Markets Sink as Yields Spike, and OpenAI Scores a Big Win Against Apple 05/21/25

Summary

CNBC's "Fast Money" Podcast Summary
Episode: Markets Sink as Yields Spike, and OpenAI Scores a Big Win Against Apple
Release Date: May 21, 2025
Host: Melissa Lee
Participants: Tim Seymour, Karen Finerman, Steve Grasso, Joe Moglia, Brian Gildenberg, Gene Munser, Mike Ozanian, Bertha Coombs

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1. Market Overview: A Turbulent Day on Wall Street

The episode opens with a stark portrayal of a bearish market environment. The S&P 500 plunged over 1.5%, the Dow Jones Industrial Average shed 816 points, and the Russell 2000 fell nearly 3%, marking one of the most volatile days in recent months.

Melissa Lee highlights the catalysts:

“A spike in bond yields triggered by a disappointing 20-year treasury auction sent stocks tumbling and lifted Bitcoin to record highs.” ([01:58])

2. Bond Yields Surge: Implications for Equities

A significant factor behind the market downturn was the sharp rise in bond yields. The 10-year treasury briefly surpassed 4.6%, reaching its highest level since late 2023, following a lackluster demand in the recent 20-year bond auction.

Tim Seymour explains:

“The lack of demand was staggering, with dealers taking almost 17% of the issue, which is a lot.” ([02:44])

Joe Moglia adds context regarding fiscal pressures:

“Higher expenses for our debt... raises major issues in the mind of the marketplace.” ([04:14])

The discussion underscores the delicate balance between rising bond yields and stock market performance, emphasizing that equities often play a secondary role to bond market movements.

3. Retail Sector Stress: Target and Wal-Mart in Focus

The retail sector is facing headwinds, with major players like Target and Wal-Mart adjusting strategies amid economic pressures.

Karen Finerman delves into consumer sentiment:

“Consumers are expecting a 7.3% inflation rate for the next 12 months, the highest since 1981.” ([16:15])

Melissa Lee points out recent moves:

“Wal Mart plans to cut 1,500 jobs to manage expenses, while Target slashed its full-year sales outlook.” ([15:33])

Steve Grasso comments on investment strategies:

“Target is down 40% this year, while Walmart remains a behemoth capable of negotiating better with suppliers.” ([20:48])

The panel discusses the challenges retailers face in balancing price increases, supply chain issues, and maintaining consumer confidence.

4. Health Insurers Under Scrutiny: Medicare Advantage Audits Intensify

Health insurers like Humana and UnitedHealth are experiencing stock declines following CMS's announcement to ramp up auditing efforts for Medicare Advantage plans.

Bertha Coombs outlines the developments:

“CMS is expanding its workforce from 40 to 2,000 coders by September to increase audit volumes from 35 to 200 records per plan.” ([25:52])

Joe Moglia remarks on the long-term implications:

“The DOJ is not going away, and this regulatory pressure will continue to weigh on these stocks.” ([27:54])

Steve Grasso advises on sector exposure:

“Elevance has less exposure to Medicare Advantage, making it a potentially safer investment compared to peers like UnitedHealth.” ([28:30])

The intensified audits signal a stricter regulatory environment, impacting profitability and investor confidence in the health insurance sector.

5. OpenAI's Strategic Acquisition: A Blow to Apple

OpenAI announced a monumental deal to acquire former Apple designer Jony Ive's startup for $6.4 billion, signaling a significant shift in the tech landscape.

Gene Munser analyzes the impact:

“This acquisition sets up a new situation where giants like Apple and Google are now being directly challenged in the AI space.” ([33:30])

Melissa Lee probes the future implications:

“This implies a push into hardware by the designer who brought the world the iPhone, suggesting new device innovations.” ([34:20])

Gene Munser further elaborates:

“Apple’s response will need to be innovative to stay competitive in the rapidly evolving AI market.” ([38:53])

The deal has sent Apple shares tumbling, reflecting investor concerns over increased competition and the company's position in the burgeoning AI industry.

6. Uber's Future in the Ride-Hailing Market: Elon Musk's Bold Statement

Shares of Uber fell over 3% after Elon Musk declared that Tesla does not need to acquire Uber to build a self-driving fleet, despite recent partnerships enhancing Uber's autonomous offerings.

