← CNBC's "Fast Money"
CNBC's "Fast Money"
Big Tech On Deck, A Transports Warning… And Foreign Money At Risk 4/28/25
00:43:35
Big tech earnings are coming up and top tech analyst Dan Niles says the bar has been raised for the group. Where he sees the space heading next. Plus, Why transport stocks are flashing warning signs, prices hikes from China retailers, a bearish call on pharma, and why foreign investors could pull out of U.S. assets. Fast Money Disclaimer
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- [00:01]
Melissa Lee
Life in the NASDAQ markets right in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Big tech on deck. More than $10 trillion worth of market cap reporting this week. The stocks have been under pressure this year, but will the results help turn things around? We'll talk with one top tech investor, Dan Niles to find out. And sell America new signs. Foreign investors are cutting their exposure to US Assets. Just how much money is at stake and what could it mean for the markets? Plus one analyst trimming his expectations for Eli Lilly. UPS gets ready to report this week. Can it. And Chinese discounters Timu and Sheehan raising their prices. What this all says about the state of the consumer. I'm Melissa Lee, come to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Fireman, Dan Nathan and Rebecca Patterson, former chief strategist at Bridgewater. And we start off with a countdown to mega cap tech earnings. Apple, Microsoft, Amazon and Metta headlining the action this week. But names like Qualcomm, Snap, Reddit and Block also on the calendar, the tech titans quiet to start the week. Although Metta and Apple both pulled off a fifth straight day of gains. This is the Dow and S and P managed to claw their way into the green. At the close, the Nasdaq was down slightly. But will this week's reports help jumpstart the major indices where they raise more questions about the state of the air trade? Google certainly seemed to have maybe lifted the bar even for these results since.
- [01:19]
Tim Seymour
The results were solid maybe a little bit. I mean, so I think the advertising part was a good read through to Metta. I think it's going to be easy for companies to not give a lot of clarity guidance or this dual guidance that we've seen because how can you possibly know? I actually think giving guidance, I don't understand giving guidance in this environment at all. So I don't know that we're going to have real clarity yet. But if it's bad, if the first quarter was bad, that's not going to be good.
- [01:49]
Karen Fireman
I think it's interesting to have these numbers dropped in the context of really where we've come from the market because we've now I almost get the sense that the pain trade for markets is actually higher here at least in the short run before I think massive pull forward. A lot of pressure on the business community. What multiple should pay for the S and P consumer headwinds. But, but so I think people almost Kind of want to believe. And as we are getting into the end of last week, what we're starting to see was the nasdaq. First of all, yeah, the NASDAQ was outperforming the S and P and Sammy's were outperforming the nasdaq. Now I'm not saying that this is where we're going to get back to the leadership that we had for two years, for five years but I think based upon what we should be hearing so far. Remember we've heard in the last few weeks not do we get Google but we heard Amazon, we heard in video talk about AI demand not seeing any let up that some of this was anecdotal, different CEO interviews but I don't know where it suddenly changes here now. You know Dan Niles is going to be a great conversation. Other people that are really kicking the tires, channel checks. What I'm hearing is it's not that simple that that actually it's there could be some slowdown and I think the brave face in mega cap tech is interesting because again something that Karen says all the time, why the need to go out there and say everything's great right now when in fact it couldn't be.
- [03:00]
Dan Nathan
This is going to surprise you. From the silver lining guy, I just didn't think that Google quarter was particularly that great. If you look at GCP and you look at the deceleration, it's seen quarter over quarter. It came in at 28% growth which sounds great, right? It's off a much lower base, let's say Thanos and Azure. But you know last quarter it was 30%, the quarter before that it was 35%.
- [03:19]
Rebecca Patterson
Right.
- [03:19]
Dan Nathan
And I know what you just said about ad revenue and that was good and they saw better than expected margins and they kept capex in the same spot. But the stock did not act particularly well, which is very different than three months ago where the stock was. Well it's not that different but the stock was at an all time high. It was down 30 some percent at its recent lows. Yeah, bounced into it. But the stock reaction tells you that investors are not particularly that excited or you know, I mean I think while the bar is low, as we get into matter, as we get into Amazon, as we get into Microsoft, if these stocks again see deceleration or the companies in their cloud businesses but they leave capex in the same spot, I just don't think they're going to trade particularly.
- [03:56]
Tim Seymour
Well put push back a little bit on Google. I mean you did touch on the run going into it, it was up $15 into it. But also on the cloud they did say they were supply constrained, not demand constrained. So I thought that growth number was fine given that, you know, there's.
- [04:11]
Dan Nathan
And that's why the capex was static. Right? They didn't change that whatsoever. But investors are thinking the opposite right now. Right? They didn't buy it up after like even being down as much as is from the highs. And I know it had that rally. So I just think that as we get further into earnings season, let's just say the stock market stays like, you know, flat for the next few days until we get to that jobs report. It's going to take a meaningful increase as far as whatever the metrics that you're looking at at, at Amazon and at Microsoft to get these stocks moving higher, in my opinion. And even now they don't trade at multiples that I think make you even feel that good about it. And I'll tell you the other thing. Nvidia acts like. You know what I mean?
- [04:46]
Karen Fireman
Nvidia, come on, you can say, I.
