Eamon Javers (3:09)

Brian, we heard From Vice President J.D. vance a short time ago speaking to reporters on the tarmac in Hungary. And he walked through some of the behind the scenes details of how this negotiation came together and why there might have been some confusion about it.

Brian Sullivan (3:24)

Take a listen.

Political Analyst (3:26)

There are three different 10 point proposals at least that I've seen floating around. The first 10 point proposal was something that was submitted and we think frankly was probably written by ChatGPT. That was submitted to Steve Witkoff and Jared Kushner that immediately went in the garbage and was rejected. There was a second 10 point proposal that was much more reasonable that was based on some back and forth between us, between the Pakistanis and between the Iranians. That is the 10 point proposal that the President was referencing in his truth yesterday. And then frankly, I've seen a third 10 point proposal that's even more maximalist than the first 10 point proposal that's been floating around various social media channels.

Eamon Javers (4:03)

So now the Vice President saying that the Iranians may have misunderstood what it was they were agreeing to, said that the United States never agreed to any ceasefire that would involve Lebanon. And so as we sit here tonight, Brian, we're in a situation where the Strait of Hormuz is effectively not reopened. There's a lot of confusion around this cease fire, but the White House says it's pushing ahead with negotiations face to face over the weekend. So maybe when all the parties are at the same table, they might be able to hash a lot of this out and resolve some of that uncertainty.

Brian Sullivan (4:34)

Brian, I think it's going to be fascinating to see who exactly those parties may be. Eamon Jabers at the White House. Amen. Thank you very much. All right, so the ins and the outsky of who may be saying what, there's warring factions maybe inside Iran. Let's just focus on on the markets because even if some people may not believe it, the markets appear to believe

Tim Seymour (4:55)

it, which is all that matters. And we've been sort of making a comparison to last April. We said it was a little different. Last April was rhetoric that they walked away from. This year is a little bit different. In terms of it's a lot harder to walk away from disruptions in the strait and all those different things. However, the market last year wanted to fade that rally in the end of April all the way through the fall. And that was a fool's errand. I was probably one of those fools. And I think this time around people say I've seen this movie before, I'm not going to fall for it again. There might be some jerks along the way, but this is going to continue to sort of do its thing. And we closed below the 200 day moving average for a week or so. Chris can speak to this. We probably closed above it today and people are going to say, you know what all systems go in terms of the market.

Guy Adami (5:38)

Well, you, you said coming in on the lead in is this a one day wonder? Which of course lays the gauntlet down guy for us trying to come up with as many one hit. But it's not a one day Wonder. It's a 7.6% move off the bottom on the S and P which now sits only 2% above the area before we got into war. So a world where I think there are more risks that will come out of this than we had going into it in a world where geopolitics where everybody's number one going into 26, certainly 25. But I get back to the part of the market you said also that it was a, it was one of the best days in years. It's certainly not for the index, but certainly for a lot of stocks below the index. And I think that's what you meant. And it was an extraordinary day for a lot of stocks. The things that I always get back to and the things that I think are very constructive is the semiconductors at one point intraday and not terribly far off of an all time high, an all time high for the most maligned group in the market. The place where there's so much pessimism that's been built up. Now, I'm not telling you that that the Nvidia charts great, but I'm telling you that semiconductors and then semiconductors making a new relative high to the S and P, showing the kind of leadership that you've expected out of them for three years is a great sign for the market.

Brian Sullivan (6:53)

Isn't this kind of. I know it sounds a little bit weird. We got Christina coming up. It's kind of a hormuz play. Semiconductors. People say that's insane. No, it's not. Because if you worry about the South Korean or Taiwanese economies or helium supplies or anything else that goes into semiconductors. Today's news was also a positive for semis vis a vis a vis the straight up.

Guy Adami (7:14)

I agree. I was trying to, and I was going to say it, it was almost like an afternoon delight, if I may, in terms of vocal Starland vocal band. But, but I think that's right and I think we've been able to look through the trade we've been able to look through in the sectors that outperformed today were the ones that have been under the most pressure. And I would also just, just point out that the cyclicality of today's movement is, is very important for markets that were overly defensive, overly rotated into two defensive sectors. And I think you can get a little more out of this.

Steve Grasso (7:43)

I think when you look at the market pre the Iran conflict, we were focused on the Fed, focused on rates. Not that we're any less, but I do believe the center stage is geopolitical right now. So the market showed us that if the strait opens up, the market rips higher. Now we have two countries that actually want the strait to open back up sort of. Right.

Brian Sullivan (8:07)

There's a sort of agreement. So are we better off today than

Steve Grasso (8:11)

we were last night at this time?

Brian Sullivan (8:12)

Yes, 100%.

Steve Grasso (8:14)

And if that's the case, then the market's going to read through it. Look at what the backdated contracts in oil are reading in December. You know this better than anyone. WTI is at $71. That means that they they're seeing through this conflict. Anything can happen on the oil front

Brian Sullivan (8:30)

and it is very volatile. But the volatility seems to be getting

Steve Grasso (8:34)

sucked out of the market right now because people are focused on what happens next.