Melissa Lee highlights the market reaction:

“Uber shares are dropping after Musk's comments, despite their partnership with Waymo to offer autonomous rideshares in Atlanta.” ([29:31])

Tim Seymour questions the feasibility:

“Why hasn't everyone replicated Tesla's approach? It's easier said than done.” ([30:41])

Joe Moglia supports Uber's standing:

“Uber remains a solid company, and Musk’s remarks seem more like noise than a substantive threat.” ([31:12])

The episode underscores the uncertainty surrounding Uber’s strategic positioning in the face of aggressive technological advancements.

7. New York Knicks’ Valuation Surge Amid Playoff Success

The New York Knicks' unexpected deep playoff run has significantly boosted their valuation, making them one of the most valuable franchises in the NBA.

Mike Ozanian shares insights:

“The Knicks are approaching an $8 billion valuation, driven by their playoff success and substantial incremental revenue from home games.” ([43:06])

Tim Seymour breaks down the revenue factors:

“Each home game during the playoffs brings in an average of $10 million in incremental revenue with an EBITDA margin over 60%.” ([43:08])

The Knicks' performance has not only elevated their financial standing but also enhanced their brand value and appeal to sponsors, exemplifying the financial impact of sports success.

8. Alphabet’s Resilience Amid Tech Sector Volatility

While many tech stocks faltered, Alphabet stood out as a rare positive performer, gaining nearly 3% after day two of its Google I/O conference.

Brian Gildenberg discusses investor strategies:

“Despite concerns over antitrust issues, Alphabet’s advancements in AI, particularly with Gemini and Gmail updates, have reassured investors.” ([41:30])

Tim Seymour underscores Alphabet’s momentum:

“Sundar Pichai’s commitment to scaling AI operations signals Google’s intent to stay ahead in the competitive landscape.” ([42:19])

Alphabet's robust performance highlights its strategic positioning in AI innovation, differentiating it from peers struggling with regulatory and market pressures.

9. Outlook and Final Thoughts

The episode concludes with panel members sharing their final thoughts and trade picks:

• Joe Moglia expresses confidence in the Knicks and urges caution in the consumer discretionary sector.
• Tim Seymour shows favor for Utilities (XLU) and maintains a positive outlook on defensive stocks.
• Brian Gildenberg discusses hedging strategies amidst MAG 7 exposure.
• Steve Grasso mentions a renewed interest in Quantum computing stock D-Wave.

Melissa Lee wraps up the discussion by highlighting the dynamic and uncertain market environment, emphasizing the importance of strategic investment decisions amid economic and regulatory challenges.

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Notable Quotes:

• Tim Seymour ([02:44]): “This is one of those days that felt really important. The price action was the most volatile day we've had in a month for an equity market.”

• Joe Moglia ([04:14]): “Higher expenses for our debt... raises major issues in the mind of the marketplace.”

• Karen Finerman ([16:15]): “Consumers are expecting a 7.3% inflation rate for the next 12 months, the highest since 1981.”

• Gene Munser ([33:30]): “This acquisition sets up a new situation where giants like Apple and Google are now being directly challenged in the AI space.”

• Melissa Lee ([29:31]): “Uber shares are dropping after Musk's comments, despite their partnership with Waymo to offer autonomous rideshares in Atlanta.”

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This comprehensive summary encapsulates the key discussions, insights, and conclusions from CNBC's "Fast Money" episode, providing a clear and detailed overview for those who haven't tuned in.

Transcript

[Melissa Lee]

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[Tim Seymour]

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[Melissa Lee]

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[Karen Finerman]

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[Melissa Lee]

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[Karen Finerman]

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[Melissa Lee]

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[Tim Seymour]

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[Melissa Lee]

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[Tim Seymour]

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[Melissa Lee]

February 2024 Nelson Report. Live from the NASDAQ markets and in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Rate shock A sharp spike in yields putting fresh downward pressure on stocks and lifting Bitcoin to record highs. Will the climb in the 10 and 30 year treasury put a lid on the stock market rebound? We'll debate that. Plus Apple picking OpenAI announcing a $6.4 billion deal to buy former Apple exec Jony Ives, a device startup. The details and the negative impact on Apple coming up. And later, U stalls the day after Elon Musk says he doesn't need them to build his robo taxi empire. Target tumbles after slashing guidance the retail ripple effect and Go New York Go will go inside the Knicks valuation surge as the team makes the deepest playoff run in 25 years.