- [04:49]
Dan Nathan
Mean like if we were on a trading desk, maybe Rebecca get away with it. But it does not act particularly well. And the headlines, you know, one is worse than the next. And you would have thought after that Google Cap that it might have traded a little bit better.
- [04:59]
Melissa Lee
Wow. If you're Mr. Silver Linings Guy, I want to see the other guy. Yeah, but we are in a curious spot, and we've said this before, where the, where the data is not necessarily reflecting what we are seeing on the front lines of business. And so as long as that sort of weird disconnect exists, could we actually be okay and surprised to the upside for this earnings season? I feel like there's such, I don't know, pessimism going into the season because of what we believe will happen that hasn't yet happen, at least in the economic data.
- [05:26]
Tim Seymour
Shoot.
- [05:27]
Dan Niles
All right, can we untangle that Gordian knot, please? I mean, when I think put that in the context of the tech stocks, you know, if I'm looking at a position I want to hold for the next three years, tech is at least a market weight in my mind because I think there's a decent probability that over that period we'll have a slowdown, we'll come back through it, these companies will continue to be globally dominant and America is probably going to win the race to get to AGI. And when we get that catalyst, we remember how fun Chad GPT was when that catalyst hit the Mainstream this one will be too I think. And so if we get another sell off, if we get a further derating of these stocks and you have an opportunity to average into them at better levels for a longer term investor. I don't even care about the non guidance and what's happening in the short term. It's more of the strategic thematic investment here. But I agree with you Karen. I mean in the very short term I almost don't know if I care what they say over the next few days because do they even know what they're saying? How could anyone have confidence right now? It could change tomorrow.
- [06:31]
Dan Nathan
These digital companies should have more confidence than if you're like a cyclical industrial, you know, financial, that sort of thing. And you know there was this Dallas Fed survey that came out and this headline is not particularly great. I mean that there's Texas manufacturing activity weakened significantly as executives use the words chaos and insanity to describe the turmoil spurred by the Trump tariff and the trade war. So you just said it's not showing up in the data. If anything in a red state like that, which is very industrial and energy and that sort of thing, you'd think that maybe they wouldn't be using terms like chaos. And so I think when we get to some of those companies you might see some guidance where they just lower the bar. I mean I don't know how you can ignore that. Manufacturing, what is this one of the. Texas is one of the top 10 largest, you know, companies by GDP or countries or states by GDP, whatever the.
- [07:16]
Karen Fireman
Hell, don't mess with Texas. No, I think, I think you're right. I think with matter I actually think they could be on the front line of some ad spend and advertiser concern. I mean they were one of the first almost cyclical like around Covid and some of that, that I thought leaving aside just how Covid obviously clearly seized up the engine but you were getting some sense that those that had exposure to the cyclicality of the consumer but the ad spend world, they were there. What's, what's fascinating to think about with matter is how the company was rewarded when they pulled back on Capex, remember the year of efficiency and all these things. Would they be rewarded here by saying hey you know, our business is fine, we've made major investments, we're, we're going to be cautious, we're going to be smart, we're going to be, we're going to allocate capital as we see.
- [08:03]
Melissa Lee
I asked this of you before.
- [08:05]
Karen Fireman
Well, I mean I think, I think the Market's not going to like it, but I actually think it's okay. And there are some dynamics that are somewhat independent of the tariff world. You could make an argument that there's pent up demand for air is going to go on for a long, long time. I believe that the question is whether there are some, you know, call it supply chain, some dynamics in the pipeline, some things that are not allowing the, the, the, the follow through to happen as fast as it can. It's not the worst thing in the world for some of these, from some of these companies and matter of all of them that we rewarded for actually having a business that benefits immediately from a I, I think is the one that they tap the brakes. It could be okay if they, if.
- [08:42]
Melissa Lee
We don't believe the guidance that they give us in terms of financial results for the current quarter for the year, whatever it may be, then why should we believe them in terms of their CapEx guidance for the year that they gave weeks ago?
- [08:54]
Tim Seymour
Well, I think it's an arms race and Right. We saw NWC affirming theirs. Right. So if they were all to go in on it together and say hey let's everybody reduce 10% or whatever it is, maybe they could do that. But now with us having done it and you know, Google also. So you would think that the other two, Microsoft and Metta are going to stick by actually remember the stock went up on their. The last time they talked about this big CapEx number not down, it was, it was down once they pulled the metaverse spend it was up but once they said they were going to do the capex. So this time if they could say we can do the same with less, that would be great.
- [09:31]
Dan Nathan
You know, I don't think that's. But we've heard stories in the last three weeks or so where Microsoft's canceling leases on datacenter. Amazon is doing the same thing. There was a story, I think the information was reporting like a week and a half ago that Metta was asking Amazon and one other, I can't remember to kind of help them on their spend with Llama which is an open source model. And you could talk about they're serving better ads and the like and that's clearly been reflective I think in the stock over the last year and a half. But if matter is getting to a point where they're not getting to serve better ads, they've been spending too much money, people are not using Meta AI the way that they might have hoped because that's the next leg of this sort of thing. I don't know, I just think that we kind of crossed the Rubicon a little bit about that spend, about that arms race and all these companies were saying, you know what, we're going to ask for forgiveness rather than permission. Well, that's been flipped on its head right now. So we're going to see as we get through these earnings over the next week or so whether investors are really going to continue to reward this kind of static level as it relates to CapEx.