Brian Sullivan (8:38)

Fair enough. Okay, follow up on that and we'll get to Chris on the markets, everything else. I want to ask you this, and we don't know, but I'm going to ask sort of anybody wants to jump in? This morning we talked about a little bit on Squawk box. Today was an extraordinary day, no doubt a great day, good news. But how much of today's move, both up and down, down for oil do you think might have been leverage? Might have been positioning. Might have been. That's why I said one day wonder. Not because I'm anti the news, but because I wonder on a day like today, fortunes were made, fortunes were lost and there are people who got rich and some people who got destroyed.

Steve Grasso (9:12)

Well, we did see on the options front, we did see shorts getting taken out considerably. 75% of the market was squeezed. So I think a lot of it.

Brian Sullivan (9:23)

That's what I mean.

Steve Grasso (9:24)

And I also believe that every rally starts with a short covering rally. Right. That I've been saying that for over 30 years. I think that those are the savvy ones and the most leverage and the most at risk in the marketplace. So the shorts usually cover first. Can this be over with one headline out of Iran? Of course, but I don't think so.

Chris Varrone (9:40)

Listen, I think if you look at any of the prime data hedge funds went into this not necessarily short but certainly the books have been way gross down over the last three, four or five weeks now what area I might gross down it mean risk has come off the books over last three or four weeks. Now one place I might push back. This was a good day internally. This was not a spectacular day internally. You know, go back to last April 9th, that Liberation Day rally. You were 50 to 1 on the upside on the Russell 3000. Today you were four and a half to one. You were 97% advancing stocks. On that April 9th day of 2025 you were about 80% advancing today. So listen, those are good numbers but it wasn't some spectacular move that would suggest there's a lot of new money coming into the asset class. This was rotational on the way down. It was frankly pretty rotational on the way up today. So I don't think it changes a lot. Tim, you make a great point. Semi is making new highs that harkens back to what was working. So I don't think it really changes a lot or flips the script of the leadership materials were very good going into this. They made new relative highs as well today. Look at the Freeport Charter Alcoa. So I don't think a ton has really changed from a leadership.

Brian Sullivan (10:45)

What is it? So it is I guess rbi random but interesting that today, one year ago, literally today was the low of the Liberation Day tariff market. So it's a little bit odd on that front. You get my point about market positioning. You just kind of said that it wasn't a spectacular day. What are we thinking about then for tomorrow? Because we look at this market and there's going to be people that say well it's over now, everything's over. But yet we had the east west pipeline hit. We had Lebanon get hit. I talked to Hay Pack Lloyd, the German shipping. They said we're not putting ships there yet. They don't feel safe. This is not over.

Chris Varrone (11:23)

So let's think about this way. We've recovered two thirds of the decline you rarely go back to the low when you recover two thirds of the decline. So let's start with that as kind of our operating framework. If you think back over the last three or four weeks, a lot of lines in the sand have been set. You know, we certainly don't want to see above 444 in 10 year yields. We don't want to see below 35 basis points on the two 10 year curve. We don't want to see new high in credit spreads. I think if this market wants to check back and consolidate, it's very important we distinguish that from actual deterioration. If it's actual deterioration, we'll give up those key macro levels. That's what I'm watching going forward and

Tim Seymour (11:58)

going to your world. I mean the fact that crude oil is still have a 90 handle on it despite that, probably the biggest sell off since what, April 2020. I think that was the negative day. Yeah, the negative, the negative day. You remember this? That was.

Brian Sullivan (12:11)

I remember that.

Tim Seymour (12:12)

I still think energy stocks, you buy the weakness in energy stocks. I mean we were still talking about crude oil. That's elevated. I don't think it's going to have another significant leg lower on the back of any news that comes out. And I think energy stocks, despite the move and despite today's sell off, I think they're still in play.

Brian Sullivan (12:27)

All right, so let's bring another voice into this market. That is Mike Schumacher, Wells Fargo securities, head of macro strategy. Mike, good to see you.

Mike Schumacher (12:33)

Thanks.

Brian Sullivan (12:34)

Perfect night. I mean, what a day. Let's start with bond yields. Chris mentioned them. Okay. Markets ripped higher, oil sank 15%. But the guy's point sells a $95 price range. 10 year yield didn't move that much.

Mike Schumacher (12:49)

No.

Brian Sullivan (12:49)

Down less than 5 basis points. What do you make of that?

Mike Schumacher (12:52)

It's interesting, right? You got a disconnect. So as Chris just said, stocks have recouped what, 2/3 of their losses? Something like that. In bond land it's maybe 1/3, in oil it's 1/3. Something's not right there. I would say in volatility space it's maybe three quarters. So what do you think?

Brian Sullivan (13:08)

Not right.

Mike Schumacher (13:09)

It seems to me people are sounding the all clear a little bit too quickly. I'm the bond guy, I'm supposed to be depressing, I'm supposed to say that kind of thing. But nonetheless, check. You look at exactly. Got them. All right, so you think about the market backdrop. I would say it's become a little bit too sanguine, a little bit too quickly. So it Strikes me you ought to have higher prices for insurance people waiting a little bit longer for the market to price some Fed easing, maybe a little bit less hiking by the ecb, that kind of thing.