[Tim Seymour]

That's right. Go next.

[Melissa Lee]

I'm Melissa Lee coming to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Feineman, Steve Grasso and former TD Ameritrade chairman Joe Moglia. Joe, welcome to the show.

[Joe Moglia]

Thank you Karen and thank you Melissa.

[Melissa Lee]

We thank you, Karen. We start off at the sea of red on Wall Street. Stocks taking a sharp turn lower midday with the S and P tumbling over a percent and a half and the Dow losing 816 points. A small cap Russell 2000 leading the losses down almost 3%. The catalyst, a spike in bond yields triggered by disappointing 20 year treasury auction this afternoon. Weak demand sending rates in the benchmark 10 year briefly above 4.6% during the session, their highest level since 2-3-30 are hitting its highest since late 2023. Meanwhile, Bitcoin that had fresh record highs for the first time since December, getting within a stone's throw of 110 before pulling back from those levels. And gold also higher up now for a fourth straight day. So what was this all about, Tim?

[Tim Seymour]

This is one of those days that felt really important. And the price action, it was, it was the most volatile day we've had in a month for an equity market. It's been on a tear and there's some questions about maybe Apple. And so there's some, there's kind of existential stuff out there when it comes to global bond yields. A 20 year auction that. Look, a lot of people probably didn't know we had a 20 year bond. In fact, this was an auction that was only brought back to life about five years ago. It was a $16 billion auction. But more importantly, it was the lack of demand. It was the fact that a coupon settled in over, you know, started out at 5%, and yet dealers took almost 17% of this issue, which is, which is a lot. It comes after we've had significant backup in yields in Japan. It comes on the eve of a tax budget, a budget being pushed through that has a big tax cut in it. Whether we already had that tax cut or whether it's a new tax cut doesn't matter. On the politics, the credit folks are telling you one thing, and in fact, I think even Moody said that, whether people want to listen or not. So it's been a very interesting few days. We all debate all the time, what's that breaking point for equities in terms of bond yields? We closed at that intraday high of where we were on the day. It seemed like the Trump administration blanked on the bond market, not the stock market. So what do you have, an S and p that fell 80, almost 80 handles immediately after that auction. Interesting day.

[Melissa Lee]

Yeah. Strategist after strategist. Four and a half percent. That's a cap for equities in terms of how high we can go. Here we are 4.6% firmly, Joe, and that has proven to be an issue.

[Joe Moglia]

I think one of the, one of the things that creates a lot of agita in the marketplace is we seemed to settle down a little while ago when Trump made it clear that he's willing to negotiate as far as tariffs go. But we still have issue with regard to taxes. What's going to happen there. We still have an Issue with regard to the budget. We still have an issue with regard to deficit. So if you have a failed auction, all that means is that ultimately we're going to have higher expenses for our debt. That is already close to a trillion dollars. If you look at increased expenses for your debt, you don't have a whole lot of room left over for discretionary spending to cut that. So that, that raises, I think, major issues in the mind of the marketplace.

[Melissa Lee]

Right.

[Steve Grasso]

Yeah, I think, you know, we all saw that sell off. A dramatic, sell off, dramatic rally back. This is just a breather, breather zone. If we stay stabilized above 5500 have it.

[Melissa Lee]

That's a one. Who said treasuries over four and a half? Yeah, you've been among that chorus People saying four and a half percent is an issue. Yeah, we're 4.6% right now.

[Steve Grasso]

Yeah, that's why I said 5,500 in the S and P if we stay above that. So I think we're going to draw down a little bit based on that. I also feel like we could run to that 6,000 level again. I had put that a couple of weeks ago on the desk. I said four to six months. We did it basically in a month to get back to that level. Too fast on the way down, too fast on the way up. If we could stay middle 5,000, I think that's a win.

[Melissa Lee]

Yeah.

[Steve Grasso]

For the overall market.

[Melissa Lee]

I mean the market seems to be operating in, in extremes at this point over the past month or so. And it's just startling that a 20 year treasury auction, an auction we barely ever mention even on the air. I mean, Peter Brookfar wrote in a note today. This is something that I don't write about usually because it's a low liquidity, sort of like, you know, oft forgotten Treasury Bond, the 20 year old.