- [10:25]
Melissa Lee
I mean, I wonder if we'll actually see if these reports are actually true because for every report we've heard the likes of Microsoft come out and say that's not the full story here we are or we're constantly re evaluating our data centers and our needs.
- [10:37]
Dan Nathan
Yeah, but when Microsoft announced $80 billion in capex, I want to say like three and a half months ago, 4, 40, 50% of that was meant to be overseas. And now all of a sudden you put together this kind of trade war. We don't have trade deals with the eu, we don't have trade wars or trade deals with Canada and the like here. So they were probably going to pull back a little bit on that spend externally and again, I don't know if they're going to be rewarded for it in the stock market in the near term but you know, it might speak to the fact that they are. Their guidance, you know what I mean about demand and stuff is not going to be particularly clear. And I don't really care when someone says we're no longer supply constrained, we're, I don't know, like we'll see, you know, I mean these things can turn on a dime.
- [11:17]
Karen Fireman
It's going to come back to me also what, what you're willing to spend on these stocks. Remember Met has always been cheap but at this point, really for the last six months, maybe for the last 12 months, it's gone from being a multiple. Karen, help me out here. I mean you know, 18, 19 and on a forward basis and 20s to.
- [11:37]
Tim Seymour
High like 22 with you know, I don't know, maybe one turn of cash, so 21. So it's a little over market multiple.
- [11:45]
Karen Fireman
And that's totally, you know, based upon the growth and where they sit. And again, you know, in terms of ad spend and ROI for advertisers and the world of AI that Facebook lives in, life is very good. It's just a question of the cyclicality and the multiple. So it gets, and we're saying that about the entire market. I Don't know what multiple we're supposed to have on the market here, but I think it's less than yesterday.
- [12:05]
Melissa Lee
I mean, we don't know what the guidance is, we don't know what earnings are. It's impossible to come up with a multiple. That's just, well, how do you invest in that environment then?
- [12:11]
Dan Niles
I'm not doing a lot. I mean, frankly, you know, I bought some more gold in January, very happy about that and I'm holding onto it. I like money markets. I know that's incredibly sexy and exciting and in equities I stay invested and I get a little more defensive at the margin. So I add more consumer staples. I look overseas. The crazy thing now is some of my typical overseas safe havens like Switzerland and pharma. I know we're going to talk about it later. Is it, you know, if we have tariffs on pharma, so it's harder to find those safe places. If you want to diversify outside of the US I think the UK is sort of interesting. It looks like the Prime Minister there has a good relationship with Trump. They might get an early deal. It's a defensive market, it's a low beta market. It's fairly cheap. And then look for relative winners of the trade war. You know, places like Brazil. Brazil is going to eat market share from China and it's going to eat market share from the US stocks. To me it's not that surprising that the stock market there is up nicely year to date.
- [13:11]
Tim Seymour
Just one more thing on matter. I do think they're taking share, right. So even if there is somewhat of.
- [13:16]
Melissa Lee
A standard in what business?
- [13:17]
Tim Seymour
Advertising.
- [13:18]
Melissa Lee
Okay.
- [13:18]
Tim Seymour
I do definitely.
- [13:20]
Karen Fireman
They're absolutely taking share in a growing digital ad space. I mean, in other words, they're the, they're the person to be investing in in a secular trend that's only getting better for them. It's just a question of are we going to hear from them their cyclicality in that, even in that core business, which how can they not be based upon what everybody's calling out? Three to six months.
- [13:38]
Melissa Lee
Let's bring in an authority on big tech and AI. Hedge fund manager Dan Niles is the founder of Niles Investment Management. Dan of course was a semiconductor and computer hardware analyst during the dot com bubble. A famed one in fact. Dan, always great to see you. Thank you for joining us. I know at the beginning of the year you took a very defensive stand relative to some of other market participants. Cash was your best position. You weren't in any of the Mag 7 names and that seems like an amazing call at this point. Are you closer to reallocating to max 7 at this point or no? There's still a lot more that you need to see.
- [14:11]
Thorsten Slok
So I think you need to look at it from a very big picture standpoint, which is if you think about what drives The S&P 500, there's really only two things, right? It's multiples and it's earnings. Right now S and P earnings are forecast. The official forecast is up over 10% year over year. I sincerely doubt that's going to occur. That number is probably close to low single digits and maybe flattish. So you know that's coming lower. Second piece is obviously the multiple and you've got the trailing P E for the S and P at 23 times coming into the year we said, you know, with inflation between 2 and a half to 3%, the average is normally 19 times. I don't think we're going to get a recession. But if you do that multiple is closer to the mid teens. So you know the multiple's got to go down. Then you move to the Mag 7, which is the question you asked me, Melissa. And if you look at it dispassionately, the numbers for four out of the seven MAG seven have been coming down since the middle of last year and that is Microsoft, Amazon and Apple. And then Tesla's numbers have been coming down since the year before, but that's obviously a different beast. So estimates have been coming down and if you look at the Mag 7 when they reported their calendar Q4 is Six of the seven companies had their forward revenue estimates go down. That's before all of this, you know, tariff stuff started to kick in. So things had already started to weaken on a fundamental basis. Now the good news, as you said, is if you look at Nvidia, the Stock went down 49% from its peak to its trough. Tesla was worse. And so a lot of these things have corrected. And by the way, the four companies that are going to report, I think all of them are going to beat revenues, beat eps, beat margins, and probably that should be good enough. But then you look at Google and you go stocks up less than 1% after having done all of those things. And so you wonder, are investors really thinking forward to the next leg of this? Which is. Yeah, that's because demand has been pulled in and we're going to have to pay that back sometime later this year. And so I'm going to actually start to think a little bit further ahead.