Brian Sullivan (13:36)

But the Fed said the opposite today. We got their minutes. So it's three weeks old. So take burn the book if you want, but in that three week old statement they did reference hiking, hiking. If inflation is not sort of fixed, inflation has got to be higher now than it was three weeks ago when they wrote that.

Guy Adami (13:56)

Yeah.

Brian Sullivan (13:57)

Are we going to get a rate hike?

Mike Schumacher (13:59)

No. That seems incredibly unlikely and the Fed speaks very opaquely so. The Fed said many people potentially could advocate a hike if certain conditions are met. It said most people actually, which is more than many. The way the Fed thinks about the world could contemplate a rate cut down the road. So the Fed actually I thought lean, dovish, not hawkish.

Guy Adami (14:18)

Yeah, I did. I did too. I thought, I thought it was dovish Fed minutes, which I think give you a little eye into all the fear of this emergency hike we were going to get. And I would get back to where is Fed policy right now? Where are we really, Michael? Given we've got a big CPI coming out on Friday, we've had inflation in every other number. But I heard a Fed that if they're pushed here, it's still the job market. That's number one. And that weakness.

Mike Schumacher (14:41)

Yeah, they're really concerned about that for sure. And that's gotten weaker. If you look at some of these, call it secondary ancillary indices like quits rate, etc. Not doing terribly well. I take your point, Tim. I think that's right.

Steve Grasso (14:52)

So Mike, when you look at the misery like index, you look at gasoline prices. We're heading into midterm elections. So you have gasoline prices and you have mortgage rates both elevated. What can this administration do? Or what do you look at in the market as the next domino? We could talk about the ten year, but what's the effect on the mortgage rate? That's when you really get lifeblood into the economy.

Mike Schumacher (15:17)

Yeah, mortgage rate. That's a great question, Steve. You think about the mortgage rate and how it's gone elevated over the last call, four to five months. You could maybe have the Fed come in and talk about doing an operation twist. Sounds really unlikely for a lot of reasons. Number one is the Fed sort of uncomfortable with balance sheet changes right now anyway. It's buying treasury bills, doesn't want to buy the long end. Secondly, a new Fed chair comes in probably next month. Maybe it's pushed back but pretty soon. So that transition stuff, if Trump and Secretary Bessant want to do something very different. We've talked about this a bit. I've mentioned in the show they could conceivably change the issuance, not schedule but volumes of 10 year, 20 or 30 year debt say wish you just a little bit less of that long term stuff. A little bit more in treasury bills. That buys them some time. Maybe it's worth 20, 25 basis points. Is it 50? I don't think so. So that to me is something that could be done but it's not a long term fix.

Chris Varrone (16:11)

Mike, it's great to see it. You know, if you think about curve shape from this point forward, you know, is there a direction to the curve up or down that gets you more worried? My suspicion would be flatter here would kind of reflect that there's an economy that's still weakening even if the Iran situation is in the background. Would you agree with that?

Mike Schumacher (16:31)

I think toward the front end of the curve, like 2 year versus 10 year. I think that's right. The thing that would really scare me though is if yields went up in the gap between the 10 year and 30 year increased. Because that's basically a vote of no confidence in U.S. governance, U.S. fiscal policy. Don't want that for sure.

Tim Seymour (16:47)

Let's talk about 30 real quick. Is a 10 year auction fine? I guess 30 year auction on Thursday. I think it's a pretty big deal.

Mike Schumacher (16:56)

I think it's a fair point. Yet decent auction intends. I agree with that. Last time I was here we talked about the horrible three year auction but that seems like old news now. As far as 30s go, it's probably a decent barometer. You don't really see a lot of foreign buyers step into 30s. Oh guys. So that's going to be consumed domestically. So to me it's less of a signal, probably intense. Unless it's really terrible.

Brian Sullivan (17:15)

So quickly, what's the next big thing you're watching? Is it cpi? Is it Iran? Is it something else?

Mike Schumacher (17:21)

CPI is old news. So the number is going to be terrible. I think we all know that. But probably just one mean, hot, hot inflation, very hot. So you're looking at a red hot, smoking hot 1% print, something like that for one month. So year over year, probably 3, 4. Really bad number. What's that?

Guy Adami (17:36)

I was going to quote a Van Halen song but it didn't really fit. And here we are talking about Van Halen.

Mike Schumacher (17:42)

We talked about Afternoon Delight a few minutes ago. So how's that.

Guy Adami (17:45)

Thank you for saving me.

Mike Schumacher (17:46)

Yes. Anyway, so inflation really not the big topic right now. To me it's got to be the Middle East. That seems obvious but really it's. What exactly is this thing? What kind of agreement is it? How many ships get through Hormuz? Does this mean that Lebanon is not attacked anymore? I don't know. I don't have the answers to these things. And that's one reason why we think volume should stay somewhat bit There is

Brian Sullivan (18:05)

a lot to watch but we're glad you're here. Michael Schumacher. Mike, thank you very much. Do appreciate that. And Tim, don't worry, be not worried about your eruption about Van Halen.

Guy Adami (18:15)

I thought you're saying get a Steve Grasso.

Brian Sullivan (18:16)

What's happy, what's the. I would never say that.

