julie Beal indicates that UnitedHealth’s shares have plummeted to an eight-month low due to legislative pressures targeting pharmacy benefit managers (PBMs).

Julie Beal [17:01]: "Larger payouts are going to squash profits and their margins."

Conversely, Steve Grasso discusses Pfizer's positive outlook following a robust 2025 revenue forecast, echoing investor relief after a disappointing previous guidance.

Steve Grasso [22:13]: "Management has truly bracketed up and down part of the Wall Street expectations."

Julie Beal supports Pfizer’s prospects, highlighting its diverse pipeline and strong position compared to competitors like Moderna.

Julie Beal [24:03]: "Pfizer is in the beginning of a very large bounce higher."

5. Exclusive Interview: Databricks CEO on New Funding Round

An exclusive segment features an interview with Ali Godsey, CEO of Databricks, discussing the company’s recent $10 billion funding round, valuing it at $62 billion. Ali Godsey explains the strategic use of these funds, focusing on employee liquidity, talent acquisition, and business expansion through acquisitions.

Ali Godsey [27:21]: "We're going to invest a lot in hiring talent... and continue hiring in sales and marketing."

He also touches on the potential for an IPO, stating that the majority of Databricks' history will be as a public company, hinting at its inevitable transition to the public markets.

Ali Godsey [28:54]: "It's not a question of if, it's a question of when."

Julie Beal differentiates Databricks from competitors like Snowflake, emphasizing Databricks' focus on AI and cost-effective solutions through open-source technology.

Ali Godsey [29:37]: "We excelled at using AI... we could really lower your cost because we were open source based."

Tim Seymour and other panelists express optimism about Databricks’ growth prospects and potential IPO impact.

6. Automotive Sector: Honda and Nissan Merger Talks

Melissa Lee reports on rumors of a potential merger between Honda and Nissan, aimed at bolstering their position in the competitive electric vehicle (EV) market against giants like Tesla. Phil LeBeau from Nikkei News provides details, noting that such a merger could result in manufacturing over 7.5 million vehicles annually, significantly outpacing Tesla's projected 1.8 million in the same period.

Phil LeBeau [33:43]: "Tesla is on pace to sell a little over 1.8 million vehicles. Combined, Honda and Nissan could produce three times that."

Karen Feynman and Steve Grasso discuss the strategic advantages of such a merger, including enhanced scale and flexibility in hybrid technologies, positioning the merged entity to better compete globally.

Karen Feynman [36:09]: "Honda has really demonstrated an ability to stay very flexible."

Steve Grasso praises Toyota's hybrid strategy amidst the challenging EV landscape, suggesting a selective investment approach within the Japanese auto sector.

Steve Grasso [37:26]: "I like Toyota's story... there's a lot of questions on where we are in terms of demand and profitability in the EV sector."

7. Steel Industry Challenges: Nucor's Profit Warning

The episode addresses the struggles within the steel industry, focusing on Nucor's profit warning. Julie Beal explains that Nucor projects fourth-quarter earnings per share (EPS) to be between 55 to 65 cents, significantly below analyst estimates of 89 cents and last year's $3.15.

Julie Beal [43:37]: "This really reflects the level of cyclicality in this business and the lack of ability to control pricing and costs."

Steve Grasso highlights that while Nucor's balance sheet remains strong, the muted pricing environment and concerns about demand continue to pressure the stock.

Steve Grasso [44:08]: "They've been buying back more shares... but this is something that probably sends a more negative signal than people had already priced."

Karen Feynman contrasts Nucor with Steel Dynamics, expressing a preference for the latter due to slightly better valuation and market positioning.

8. Retail Investor Outlook: Insights from Joe Moglia

In a guest segment, former TD Ameritrade CEO Joe Moglia shares his bullish outlook for retail investors in 2025. Moglia attributes his optimism to the current presidential administration's pro-business stance, reduced regulations, and supportive policies for crypto and technology sectors.

Joe Moglia [38:21]: "He's pro business, he's pro markets... he's going to blow our taxes... and minimize regulations."

Moglia advises retail investors to focus on technology, growth-oriented stocks, and crypto, aligning with trends in the current market environment.

Joe Moglia [39:32]: "You have to be involved in those three areas... growth-oriented and crypto."

He also reflects on the evolution of retail investors, noting increased financial literacy and access to risk management tools compared to a decade ago.

Joe Moglia [41:00]: "The individual investor today... is far more knowledgeable than the individual investor of the past."

9. Final Trades and Market Wrap-Up

The episode concludes with panelists sharing final trades and outlooks:

• Karen Feynman anticipates a bounce in transportation stocks.

  Karen Feynman [45:57]: "I think we're finally seeing the bottom in transportation looking interesting."

• Steve Grasso highlights Pfizer's attractive dividend prospects.

  Steve Grasso [46:09]: "Pfizer is also close to 7% and they say they could grow it."

• Tim Seymour discusses strategic options like selling upside calls on Google to fund downside puts.

  Tim Seymour [46:15]: "Selling some upside calls in Google and actually use the money to buy some downside puts."

Julie Beal supports the bullish sentiments, encouraging exposure to high-growth and tech-driven investment opportunities.

Julie Beal [42:27]: "You got to think high growth, you got to think crypto and you got to expose yourself to a lot of different investment ideas."

Conclusion

This episode of CNBC's "Fast Money" provides a comprehensive analysis of rising bond yields and their potential impact on the stock market, spotlighting significant movements in major stocks like UnitedHealth and Pfizer. The exclusive interview with Databricks' CEO offers a glimpse into the strategic maneuvers of a leading AI company amid a substantial funding round. Additionally, discussions on automotive mergers and challenges in the steel industry underscore the varied dynamics across different sectors. With expert insights from industry leaders and seasoned investors, this episode equips viewers with the knowledge to navigate the evolving financial landscape.

Notable Quotes:

• Steve Grasso [02:39]: "If yields go to 5%, who knows what the psychological level is."

• Julie Beal [17:01]: "Larger payouts are going to squash profits and their margins."

• Ali Godsey [29:37]: "We excelled at using AI... we could really lower your cost because we were open source based."

• Joe Moglia [38:21]: "He's pro business, he's pro markets... he's going to blow our taxes... and minimize regulations."

Timestamp References:

• Discussion on Bond Yields: [02:20] - [07:05]

• Impact on Stock Market: [07:05] - [10:25]

• Fed Meeting and Inflation Outlook: [10:25] - [16:42]

• UnitedHealth and Pfizer Stocks: [16:42] - [24:03]

• Databricks Interview: [25:30] - [32:58]

• Automotive Merger Talks: [32:58] - [37:26]

• Steel Industry Challenges: [37:26] - [47:03]

• Retail Investor Outlook: [38:13] - [42:07]

• Final Trades: [45:57] - [47:07]

For more insights and detailed analysis, visit CNBC's Fast Money.