- [16:21]
Dan Nathan
Hey Dan, help us Think about this, because I remember speaking to you when Q2 results were being reported last week. You just said that a bunch of the Mag seven names had, you know, they had estimates coming down, right, last July and August and I think that was the relative top in the Mag 7. You also came into this year, as Melissa just said, you had none of the Mag seven in your portfolio. There were none of your top picks. At what point, again, if we had that pull forward like you just mentioned, at what point do you think you get more constructive on these names? In the back half of the year, what would some of the things that you'd be looking for?
- [16:53]
Thorsten Slok
For me, quite honestly, you've got to get through a negative GDP print probably in Q3 because you've had so much demand pulled forward in the fourth quarter and in the first quarter. And I think what you're going to see is numbers get cut really dramatically in the back half of the year. So the time to get bullish was, you know, a few weeks ago, right? I had an interview on CNBC on April 7th and I said, look, you know, I'm bullish. Short term, long term, I'm still bearish. And then you have Trump, you know, walk the tariff back 90 days and everything rallies, you know, today I started to peel off some things that, you know, I bought for a short term rally because I'm looking at Google and I'm going, well, people want to like it, right? It's 18 times and obviously there's things you can look at that I have issues with longer term. But I'm kind of surprised that the stock didn't rally more off of those numbers. And so then I go, well, maybe people are thinking about the fact that the clicks for search was only up 2% and a year ago it was up 5%. The year before that it was up 8%. So market share is being taken. Do people start to think about Apple's market share loss? What about Nvidia, this Ascend processor that's coming out? That's probably going to take 20% of the market away from Nvidia in China, right? And then the deep SEQ stuff cuts the inference costs. So there's a lot of things you still have to go through. Market tops are a process. Remember the market peaked in February. We're like two, two months into that. Usual drops. When you're potentially staring into a recessionary environment. You look at the tech bubble or the global financial crisis that took a year and a half to two and a half years to sort this out. And numbers haven't really started to come down in a meaningful way when S and P forecasts are for growth still above 10%. So I'm a fundamentals investor, unfortunately or fortunately, and I go we've had 11% rally in the S and P from the bottom. The normal bear market rallies are about 10 to 14% in size and they occur within two to four months on your way to losing 50% of your money if things get bad. This one's up 11% right in that range. And I think you got to start wondering a little bit more about the downside risk potentially, you know, after you get these good prints from the four companies coming up this week.
- [19:19]
Melissa Lee
Dan, always great to get your analysis. Thanks so much for joining us.
- [19:23]
Thorsten Slok
Thanks, Melissa.
- [19:24]
Melissa Lee
Dan Niles, Niles Investment Management. Rebecca, do you agree with Dan this is just a bear market rally. We're headed for more downside?
- [19:31]
Dan Niles
I don't know if today is the top of it, but I 100% agree that that these things happen in waves. They don't happen in a straight line. So is it very possible that we could have a truth social post or an announcement or one of the various factions from the White House creating more uncertainty in the days ahead?
- [19:49]
Melissa Lee
Yeah, for sure. We've got a news alert out of Washington. Speak of the several CEOs set to visit the White House on Wednesday. Megan Cassell's got the details. Megan?
- [20:00]
Megan Casella
Hey, Melissa. That's right. We're just learning from White House officials that the president is set to hold an event here on Wednesday called Investing in America. It will feature company leaders from a number of sectors. I'm told defense, tech, health care and consumer products will all be represented. Companies are sending either leaders or top CEOs, and just some of the CEOs that will be here are the leaders of Nvidia, GE Aerospace, Johnson & Johnson, Eli Lilly and SoftBank. I'm told by White House officials that this is an event designed to highlight the amount of investment that has been announced so far this term. All of these CEOs and company leaders are representing companies that have agreed to invest in the country since the president has been in office. They'll be displaying their products, talking about their investments, and the White House hopes they'll be encouraging further investment to come. It comes, of course, Melissa, as the White House is using this week to mark the president's first 100 days in the White House. There are a number of events throughout the week, and this one on Wednesday will be to mark the actual 100th day.
- [20:57]
Melissa Lee
Melissa Megan, thank you. Megan Casella.
- [21:01]
Dan Niles
I think more investment in the economy is great news. It's going to support gdp. But it is interesting that we're seeing companies in the US announcing investments rather than trade deals. And the 90 day clock is clicking and so far we haven't seen any.
- [21:17]
Dan Nathan
Every CEOs there has already announced, they've either announced an investment or they're looking for a carve out. I mean, like, come on. And so these sorts of announcement are going to lose their teeth. I think the market probably won't off of these sorts of things. And so, you know, again, I think it's kind of like Infrastructure week, remember for four years about infrastructure week is going to happen. It never happened. And now you're getting these kind of announcements on buying, you know, investing infrastructure here. But if the companies don't have any clarity, we've just been talking about this, the CapEx is going to go down.