Steve Grasso (18:19)

Yeah, the market's taking its lead. The market is taking its lead from the war headlines. And when you see, when you see that, that headline today that Iran and we don't know to your point, we don't know who's disseminating that headline saying that the US violated the ceasefire, that keeps you on your toes. So as long as we have the US stand pat, I think the market has more room to the upside.

Brian Sullivan (18:43)

We all want that piece. And by the way, one thing I'll say before we go with dividend yields. Chris Frone, I think the S and P is higher on the year if you include the dividend yield. If not, it's pretty slow right there.

Chris Varrone (18:57)

I mean remember though, equal weight is still positive on the year. Equal weight S and P never broke the 200 day. Small caps really never broke 200 day. Mid caps really never broke the 200 day. I still think this year is about the average stock over the big one.

Brian Sullivan (19:07)

All right, well meantime we know the markets here ripped higher. They're all over your screen. But Tim says the real story may be overseas. How come?

Guy Adami (19:17)

Well, it's Germany. If you think about what the impact of higher energy costs are on some of the biggest developed nations in the world. We know Japan imports 80% of their energy but, but Germany's close to 70 and 77% of that are fossil fuels. Germany is a much more economically energy sensitive economy and really what we saw both with bond yields and the DAX from the outset of the war actually shows that and shows it strongly. I mean you had the DAX which sold off almost 15% in dollar terms to the S and p is down nine and a half. Today's move is 170 basis points of outperformance on the DAX and that's in the European morning. And I bet it might have been higher if you added in the rest of the US Day. If you look at bond yields, they were the ones that really showed the most concern around inflation. They were the ones that went up almost 25% off of the pre war level. So I would just get back to the trade that was working and some of the cyclicality. If you see cyclicality, come back. You want to own Europe, you want to own Germany and I think that's a great place. But I'm not saying it's off to the races. I'm just saying this is a case where if everything's better, look to Japan, but definitely look to Germany.

Brian Sullivan (20:29)

Yep. Super, super energy intensive and reliant economy. Tim Seymour, thank you. All right, we have got a long way to go. And coming up, Baba Boyd, Alibaba Bopping. We're going to find out why next. Plus what Delta Airlines may have said that made a lower oil story even better. You're watching Fast Money. We're back right up.

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Brian Sullivan (22:56)

All right. Lot more going on than just the macro markets, Iran and energy. Alibaba bouncing, the Chinese tech company launching an AI data center with its very own chips. Let's get more on this big story. Christina Parson Elvis joining us here on set with that and more and that $5 Canadian that I just had.

Tech Analyst (23:17)

Because right now we're talking about China and the key China right now, China and chips. The key word you use the Brian though is own. And I have that in quotations in the prompter here because Baba launched a data center in southern China, China, powered by 10,000 of its own AI chips. No Nvidia anywhere in the picture. And that's not an isolated move. Deep Seek, for example, is about to release its next model. And Deep seeks an AI Chinese startup, a V4, and it will run entirely on Wallace chips. According to the information, the model could have come out sooner, but Deep Space Deep Seek spent months rewriting its code with wall engineers to get it working on domestic hardware. Alibaba, ByteDance, Tencent have all placed bulk orders. Hundreds of thousands of Huawei chips, not American chips. And Huawei is now trying to push those ships beyond China's borders. Malaysia recently said it would deploy Huawei's ascendant chips as part of a sovereign AI program the first time outside of China. So the risk for Nvidia is no longer just lost sales in China. I know many analysts will say, oh, it's not in estimates. We've taken it out a long time ago. But it's that parallel ecosystem forming around Alibaba, Huawei and Deep Sea One that gives Chinese AI firms something they haven't had before, an exportable alternative.

Brian Sullivan (24:31)

So is this everybody? Kind of. It's hard to keep track. You got Alibaba, you got a video, you've got all these companies, Amazon, Gemini, Google. Are they all competing now with each other? Is there a common winner somewhere?

Tech Analyst (24:44)

Nvidia still has a stronghold over the market, especially on the trading up stage with the inference, the second part where you're, you know, spitting out the answers to your queries, like, you know, who's on this Canadian bill That part is becoming incredibly competitive. In the case with China, though, their AI stacking on the trading front may not necessarily still compare to what Nvidia's latest offering is. But they have the ability to stack on many chips because power isn't a constraint. They're also. Their chips are a lot cheaper, which makes it more marketable once you leave outside of China. And that's a huge selling point, given how much there's a lot of.

Brian Sullivan (25:18)

Hold on. There's a lot of fear in the car industry about BYD of China coming to the United States or Europe and taking a lot of share. Does that also exist in the AI data center and chip market? Is there a lot of fear? Well, that's this whole. Yeah, I know that's. Is that going to come in and undercut? Is that going to kill Nvidia?

Tech Analyst (25:35)

It's going to eventually start to chip away at its market share around the globe.

Steve Grasso (25:38)

You did there.

Brian Sullivan (25:40)

Chip away.

Tech Analyst (25:41)

Yeah, I can't. You don't have to state the obvious lines.

Brian Sullivan (25:45)

Sorry, yeah, this is serious. But who's on that? $5 Canadian. Who is that?

Tech Analyst (25:50)

No, and I'm not saying it right now because I'm blanking. Go back to this chip story.