[Brian Gildenberg]

Right.

[Melissa Lee]

So why popular bond? No, not at all.

[Brian Gildenberg]

A bellwether now or proxy anyway for. Well, for longer term debt. Right. So I mean the market selling off, it's just math. If rates are higher, Right. Discount, discounting, cash flow of earnings forward, then you get lower values. But I also think we had such an enormous run. The volatility index was down below 18 today. Closed, I think near 21 below 18. That was that. That probably shouldn't have been there today, but I do. You know, we've all been worried about this deficit situation and the math of it just getting worse and worse and it's sort of, you know, gradually at first, then all of sudden. Are we in all of a sudden I don't know, but that, that is the thing that I find most scary.

[Melissa Lee]

Yeah, you mentioned always long. Yeah. You mentioned volatility going to the extreme lower. Carter Braxton Worth actually put out a note pretty much in the middle of the sell off this afternoon, pointing out the gaps above us here. And the gaps will be filled, meaning volatility will go higher and the markets will continue to be challenged as we fill those gaps.

[Tim Seymour]

Yeah, I think, I think we often say, I hear Steve using that term a lot, especially in terms of down moves. So I think it's, I think it's extraordinary. I think it's extraordinary when you think about that, if you want to take it to the extreme and people are now bringing up the term bond vigilantes. And what does that really mean? Well, it's not like one big hedge fund. It's just a lot. It's basically the bond market saying at some point, enough's enough and we will vote with our feet. And the extreme example of that is Liz Truss in the UK Budget when again, they tried to jam through a budget that was deficit terrible for an economy that was slowing down. So you get a confluence of events that right now are a big challenge. And I do think that this is another one of those challenges. And I think there's a lot of pressure from the White House on the legislators to push through this bill. In fact, this is really being seen as a loyalty test and being, you know, being phrased that way. And therefore the market is saying something very different. The market saying be loyal to the bond market, which is being loyal to essentially funding America at a time when there's a lot of issues here. So it's a fascinating day for equities because equities, we all know are always second fiddle to what the bond market has to do.

[Brian Gildenberg]

And I think this is not the kind of thing you could pressure the Fed. Right. This is beyond. This is. This is not a Fed thing to move. Right. It is the markets to move.

[Melissa Lee]

Right. I mean, bonds, we're talking in the car ride. We talk on the car ride home about things we talk about on the show. Extremely exciting car ride home. But you're mentioning bond yields. They're not political, they're not biased, they will go where they go. Exactly.

[Steve Grasso]

But, but to that point, whenever we start to get to these bond yields above four and a half percent, there's always a sneaky headline with the government. It's something that they can't control.

[Melissa Lee]

Trump will come in.

[Steve Grasso]

So something happens where all of a sudden we're back at 4.3 in the.

[Brian Gildenberg]

10 year, you get some CPI data. That's good.

[Steve Grasso]

I mean, it's that, it's that quick. And when I first started my career in the early 90s, the markets used to take weeks, months, years to play out a scenario. They do it now in days, in hours and days and weeks. So we could be looking at a ten year, that's four and a quarter tomorrow. This is how quick it happens. And then the whole narrative changes.

[Joe Moglia]

I think the other side to this, though, is we can't, we can't forget the president that we have, who happens to be a narcissist. So he wants to look good no matter what the situation is. So he wants to make sure that if the stock market is doing well, he wants to be the person responsible for that. If he always considers himself a great deal guy. So you've got deals going on with regards to the Congress, with regard to taxes, with regard to deficit, with regard to every other country in the world. And he's not going to allow himself to look bad. And if things go too far in a negative direction, he's going to step up, he's going to come up with a tweet, he's going to do something that will help put a halt on the market's down move, help turn it around a little bit.

[Melissa Lee]

So you also believe that Trump somehow will step in to save the markets. Can't go too far.

[Joe Moglia]

I 100% believe that, Melissa. I really do believe he's not going to let it happen.