- [21:46]
Dan Niles
Well, you just said the Dallas Fed survey, right? We are, we are a couple standard deviations below the average and that's true across every regional Fed survey that came out this month.
- [21:57]
Karen Fireman
But, but the market is focused on a few different things and we are now seemingly near the end. Not the end, but the detox phase we got hard. Now we're moving on to new phases. I mean that's, that's the strategy from this administration right now. So whether it means any real, you know, changes are actually going to be happening or things that are benefits or deals that are cut on the trade side, I don't know. But I think about the phases this administration, I think they've, you know, we got a little sniff of the Trump put last week we talked about that. So I think the worst of detox in terms of the market, market has been out there.
- [22:28]
Dan Niles
I'll take the other side of that.
- [22:29]
Melissa Lee
All right. We shall see. As they say on tv. Coming up, not feeling the pharma space. The bearish call from one analyst as we await results from the health care space. What our traders see from that sector next and price hikes in the discount aisle. How China's retailers are responding to Trump's tariff plans and why consumers will be the ones feeling the pain. Don't go anywhere. Fast money's back in June. Welcome back to Fast Money. HSBC out with a new bearish note today on pharma. The firm warning the confluence of U.S. tariff risks combined with a large patent cliff and the part D IRA headwind could put pressure on the sector this earnings season. HSBC lowered its ratings on Novartis gsk, Eli Lilly and Biogen, just ahead of their reports this week. You're mentioning the normal, safe havens. A lot of these Swiss pharmaceutical companies no longer at this point.
- [23:19]
Dan Niles
Right. You know, I mean, you and Karen and I were talking a little bit before the show, before the gentleman appeared, joined us later. Yes. Excuse me. It's interesting to think about. Do you avoid pharma? Because we could have tariffs and because there is a national security strategic industry element to it. But because it's so strategic, if you tariff pharma, I mean, Ernst and Young had a report out this week suggesting prices for the consumer, if they were all passed on, could go up about 13%. American voters ain't going to go for that. So there's got to be carve outs. How do you square the circle? It's a, it's an important strategic industry. You have to protect and you have to lower costs, not raise them, I find. I don't know how you trade this one. To be honest. I'm stuck right now. Normally I would be leaning in heavy to pharma, but right now I'm stuck.
- [24:08]
Tim Seymour
I mean, there's a lot to hate, right. I'm long just. You talk about tariffs, right. Uncertainty. We don't, you know, there's Patton Cliff, Inflation Reduction act, there's all kinds of things. Patent cliff, tariff is always. Yeah, you know, that's always a concern. All that having been said, the valuations here have been. I don't know when they were last this low. So I think there's two things there. There's uncertainty in general and there's fear of tariffs and whatnot. And both of the. If they were to just clear up one of them, only one, if they cleared up both, almost regardless of what, what it is, what the new policy is, markets hate uncertainty more than they hate almost anything else. So I'm long. I think some of them are great yields, some of them are going to be good growers. There is. You did talk about Lilly.
- [24:58]
Melissa Lee
Yes.
- [24:58]
Tim Seymour
Maybe being expensive. Lilly has more hype, more earnings, more than, you know, more a great Runway. But that one is the least defensible on a, on a valuation.
- [25:08]
Melissa Lee
And that was a part of the downgrade for Lilly. It was a double downgrade down to reduce also reduction of the price target. That I thought was most interesting because they were saying the market is underestimating Novo's brand power. As compounders go away, they can no longer compound semaglutide or tirzepatide. They're just sort of underestimating Novo entirely. Also underestimate Kagar Sama and you have this vast sort of dispersion between the valuation of Novo versus Lilly and you actually, I mean you guys took advantage of that.
- [25:38]
Karen Fireman
Yeah, well, I mean, maybe, I mean owning, owning Novo hasn't been, you've, you know, you've not been doing yourself a solid here. You've definitely suffered by looking at valuation dynamics. I think Lilly is really tough to bet against here. I do think that there are market dynamics and remember it was over owned, it was overhyped, the valuation was very expensive. But I think, you know, you're, you're, you're troughing around here. You certainly can be adding to a position here. I think you get into a Novartis and some of like Novartis to me because you have an affects dynamic and you also have a buyback dynamic. This is that defensive kind of pharma with a little bit of a boost from the whole euro thing. That actually is something that I want to own here. Even though I realize it's not a runaway story.
- [26:18]
Melissa Lee
There is a lot more fast money to come. Here's what's coming up next.
- [26:22]
Rebecca Patterson
A discount double take. Looking for cheap prices, you may need to look somewhere new. How China retailers are responding to Trump tariffs and why it could mean an even bigger crunch for the consumer. Plus foreign flows looking for a new home. The rush of money that may pour out of US Assets assets and where it may be heading instead. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this. Calling all Fast Money fans. Join us for our next live event Thursday, June 5.
- [27:10]
Tim Seymour
This show encouraged me to get into.
- [27:12]
Dan Niles
Training and I think I've become a.
- [27:13]
Melissa Lee
Much smarter trader from them.