Tim Seymour (25:54)

So is that the existential risk, John McDonald. Not today, but to invit the fact that Chinese can do it cheaper and seemingly more efficiently? Air quote.

Tech Analyst (26:04)

There's 1,000%. Yes. And why? Because the CEO of Nvidia, Jensen Huang, how many times has he said that the Chinese market is worth so much? It's, you know, $50 billion. All of these Chinese developers are over there. We're missing out on this important market. And he's making that statement because he wants to convince politicians in D.C. to allow or to reduce the export controls it reduce the export ban so that they can keep, you know, their market share over there or they risk to come full circle to the story. Losing it to Baba or Huawei or whatever other Chinese chip firm is, you know, gaining.

Brian Sullivan (26:38)

It is a big story. Chips, to your point earlier in the show, and Tim's yours, Chips leading the way today as well. All right, there is a lot more fast money to come. Here's what's up ahead.

Show Announcer (26:50)

Time for takeoff. Shares of Delta surging after earnings. How they're offsetting the rise in jet fuel costs and how much higher can they fly? Plus, big banks ready to kick off earnings season. What Chris Barone sees in the technicals and what it says about the market's next move. You're watching Fast Money live from the NASDAQ market site in Times Square. We're back right after this.

Brian Sullivan (27:21)

All right. Welcome back. Shares of Delta Air Lines soaring as much as 13%. They reported earnings atop both the top and bottom lines this morning. And the CEO at Bastion was on CNBC this morning Talking to Phil LeBeau said the company plans to meaningfully cut growth plans as jet fuel costs remained elevated, of course because the war in Iran, higher costs, adding $2 billion to Delta Airlines fuel bill this quarter. Here's what Ed Bastian had to say.

Mike Schumacher (27:52)

If fuel prices are going to stay elevated, we have to be responsible. We have to find ways to get our costs covered. One of the ways we're doing it in the, in the second quarter is we're pulling capacity down to accommodate and try to get ahead of some of that potential weakness. But we're not seeing it the last 30 days, our bookings are up double digits every day for the last 30 days.

Brian Sullivan (28:12)

Now Delta Airlines also joining United and JetBlue and Southwest Airlines in raising checked bag fees this week. Obviously the whole group, Tim, today got a big boost as, as oil prices and thus theoretically jet fuel prices came down or will come down.

Guy Adami (28:28)

Well, I mean everything at Bastion does seems to be thoughtful. But the best thing he can do is reiterate that airlines are run differently than they were 10 years ago, even five years ago. Absolutely 20 years ago. And that's what he's doing. He's like when we have higher costs, we certainly can't have too many flights out there. We've got to reel in our capacity. And that has been something that airline investors have been looking at for a long time. If you look at that operating margin in the first quarter, it beat all expectations. If you look at the, the essentially the net revenue number of up 9.6%. I mean that that was higher than the guide which had been upgraded. So I'm a Delta bull, I'm long Delta. I also believe that airlines may now be again we're talking about a world if we're just going to play out the scenario that we started the show with, that we've seen the worst of it that airlines which haven't really rerated since COVID and actually were starting to before war hit. Delta kissed all time highs today, pulled back. That's fine. I think you can buy that.

Steve Grasso (29:28)

When you look at the one year performance on Delta, it's outperformed the entire group. Delta is the only one that owns its own refinery. You know that better.

Brian Sullivan (29:36)

They said they, they saved like 300 million.

Steve Grasso (29:38)

They saved 300 million. So. So obviously it sounds like it's 10%, 15% of the number that they said they're going to lose. No other airlines hedges these days. So that's their pseudo hedge. If you're going to buy an airlines, I think Delta is the probably the

Brian Sullivan (29:53)

best position the charts look Chris, you

Chris Varrone (29:54)

know Tim, I think you would agree it wasn't the greatest close today. No on Delta back. But I think as long as this kind of keeps its head above 6465, it gets the benefit of the doubt here. Remember this bottomed relative to the S and P on March 11, so long before we knew what was going to happen over the last 24 hours. I think airlines in general have actually held up for pretty well the last two or three weeks. Cruise lines have held up particularly well. I think Viking made new highs today. So the whole space travel in general Marriott comes to mind. Hilton, Wyndham have all acted well despite the obvious headwinds.

Brian Sullivan (30:22)

Fair enough. Just got to say it's anecdotal. I've been to about 10 airports in the last five weeks. They've all been empty.

Tim Seymour (30:28)

What was your favorite?

Brian Sullivan (30:30)

Calgary.

Square Rep (30:31)

Why?

Tim Seymour (30:31)

See, that's where the stampede is.

Brian Sullivan (30:34)

It is. And the flames. But they're all YZ is a great rush tune and a great airport. Yeah, not as good as YYC as an airport. All right, coming up, big banks on deck ready to kick off earning season. What Chris sees in the charts and why he says the group could be nearing what he calls escape velocity. Yeah, I also made that noise. We're back right after this.

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Tech Analyst (31:29)

One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just try trusting yourself. Life is short and you just got to think big to accomplish big things.

Julia Boorstin (31:42)

Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday. Wherever you get your podcasts, I welcome back.