[Tim Seymour]

But the thing that has to give, and I guess it's so, it's so painful for us to get into the political realm on this show because let Washington do what they do. But if you think, you know, what I'm reading from Wall street economists is that if this tax bill goes through, this big, beautiful bill goes through, it has the implications of about, you know, a $3 trillion impact over the next decade in terms of the deficit. So you get back to what the market is somewhere and the bond vigilantes who are not a particular person, but it's a force that's saying enough is enough. And it's one thing to have the rating agency that no one really listened to come in either very late or not. But, but at some point, you can make an argument that, as Steve says, this is happening quickly, or I can make an argument that Since July of 2000, after we digested the worst of COVID that rates have been going higher and, you know, Carter comes on here and he's, he's right to point out that we've drifted in a range for two years on the 10 year. But I can look at that chart and I can tell you we're going slightly higher.

[Joe Moglia]

How about if the reality is, though, things really get bad, can we count on the Fed to actually come in then? Isn't that when they're going to tend to be more accommodative?

[Brian Gildenberg]

What's really bad, though, is it, I mean, if it's a labor market that.

[Joe Moglia]

Gets really bad, the markets, the, the market's in a bit of a free fall, rates really, really much higher. I mean, I think at the end of the day, at some point in time, I think the Fed does act. I don't see that happening tomorrow. But I think if we look like we're going into a recession, we're going to have some serious issues. I think the Fed potentially does wind up doing so.

[Melissa Lee]

It feels like the Fed's going to want to see an uptick in unemployment. Like we are going to be either in it.

[Steve Grasso]

They're going to go with whatever the first thing that shows on their mandate. So if it's inflation that spikes, they're going to treat inflation. If it's, if it's unemployment that spikes, they're going to treat that. That's going to have to do, the dual mandate. But if we think back to Tim's point, the Biden, the first Trump administration wrote $7.6 trillion extra in deficit spending. Biden wrote 8.4 trillion. The markets were still, still terrible on a fiscal level, but better than the entire globe on a fiscal level. So something to keep in perspective.

[Melissa Lee]

All right, let's go down to Washington here. All these moves come as lawmakers scramble to finalize a budget bill before Memorial Day weekend. Emily Wilkins is in Washington with the very latest on this. Emily? Hey, Melissa. Well, yes, President Trump just met with the deficit hawks today at the White House trying to get them. Yes, on his mega bill that includes number of legislative priorities, most importantly perhaps his tax proposal. We understand that meeting just met. We're still waiting for a bit of a readout here, but the two groups traded barbs earlier in the day as Trump has been pushed, pushing for a vote this evening or as soon as possible. And these holdout lawmakers are pushing for deeper cuts. They want more spending cuts, including phasing out certain green energy tax credits completely within the next few years and implementing work requirements earlier for Medicaid. Chip Roy criticized the current proposed cuts in the bill as not going far enough. Today he tweeted that writing a deficit backed blank check and that he's referring to the state and local deductions there is easier than cutting spending. And he lists a couple things like doge those green energy tax credits and post Covid spending. The congressman said that Congress in the swamp will always choose the easy route, but we can't afford it. The White House responded soon after that in a statement touting the bill's positive impact. But it ended with a warning saying that President Trump is committed to keeping his promises and failure to pass this bill would be the ultimate betrayal. Speaker Mike Johnson, who is also at the White House, he had hoped to have a potential vote on the bill today. He was thinking maybe today or tomorrow, but lawmakers have been waiting since 1am for a final agreement to come about from leadership. And these fiscal hawks, they could not be, they could be having an agreement around the corner or they could be waiting for much longer. We're all waiting to see exactly what the outcome of this meeting is. Melissa? Emily, thank you. Emily wilkins, I wonder if any of these guys are going to point to the bond market and what they did, what the bond market did today as a sign that maybe it's not going far enough in terms of all these.

[Steve Grasso]

I'm going to explain the bond market to them.

[Melissa Lee]

All right. Let's say that for another show.

[Tim Seymour]

Well, I do think that there is pressure here and I do think that there's pressure at least. Again, it's so interesting that folks that claim that they are conservative Republicans are really stepping into what at least has been a traditional role. I mean, they are fiscal hawks, stocks, they are dyed in the wool. They are doing what they should be doing. And it gets back to what markets are willing to tolerate. Today was a day that felt a lot like a month ago, not just because the S and P was down, but again, it was one of those days where the dollar was weaker, equities were weaker, bonds were weaker. We had the emerging markets feel to us in this country. This is all also happening on a week when the G7 gets together and there's a lot of politics around the dollar and there's a lot of sense from a lot of our foreign trading partners that this administration would like this dollar significantly weaker. That's playing into some of this too, all the time. When again, I know, folks, you're not looking at Japan's bond market, but what's happened in Japan over the last 10 days is a lot more significant in terms of the the impact at Least the relative move there than what went on here today. It's a big deal and it will put upward pressure on US Rates.