- [27:15]
Rebecca Patterson
Watch the show, stay for an exclusive Q and A, meet the traders and leave with a special gift.
- [27:21]
Craig Fuller
This was an incredible experience. I loved being here and meeting these.
- [27:24]
Karen Fireman
Guys and it was just, the experience was awesome.
- [27:27]
Megan Casella
Never miss a show ever.
- [27:29]
Rebecca Patterson
So to find out how to navigate this wild market environment, get your tickets now, just scan the QR code or go to CNBCEvent.com fastmoney.
- [27:41]
Melissa Lee
Welcome back to Fast Chinese retailers upping prices paid by US Customers thanks to President Trump's tariffs. TEMU imposing import charges on some items of between 130 and 150%. While fast fashion giant Shein is hiking prices by as much as 377%. The cost of the even the price hiked products are pretty low still, I mean especially compared to a US Retailer at this point.
- [28:07]
Tim Seymour
Yeah. I mean the list of products was fascinating.
- [28:10]
Melissa Lee
Eyebrow gel was 97 cents and $2.90. Really?
- [28:13]
Tim Seymour
Yes.
- [28:14]
Melissa Lee
You should have.
- [28:14]
Karen Fireman
Oh man, it went off.
- [28:15]
Melissa Lee
Did you order?
- [28:18]
Karen Fireman
Stocked up?
- [28:19]
Melissa Lee
I mean your eyebrows are gonna.
- [28:20]
Karen Fireman
I might just take some from here.
- [28:23]
Tim Seymour
Yeah. And what was it? Glue on nails, Toenails. I thought. Who knew? I didn't. Yeah. Still incredibly cheap. But you think it's got. I mean there was a lot of pull forward I would imagine. Right, right. But I mean Pinduoduo, you know, this is a problem for them that was going they own Temu. But I still, I still like Japanese Chinese equities.
- [28:48]
Dan Nathan
This is a good thing though because Treasury Secretary Bess and he said about a month ago that the American dream is not cheap crap basically from China. You know what I mean? So maybe this is part of the plan and I'm saying that kind of sarcastically in a way, but like for Metta, this is real. I mean 11% of their sales came from China last year. This is the second biggest, you know, location for them.
- [29:06]
Melissa Lee
And these are the two huge advocates.
- [29:07]
Dan Nathan
Yeah, and tamu. And you know, the other thing is like, you know, we're so turned around with the China stuff. If you think about it, it's like we're going to give exemptions to Nvidia. We're going to give exemptions, you know, all over the place to tick tock. They don't have to sell that. Okay. But these guys, TEMU has been, you know, probably collecting data she had on US consumers for like a really long time. And I just feel like if this is about, you know, rebalancing, you know what I mean, the trade situation with us and them, like we got to have some teeth to this sort of stuff because if you're just going to give exemptions to the apples and the Nvidia and all this sort of stuff, what are we trying to do? Because we're only right now inflicting pain on our economy.
- [29:45]
Melissa Lee
Right. And then there's also in Amazon there are a lot of third party sellers. They import stuff from China and then they sell it on the platform. And so there's a host of businesses there that won't advertise on Amazon that will have reduced sales that may have pulled forward this quarter, but only have inventory until May or so and then, and then you see the impact later.
- [30:03]
Karen Fireman
Well, that's part of this is going to be a delayed. Right. It's going to be a slow, it's going to be a slow train wreck. And it's going to be something that I think the consumer is going to feel. And I think the consumer is probably the second or the third headwind of all the headwinds we've talked about that are really going to fall in line here. I would bring this back to when I see these headlines about Temu and Shannon. Makes me want to buy Alibaba because Alibaba's core business is not selling this stuff into the US Ali, cloud and some of their core business. By the way, Alibaba internationally outside of the United States and at least within with Pan Asia is something that's actually very exciting. So I don't think this is a time to sell that one.
- [30:39]
Melissa Lee
Coming up, investors leaving the US A big shift. Rebecca is seeing an American asset ownership and just how big the outflows could get. She'll explain when Fast Money returns. Welcome back to FAST money. Stocks muted to start the week as investors awaited a big batch of earnings and Friday's jobs report. The Dow jumping more than 100 points, the S and P eking out a small gain and the NASDAQ closing with a small loss. Check out shares of Netflix, notching their seventh straight positive day, its longest winning streak of the year. The streaming stock up more than 15% in that time. And some after hours action. Shares of an XP semi falling despite beating EPS and revenue estimates. The company announcing its CEO will retire at the end of the year. The stock is down 7%. And shares of cloud company Octa jumping after hours. The stock will join the s and P500 excuse me, the S&P Mid Cap 400 index effective on Thursday. Well, even with the recent rebound, one of our traders is sounding the alarm over foreign investors looking to lighten up on U.S. assets. Rebecca, what are you seeing? What have you heard?