Brian Sullivan (31:52)

Pretty much like everything but oil and gas, big banks. They caught a big bid today. Citigroup, in fact, closing at its highest level since February. The action coming as we get ready for earnings from everybody got Goldman Sachs kicking things off on Monday and then the rest kind of all line up. So Chris Varrone, what are the charts saying?

Chris Varrone (32:12)

Well guys, I think actually it's probably the most important part of the market here because if you think about what was the story before Iran, it was all about the private credit mess. So as Iran fades into the background here, at least we hope it does, I think the big question is can the banks actually exhibit some relative strength here and put to bed some of the concerns that were brewing in the financial sector for the better part the of part of the last couple of months. I thought yesterday was interesting. So even before today's price action you had something like 65, 66% of the banking group make a new 20 day high. So groups in uptrends where the new high list is expanding is generally a pretty good sign. I think if you pair that with the strength we've seen from the transports. It's hard to make a recession call when banks are hanging in as they have throughout this entire thing and transports are the leadership. Doesn't sound like very recessionary leadership to us. And you know, I think lastly if you're going to talk about curve shape here as well with you know, stocks like Citigroup, bank of New York, PNC on the outperforming list here, that sounds like steeper curve, not flatter curve. So as we look ahead Brian, over the next really number of weeks, a number of months, what the banks do from here I think will be essential, engaging. Is there something more sinister out there? We don't think there is.

Brian Sullivan (33:24)

But you say, I assume you say they're the most important important group Guy Tommy because the weight that they're not energy, I mean I love energy but it's four and a half percent of the market. It's not going to drag the market up. Financials a bit of a different story.

Tim Seymour (33:35)

I tell the tell in terms of what they're seeing. I mean bank of America seemingly has only seen great things but I think we've been universal in our love of Citibank Jefferies and think initiated or upgraded stock at the end of March, $135 price target. Our logic behind it is one Jane Fraser but two, the compelling valuation that even at 122 I think it still

Steve Grasso (33:55)

has, you know, the city has had the move. When you look at it it's all these charts look almost interchangeable. But when you think about the year that's coming up now, we're going to have a couple of hot IPOs. There's going to be probably Some decent M and A. And you think about Morgan Stanley, you think about Goldman Sachs. Anything about JP Morgan, Citi has already performed. I don't say that they're going to turn back on it, but I would look to the year that we have in front of us versus the old story about D WRAG and yield curve.

Brian Sullivan (34:24)

If Space X goes really, really well, Tim, is that going to open the door for a lot more, more IPOs, or is it its own thing and it kind of operates in a vacuum?

Guy Adami (34:34)

I think it's both. I mean, I don't look at as a driver for bank valuations because people are now looking at the IPO market. I think people are going to see that banks in terms of their investment banking, in terms of their capital markets business, in terms of, I mean those numbers were fantastic in the first quarter. A little volatility goes a long way. Chris is right. I mean, we, we, we were focused on credit. I think credit doesn't happen until it happens. And I think right now we're not looking at a credit crisis. I think the world we have is, is actually not near a recession. I think we've talked about it and I think we've said stocks aren't priced for that. But getting back to banks, I would argue they've kind of been walking on sunshine for the last few days, not just today. In other words, they're up almost 14% off the floor. You're shaking your head, but Katrina and the waves also matter. And I would just say you don't want to see them rallying that much more into earnings next week because we know what happens when they do that.

Brian Sullivan (35:29)

Coming up, possibilities in property. What your next guest says may be the ultimate safe haven in real estate. All right, let's talk about real estate. Not the great New Jersey band, but actual real estate. Thank you. Housing stocks may be struggling. Commercial REITs though mostly outperforming the broader market by about 9% this year. Your next guest says the space may be the most attractive safe haven trade in the market. Darrell Craig, the CEO of Easterly Government Properties joining us now on set. Maybe the best ticker out there, dea, because most of your properties go to the dea, FBI, their government. So you would assume that is a safe haven. But we also know that DC Is a lot of work from home. How does this get resolved? What does it mean for Easterly?

Darrell Crate (36:22)

Yeah, well, we built this, this portfolio for durability. Most we don't own any federal buildings in Washington. We're out where the work gets done and it is out in the field offices of the FBI, the Drug Enforcement Administration, the Veterans Administration. The ticker is dea because they wouldn't give us FBI. But, but broadly it's, it's all of those agencies that depend upon Republican Democrat. They have an enduring mission for the, for the United States. And we know that these buildings and the enduring mission is going to last.

Brian Sullivan (36:49)

So what is. Let me ask you that. No, because I got a lot of friends in D.C. in the Virginia area and a lot of them, you know, they're going to hate me for saying this. They're working from home almost all the time.

Darrell Crate (36:58)

Yeah.

Brian Sullivan (36:59)

The stock could use some help. It's had a tough couple of year run. What is Wall street missing about easterly government? Because somebody's missing something.

Darrell Crate (37:08)

Yeah, no, no, it's a great point. I mean, again, you know, in the vacancy Doge, all of these concerns have really put, you know, put a head, put headline pressure on the stock. The reality is though, that you can't catch criminals from your basement. The dea, you can't store drugs in your refrigerator at home. You've got to do those in those spaces, facilities. And we have leases, very young buildings. They're 16 years old. A government building lasts 40 years. So we've got one lease, two lease renewals that are coming. So there's just consistency cash flow with an 8% dividend. We're in a fantastic place to provide durable income and, and opportunity for investors.