[Melissa Lee]

All right. Meantime, more signs of cost pressures in the retail sector today. We had a number of, of earnings reports. We also have the Wall Street Journal just reporting that Wal Mart plans to cut 1500 jobs to help manage expenses and speed up decision making. This after all these retailers this morning raising concerns over the impact of tariffs. Target cutting its full year sales outlook. TJX warning it could miss Q2 earnings estimates and lows, saying it is seeing a drop in demand for do it yourself projects. For more all this, let's bring in Brian Gildenberg, Managing director at Retail Cities North America. Brian, great to see, see you.

[Karen Finerman]

Great to see you too.

[Melissa Lee]

So when are we going to start actually seeing a consumer in distress? Because so far we haven't really seen it, but we've gotten signs and clues.

[Karen Finerman]

Well, I think, I think you've got a couple of things that are going on right now and the easiest way to think about this is the two prong issue. You've got one, you've got the math problem, which is what will happen to products that are tariffed and how retailers are going to treat the prices of those products. And you heard a bunch of the retailers talking about their varying approaches to that today. I think the second problem which is harder to forecast obviously, but, but more pronounced right now is the impact that the inflationary narrative is having on consumer confidence. Consumers right now are expecting a 7.3% inflation rate for the next 12 months, which is the highest number since 1981. Is that right? Probably not. But whether it's right or not matters less than whether the consumers believe it or not. So I think right now what needs to happen is the actual math on tariffs will be one thing, but I do think that the narrative settling down around what a known amount of inflation and a known trading and a known balance of what's going on from a trade terms point of view would be extremely helpful to helping both the consumer and then the retailers forecast results.

[Brian Gildenberg]

Brian, it's Karen. Thanks so much for being on. So we're heading into summer. We got back to school season coming up. How often, how often does consumer sentiment not align with what the consumer actually spends?

[Karen Finerman]

I think we always try to look at consumer sentiment in terms of its directions probably more important than the absolute number and that consumers, it's, it's kind of, you would assume the consumer sentiment would drive purchase behavior, but we often found was exactly the opposite. Which is that what you were able to buy changed your sentiment.

[Tim Seymour]

So.

[Karen Finerman]

So I think there's going to be an interesting impact to that as, as prices go up, if prices go up and as they do, shoppers are going to feel worse about their situation in the short term and in the medium term that'll probably put a bit of, a, bit of a crimp on expenditure. I think the other thing right now is that it's important remember that the American shopper is extraordinarily gun shy about inflation, having just gone through two or three years of relatively extreme inflation for us. And as a result, I think any narrative or any evidence that they can find will be sort of confirmation bias for the shopper. So I don't know how helpful it is to look at the past sometimes of this. It's really important to understand how consumers feel about inflation and what they're going to see and hear now that's going to change or influence that behavior.

[Melissa Lee]

Wal Mart really got a drubbing, Brian, from President Trump when he said that it was going to might have to start raising prices on tariff goods soon. And it seemed like the other retailers learned their lesson in terms of how they approach price increases on their conference calls. Do you believe that? Is there a way for them to continue to keep prices low by haggling with vendors, etc. How much leeway do they actually have or. They just did. They just learned their lesson and you know, they said we're not going to talk about explicitly on the conference call, but you know, off the call they're like, yeah, that's probably going to happen because it has to happen. You mentioned it's a math problem. It is a math problem in terms of margins.