- [31:41]
Dan Niles
So I was in D.C. this past week for meetings of the International Monetary Fund World bank, and it's really kind of speed dating for macro nerds. You just get policymakers from all over the world, investors and researchers like me, and you get a good take on where your peers are, your investors are and the policymakers are. And what I walked away from was more certainty than I had had in Liberation Day those first few days where people were saying, who's selling? Is it foreigners selling? But we didn't know for sure. What I'm seeing now is that there are a large number of foreign investors who are worried not only about tariffs but just about America's reliability as a partner. And I think they're looking at a huge US Allocation that has built up over the last several years and saying maybe we should have a little bit less. Just trim off the tops. Right. Basically have a risk premium on US Assets because we have so much uncertainty. And so what does that look like? You know, the U.S. treasury puts together how much foreigners own in U.S. assets. As of the middle of last year, which is the latest number, it was about a little over $30 trillion. So if you just hypothetically pretend you're the chief investment officer of a major overseas pension fund or sovereign wealth fund, you say, I'm going to take 2% off my US stocks, 2% off my US bonds, 4% shift incremental, small, no big deal, that's $1.2 trillion that is going to be leaving the US now, it's not a crisis. This isn't happening tomorrow. These investment committees will take months to think about things. They'll have a meeting, they'll have a board approve it, and then it gets implemented. But what this is, is a slow bleed of support out of the US Markets, either going back to home markets or into new opportunities or things like Gold World.
- [33:28]
Melissa Lee
And we've also seen some of that going on here in the United States, of course.
- [33:31]
Karen Fireman
Yeah. And again, make international great again, so mega. And as someone that's been investing globally most of my career, I mean, I've run global money on the hedge fund side, I now run an international etf I devo. And what I see is that people have said, especially during the best of Times in the U.S. why do I need to invest internationally? I don't care that it's cheaper. I can do so many great things in this country and without the corporate governance risks, etc. Well, now there's different types of risks. And I would just say there's. There are. We have introduced certain types of sovereign risks, whether they actually would translate into tariffs or certain things that happen sector specific. But you're now looking at GDP differentials between the US and the rest of the world that are no longer favoring the United States. You're now looking at central bank differentials that are no longer favoring the United States. You're now looking at a multiple that we've talked about. I mean, trailing at least, I'm sorry, the last six or even maybe 10 or 12 quarters. We've seen 22 to 24 times forward on the S and P. International was always kind of 16 to 17. And that differential now at this point, US is going to be coming in. It makes the foreign markets look that much more interesting. So if you're talking about someone. So I talk to advisors for ideal a lot. When you, when you talk about an allocation international, These guys have one or two ETFs in there or one or two names, about 2%. So just going to 4% is a big deal. And with the backdrop that I think we're going to have over the next, next 12 to 24 months, I actually think you have a currency tailwind as well.
- [34:54]
Dan Niles
And that's an important point. Sorry to jump back, but. Right. We're going to have a weaker dollar on the back of this because the dollar is driven by trade flows and capital flows. Our trade deficit, in theory, if President Trump gets his wish, is going to get smaller. So that removes a weight on the dollar. But I think the capital flow is likely to be dominant as it has been for the last few decades. And I think we're going to see net dollar selling.
- [35:16]
Melissa Lee
But the condition that can come along with a shrinking trade deficit is recession here in the United States. So if we do see one here, then can the rest of the world emerge unscathed or the rest of the world doesn't matter though vulnerable in terms of a stock sell off. Right.
- [35:30]
Dan Niles
No, I think everyone goes down together. We were joking in between our hits here about Japan. Japan's economy. It was in the 2025 outlooks. It was the market darling by a lot of the investment banks. I was rereading them in January. I'm like, ah, you love Japan. Japan. Japan's now down what percent? So year to date, 10ish.
- [35:49]
Karen Fireman
Yeah, even a little bit more, although it's had an offset from the currency. So that's been helpful.
- [35:53]
Dan Niles
Right. And the IMF just downgraded its GDP forecast for Japan by half a percentage point to 0.6%. So this economy that finally got going again, it had reflation, wage gains, corporate reform, and it didn't do anything wrong. But this shock is basically going to make it teeter on a recession.
- [36:11]
Melissa Lee
The show is so much smarter. When Rebecca usually joking about Japan, we're joking about like the Brady Bunch, you know, some episode from 19, which by.
- [36:18]
Karen Fireman
The way, I mean, that's some smart trivia. I mean, I'll have Brady Bunch trivia. Anybody out there? But yes, Rebecca does make us smarter.
- [36:25]
Dan Niles
You guys are nice.
- [36:26]
Melissa Lee
Coming up, it's not just big tech on the earnings radar this week. One of our traders has his eyes on UPS's report tomorrow morning what he's expecting out of that one and what the recent decline in the transport space says about the broader economy. Me Fast Money is back into welcome back to Fast Money. A huge slate of earnings on deck tomorrow. Coca Cola, gm, Visa, Snap, all reporting. But one of our traders has his eyes firmly fixed on ups. Dan is that trader.
- [36:54]
Dan Nathan
Yeah, this has just been a train wreck, right? It's down 57% from its Covid highs and I think about 65% of their sales are here in the U.S. we keep hearing about shipping coming to a haul, freight coming to a halt, rail coming to a halt. I mean the list goes on and on. And you have to say to yourself, this is A company did $13 in earnings in 2022, $100 billion in sales, and they're expected to do seven and a half dollars in earnings. It trades at like 12 and a half times right now. I just don't know if there's anything this company could say to get their stock up right now. And so that's a really sad state of affairs because their guidance or their visibility, they're probably not going to give guidance headlines is going to be really important across a whole host of different industries here. So again, I think it's this is worthy of paying some close attention to.