Tim Seymour (37:45)

Talk about the impact of doge, if any, and budget cuts. Because my sense is that was sort of a double whammy in terms of the stock price.

Darrell Crate (37:53)

Yeah, I mean, Doge again, the stock really got hit with DOGE because people thought the government was going to cancel all these leases. These leases say United States of America on them. You know, they are full faith and credit of the US Government, just like your dollar bill. So they're not going to default on these leases. But there is confusion. There's always, there's always been confusion as we're going through these transitions. So we find ourselves in a place where the stock continues to get beaten down, but the durable cash flows are there for investors.

Chris Varrone (38:19)

Investors, Darrell. I think it was in yesterday's Wall Street Journal or maybe this morning there was an article about how stuff in the D.C. market on the commercial side is getting sold for, you know, 10, 20 cents on the dollar. I actually view that as bullish that there's activity now we know the price and stuff is clearing. Would you view it in a similar way?

Darrell Crate (38:34)

Yeah, no, I mean, I think There's a lot of government buildings in Washington in particular, you know, that should be vacant. It's not really where the work is getting done. You've got. But you do have a stabilization in office in D.C. but also around the country. You know, in the office sector. In real estate generally it's been a little bit of a depression because fundamentally, you know, banks have been withdrawn their financing from many of these buildings. Capital has been scarce and that's really depressed. You haven't seen flows going into real estate in, in really a couple of years. But as interest rates are where they are, valuations are at attractive level. If interest rates come down just a little bit, inflation stays away. Real estate could be a place to be. And why not be in a place with long term leases, high credit tenants.

Steve Grasso (39:12)

It's actually a durable ask you when you look at the, everyone talks about the patent cliff, but there are a couple of refi walls that are coming up. And when you look at commercial real estate, these, these short term rates were at 3, 3 and change 4%, maybe the max. Now you're looking at considerably higher rates and people have avoided that section. Is that a big part of why people are staying away from commercial real estate?

Darrell Crate (39:35)

Absolutely. I mean, you know, one of the biggest influences of real estate is interest rate, you know, is really interest rates. And as you think about it, a real estate real estate investment gives you bond like returns but also gives you some equity opportunity. There's been so much uncertainty in our space in the government, which now there's clarity. Not one of our leases was canceled during doge, but you look in the office sector generally and you're beginning to see people understand, you know, where that is, where valuations are and the biggest stress point is interest rates. So as we get a little more clarity on where we go, as Kevin Warsh comes into, into the, this new seat, maybe it's really a time where real estate could run.

Brian Sullivan (40:10)

All right. Darrell, Crate of Easterly Government Properties. Darrell, really appreciate you coming on set.

Darrell Crate (40:14)

Great to be with you guys.

Brian Sullivan (40:15)

Thank you very much. We got some vacancies around here too. You might maybe move in. Tim, your take on the group.

Guy Adami (40:21)

Well, I think it's always some sense of cyclicality. It's some sense of interest rate sensitivity. It's some sense really of, of where you are seeing institutions looking for yield. I mean this is an environment where when yield has been plentiful or there have been opportunities to find either inefficiencies or there's been at least yield product out there. I Think that's where the cycle runs. It's, it's certainly a place. We talk about the housing market, we talk about investments there. And I don't think you need to chase that stuff here.

Brian Sullivan (40:49)

All right. Coming up, we're going to talk inflation, oil and geopolitics. We're going to give you the read on how investors may be feeling about some of the biggest risks that still remain in the market and what that means, what you should be doing with your money as well. More fast money. Two minutes.

Steve Grasso (41:12)

All right.

Brian Sullivan (41:13)

Welcome back to Fast money. Even before last night's ceasefire announcement, investors feeling cautiously optimistic on the market. How do we know that? Well, we know it from Investor PD's latest reader survey conducted earlier this week. Editor in Chief Caleb Silver is here now with more on individual investors. And I want to say that this. Caleb, good to see you. This survey was done. Yes.

Caleb Silver (41:36)

Two days ago, Friday through yesterday.

Brian Sullivan (41:39)

Okay. So a lot changed.

Caleb Silver (41:40)

Busy.

Brian Sullivan (41:41)

Five days it was. Today felt like five days in a good way. Tell us what you learned and then also kind of give us your editor in chief view of how things may change if you redid it today.

Steve Grasso (41:52)

Yeah.

Caleb Silver (41:52)

Well, we've been gauging sentiment every single day, but when we asked them point blank these 25 questions, what are you afraid of? What are you buying? What are you selling? What would you do if you had some extra money? Most of the individual, individual investors we survey say we're still pretty optimistic. Maybe they've seen this before. They have taken some shots over the past few months and maybe they're saying that's all you got because they assumed that this might happen, what might happen today and it might happen again. Now maybe, maybe they're being foolish about it, but they've been right every time that they've stayed in the market and continued buying their favorite stocks.