[Karen Finerman]

I thought Target, I thought Target had the sameest approach I've heard today to this, which is to say, look, prices move a lot and we're going to. Tariffs will be one of many inputs into how we need to think about that problem. And I think Target was right because I mean, even just the stupid headline. But you know, the Daily Mail.uk had a headline from a Target employee who posted on Reddit that the price of some charger went up and that became news. Right. So I think Target and a number of retailers realize that if they say they're not going to raise prices that they're highly subject to somebody pointing out that they have. And I think Target's particularly gun shy about negative narrative at the moment, so that makes sense too. But, but yeah, I think, I think there are certain retailers that are certainly less China dependent than Wal Mart and are in a more comfortable position with that. Wal Mart does, Wal Mart does derive a lot of its import volume from China and as a result I do think has to be more cautious about that. I think other retailers like Target, whose supply chain is more apparel centric, have been diversifying away from China as a, as a source, as, as a sourcing place for years partially because that's kind of where the whole apparel industry has moved and that's a very big part of Target's business vis a vis Wal Mart. I think every retailer is in a slightly different position with this and to some degree I think retailers are going to have to, they are going to have to figure out within the context of the politics what the narrative needs to be.

[Melissa Lee]

Yeah. Brian, great to have you. Thank you. Brian Gildenberg.

[Karen Finerman]

Thank you.

[Melissa Lee]

Where do you stand on retailers?

[Steve Grasso]

So when you look at Target, Target's on a one year performance is down 40%. We were all saying the same stuff. It's, they've had their issues on a multitude of different problems and it's an ongoing basis. Walmart has the ability to haggle with any one of its suppliers more than any other, any other retailer across the board. They're a behemoth. When I look at the stock I want to invest in, I look at TJ Maxx, what do they, what's their bread and butter? They're figuring out how to have the right inventory, figuring out how to take someone else's surplus and sell it for cheaper, for a cheaper amount of money. And people go to them, they flock to them. This probably plays right into a TJ Max or a Ross stores where they're taking someone else's era in inventories and making it their tailwind.

[Joe Moglia]

Yeah, when I think about where I'd like to put my own money, I think the last place I want to put it is consumer discretionary. They've been in a bind, they are in a bind, they're going to get, continue to be in a bind. So with the CEO of one of these companies, you always have to care about market share. You have the threat, you have tariffs that are very, very real reality market share. You can enhance your market share or maintain it by lowering your prices or not allowing them to go up or you have a better product and service. So if you, if you choose to absorb, if you choose to eat the tariff, then that may help you near term as far as your market share goes. But eventually that going to shrink your market, your margins are going to have a negative impact on your stock price and how long can you continue to do that? So I don't, I don't see, I don't see anything that's really going to help the consumer discretionary sector with the stress that they're under and the pressure politically, frankly from the president.

[Melissa Lee]

Coming up, shares of Medicare Advantage providers sinking after hours on news of more aggressive auditing efforts from regulators. The details moving the stocks next. And Uber slams the brakes. How Elon Musk's comments yesterday put shares in reverse and what the future of the ride hailing space could look like.

[Steve Grasso]

This is Fast Money with Melissa Lee.

[Melissa Lee]

Right here on CNBC. For 140 years, MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care. Together, we're building a healthier future.

[Tim Seymour]

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[Melissa Lee]

Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn [e-mail] creditcard based on the February 2024 Nelson Report.

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[Melissa Lee]

Welcome back to Fast Money. We got a news alert on Nike. Sending shares higher after hours or Kate Rooney's got the latest. Kate. Hey Melissa. Well, it looks like Nike and Amazon are getting back together. This is according to the information reporting that Nike is coming back to Amazon. This is six years after the retailer stopped selling through Amazon in favor of going direct and selling through its own stores and websites. Nike shares, as you mentioned, higher on this news. An Amazon spokesperson confirming this to the information. We are reaching out to both companies. It's a win for Amazon after losing that major brand. And also Nike is really trying to revive some slumping sales here. And big deal for Amazon though. They've really tried to lean in to some of those bigger brands and the more popular consumer brands, but moving shares, not seeing anything on Amazon after hours, but big news for Nike. Back over to you. All right, Kate. Thanks. Kate. Rooney up two and a half percent or so, Tim, on Nike shares, why.

[Tim Seymour]

I like it for Nike shareholder here. It makes you wonder what what Dixon Footlocker are thinking again, when part of this was really built around who was going to be able to put a little bit more pressure on, you know, I mean, Nike's got they've got options. And it's been clear that a couple of Nike's rivals have gone the Amazon prime route already. So maybe there was pressure on Nike here. I don't think this really changes the game, but fascinating.

[Melissa Lee]

All right. Meanwhile, health insurers including CBS, Humana and UnitedHealth all dropping in the extended session this a CMS announces a major expansion of its auditing efforts for Medicare Advantage plans. Bertha Coombs has got the details on this one. Bertha?