- [37:38]
Melissa Lee
Meanwhile, trade between the US And China is in fact collapsing amid the Trump administration's tariff policies. Apollo Global chief economist Thorsten Slok noting containers going from China to the US have fallen off a cliff recently, which could lead to empty shelves and of course, inflation. Our next guest says the impact won't stop there. And mass layoffs, layoffs, layoffs are possible throughout the transport industry. Freight Wave CEO Craig Fuller joins us now. Craig, great to great to see you. We've heard of the reports of just people not ordering any more, companies not ordering anymore, cargo ships being stranded. How bad is it right now?
- [38:11]
Craig Fuller
Well, it's about to get much, much worse. So certainly it's true that companies have canceled orders. A lot of these orders they had in place up to a year. And so they were expecting, certainly expecting some level of tariffs, but not what we've seen right now. So most people expected we would see up to about 20% tariffs on China. Now we're looking at something that's completely different. In fact, the margins just don't make sense for them to import because they're looking at a potential 145% tariff. So there's been a lot of cancellation of voyages to the United States and the amount of freight that we're expecting over the next two weeks to drop off in a year over year basis is down 35% in terms of imports and this is going to show up in the domestic economy pretty soon. We're about anywhere from two to four weeks out of seeing the trucking industry lose an enormous amount of its volume. Probably around 6% of total trucking volume around the United States is actually going to drop off simply because we don't have the import activity happening.
- [39:09]
Melissa Lee
And then of course, there's the knock, there's the ports. And then if you, I mean, you're freight waves, so you're focused on sort of the cargo aspect of it. But then of course the ripple effect is into the stores, into the businesses where there will be layoffs else as well. Yeah.
- [39:22]
Craig Fuller
There's half a million people that work in logistics in Southern California alone. There's 9 million people that work across the country in logistics. And all of these jobs are going to be impacted in some way by the slowdown in import activity. And so we're expecting there to be mass layoffs in the logistics industry. And also as Apollo reported, which is going to show up and impact retailers. Retailers are simply not taking inventory of products that they have pre ordered and they're certainly not ordering new products. And we will see inventory stock out sometime in late summer, probably as early as late June, but certainly in July and August. And I think most consumers will notice it when they go back, when they go to purchase their back to school items.
- [40:08]
Melissa Lee
Yep. Craig, thank you. Thanks for joining us, Craig.
- [40:10]
Craig Fuller
Thanks for having me.
- [40:12]
Melissa Lee
Coming up, crunch time in Canada, what the country's election results will mean amid tariff talks with our neighbors to the north. That is next. And do not miss a special anniversary event as we celebrate two decades of mad money. We look back at the show's Incredible run tomorrow, 7pm Eastern time right here on CNBC. More fast money in two. Welcome back to fast money. Canadians heading to the polls today to elect their next prime minister. The race primarily between sitting PM Mark Carney and Conservative leader Pierre Poyler. Tariff. President Trump this morning, excuse me, repeating his calls for Canada to become the U.S. s 51st state as his global tariff plans became a key headline in the country's election race. Rebecca, you're flagging this. Obviously this has implications in terms of who we will deal with in these upcoming trade talks.
- [41:01]
Dan Niles
Well, the fact that the president did the 51st state shtick is helping Mark Carney at the margin. Right. Mark Carney is coming out as the candidate who's going to push back harder on Trump. And it's pretty extraordinary to see an election in a developed economy turn so quickly to this degree. I mean, it's. We just don't ever see matters a lot because 20% of Canada's GDP is exports to the U.S. the U.S. is the biggest investor in Canada by a lot in terms of foreign direct investment. We're linked at the hip. So if he takes a harder stand, Trump doesn't get another thing for his list of wins. When he comes out with the wins as quickly, it could affect supply chains quite a bit in the short run between the two. And based on the last guest we just had on, you know, if we have supplies we need coming in from Canada and we get a lot of stuff there, from commodities to manufactured goods to inputs that could make the stagflationary pressures that much worse here in the short term.
- [41:58]
Karen Fireman
Yeah, I think, I think on the commodity side, it's really underestimated, you know, the role of Canadian energy in our country. I know we have energy independence here, but I think, you know, Canada has been a big player. I do think this could be a catalyst to the Leafs winning the Stanley cup this year.
- [42:11]
Melissa Lee
You heard it here of next final trades, final trade time. Tim Seymour.
- [42:22]
Karen Fireman
Nice having Rebecca here and Total Energy for the global trade.
- [42:26]
Dan Niles
Rebecca, I'm absolutely thrilled to be here and I'm going to say bdc, Consumer Staples.
- [42:32]
Tim Seymour
Yes. So we got a huge slate of earnings coming up, but I'm going home with the girl that brought me Meta.
- [42:40]
Melissa Lee
I'm approving her final. Good, Dan.
- [42:44]
Dan Nathan
I think in a recessionary environment, you can hang out or hide out in a name like McDonald's.
- [42:48]
Melissa Lee
All right, Rebecca, great to have you here.
- [42:50]
Dan Niles
Thanks for having me.
- [42:51]
Melissa Lee
Thank you for watching Fast Money. Mad Money with June Kramer starts right now.
- [42:56]
J
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