Brian Sullivan (42:23)

So the idea basically is that yet you're afraid. It's, it's a scary time. There's a lot of uncertainty. We don't know what's going to happen overseas. Heck, we don't know what's going to happen here. But your readers are saying got you got to hodl, for lack of a better term. I know it's a bitcoin term, but for stocks hold fast total, because these

Caleb Silver (42:41)

are the stocks that have brought them such great gains over the past few, few years. But also we saw about half of our readers trying to buy the dip in their favorite stocks. Their favorite stocks again, look like the top of the NASDAQ 100, like the top of the S&P 500. About half of them said we took an opportunity to get some of these on discount.

Guy Adami (42:57)

Caleb, what what has changed in terms of their approach either to bitcoin and some of the exotic stuff that was seemingly a place they wanted to be. Even gold and gold miners place that plenty were exposed. But we know what was going on in the momentum and it feels like the retail investor left before the institutional did.

Chris Varrone (43:18)

Absolutely.

Caleb Silver (43:18)

When you asked, when we ask our readers, where do you feel the bubbles? Where's the frothiness? They still feel it in a stocks and they definitely still feel it in crypto even after a big haircut in bitcoin and other crypto currencies. Maybe they never believed it. Now they really don't. Gold also they feel even with a drop is overvalued so they feel heaviness in a lot of those assets. Again, it's the stocks that they lean into and they've been doing it all along.

Steve Grasso (43:40)

So when you look at this, you've been doing this for a long time and I love this segment. Is there anything that sticks out at

Brian Sullivan (43:45)

you where you look at it as

Steve Grasso (43:47)

a 50,000 foot up technique? Is there anything that sticks out other than the resilience of the retail stock owner? Do you see anything where you say okay, maybe there's a little bit of a nuance to this? Yeah.

Caleb Silver (44:01)

When you look at the stocks that they've been buying lately, we like to do that every single week. We're looking at stocks like Apple which caught a pretty big bid over the past few days despite some of the news. Nvidia, always Microsoft, Tesla, Micron and Amazon. Then we asked them what stocks do you hold Again, a lot of those same stocks. But then what stock would you buy today and hold for the next 10 years? Same stocks. They are not willing to turn over their portfolios even after some big sell offs here, even after leadership has shifted

Brian Sullivan (44:26)

other but it's interesting because I know we got a lot of people probably driving home. They're on the radios, the kids heads out. Here we go. Sandy's off. Well we got the chart at 5050 inside joke. 50% of your readers said that AI related stocks were the most likely to be overvalued.

Caleb Silver (44:44)

Still, even the other half I was

Brian Sullivan (44:46)

staying in and the other half is like sold to you.

Caleb Silver (44:49)

They may feel like they're expensive. That doesn't mean they want to sell them. That doesn't mean they wouldn't buy them if they had some extra money. We always ask them the discretionary question what would you do with an extra ten grand? Buy individual stocks. That's what they've been doing. That's what they intend to keep doing. And they have been through some cycles. This last little correction shocked a lot of people just with the severity of it. But they've seen these stock markets bounce back, especially over the last five years. Are not willing to totally believe in a big dip that's going to be sustained.

Brian Sullivan (45:14)

I love that graphic. Put it back up. What would you do with an extra 10k? And the last one was CDs. And my old brain immediately went to music. I'm like, oh, they're going to buy some music with records. See, there we go. But I assume they mean, what would you be buying?

Guy Adami (45:26)

Like some Kaja? Google?

Brian Sullivan (45:29)

Too shy. Shy?

Guy Adami (45:30)

No way.

Brian Sullivan (45:31)

Come on, you're not going to get me on this stuff. Caleb, love you, man. Thank you very much. Up next, your final trades. Quick news, a little on anthropic. US Appeals court declining to block the Pentagon's blacklisting of anthropic. Kind of a win for the Trump administration. Defense Secretary Pete Headset instituted the blacklist over anthropics refusal to allow the military to use its clogged chat bot for surveillance. Final trade time. Tim, kick it off.

Guy Adami (46:03)

Yeah, Chris talked about transports acting. Well, UPS is ready to bust a move again.

Steve Grasso (46:08)

You know, I like when the market gives you a tell. And you know what pop today. Quantum stocks inflection. More to go.

Caleb Silver (46:14)

I think these banks are okay.

Chris Varrone (46:15)

Citigroup, long or see

Brian Sullivan (46:18)

guy.

Guy Adami (46:19)

No one played the game.

Brian Sullivan (46:20)

Nobody played the game with Tim.

Guy Adami (46:21)

Lay it alone. It's fine.

Tim Seymour (46:23)

My favorite one hit wonder is lady in Red by Christopher.

Chris Varrone (46:26)

Oh, brutal.

Guy Adami (46:27)

You just. A lot of people are now you

Brian Sullivan (46:29)

kind of Rick rolled us poisoned for

Guy Adami (46:30)

the rest of the night.

Chris Varrone (46:31)

Yep, it was a Rick roll.

Tim Seymour (46:32)

Walmart.

Brian Sullivan (46:33)

Walmart is your final trade. All right. Really appreciate that, everybody. Hey, have a great night. Thanks for watching. Matt starts right now.

Julia Boorstin (46:41)

All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by 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 this is the

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