[Brian Gildenberg]

Melissa, you know the center for Medicare and Medicaid Services says that it's going to ramp up that auditing of Medicare Advantage plans and expand its technology and workforce to catch up on more than six years of audits. If last fall the feeling was that the Trump administration would take it easier on MA plans, well, the Biden than the Biden administration had this afternoon, that's certainly not looking like it's the case. CMS pledging to look to expedite its review of plans billing from 2018 to 2020. CMS Administrator Dr. Mehmet Oz saying while the administration values the work that Medicare Advantage plans do, it do CMS faithfully. It's time, he says, that CMS faithfully executes its duty to audit these plans and ensure that they are billing the government accurately. This whole issue of over billing has been one that has dogged these players for years. Now one of the things they're going to do, they're going to enhance their technology, spend more on that, expand the workforce. As the rest of the health department is being slashed, they're going to expand the workforce of coders from 40 to 2000 by September 1st, increase audit volumes to 200 records for plan. Right now they do about 35. They're also going to work with the Office of the Inspector General to make sure that they collect on penalties. Melissa, you know, the DOJ is already looking at penalties on overpayments or over billing for Aetna, Humana and elevance. This is certainly going to put that regulatory pressure and ramp it up.

[Melissa Lee]

Right, Bertha. Thank you. Bertha Combs, the sector just can't catch a break here between medical loss ratios and audits. Now, Karen, you own Elevance.

[Brian Gildenberg]

I do. It's a little less exposed than some.

[Melissa Lee]

Of the other names, but down after hours.

[Brian Gildenberg]

Down a little bit after hours. I mean UnitedHealth just, it just can't seem to catch a break at all. It's down another 10 bucks in the aftermarket. It's cheap, but I still can't quite get there.

[Joe Moglia]

Yeah, Joe, I think the, as far as UnitedHealth goes, I think they're doing a good job internally from PR perspective to troubleshoot and talk about, we don't really have a problem here, but we have been above board the whole time. But the reality is the DOJ is not going after them. If they don't have something that they really feel they're going to, they're not going to embarrass themselves by going after one of the greatest companies of all time. And the DOJ is not going, not going away. So the issue I've got with UnitedHealthcare, as great a company as it has been, they're going to be in the woods with this for a long time. This is not going away tomorrow. And that, that, that's not going to do anything good for the stock.

[Steve Grasso]

I try to drill these down and just look at the exposure to Medicare Advantage. So as Karen said, elevance has less. The most is unheard of. Then it goes Humana and then cvs. Cigna sold most of its Medicare Advantage or all of it back in 2024. So they have a negligible exposure to it. So if you're looking for just the to get out of the way of Medicare Advantage, Cigna is the one to go to.

[Melissa Lee]

Coming up, Uber shares getting to a halt after Elon Musk boasted about Tesla's robo taxi future. How AI is turning the ride hailing industry upside down. Plus OpenAI stages a major cross who as it lands a deal with the legendary former Apple exec, what it means for the iPhone maker and the state of design. You're watching Fast Money live from the NASDAQ Marketsite in Times Square back right after this. Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places.

[Tim Seymour]

That take credit cards nationwide.

[Melissa Lee]

And every time you make a purchase with your car, you automatically earn cash back. Welcome to the now it pays to Discover. Learn [e-mail] credit card based on the February 2024 Nelson Report Imagine what's possible in your business career when learning doesn't get in the way of life. At Capella University, our game changing flexpath learning format is available in select business programs and lets you learn at a time and pace that works for you. That means you don't have to put your life on hold while earning your business degree. Instead, enjoy learning your way and earn your degree without missing a beat. A different future is closer than you think with Capella University. Learn more at capella. Edu welcome back to Fast Money. Uber dropping more than 3% after Elon Musk said in a CNBC interview yesterday there was no need for Tesla to buy Uber to build a self driving fleet, the stock hit an all time high just yesterday after announcing a partnership with Waymo to offer autonomous rideshares in Atlanta. Tesla basically said we can build an app. There's no need for an Uber is that easy to replicate the Uber business.

[Tim Seymour]

Then why hasn't everybody done it? And that's the other side. It's like, oh, the hardware is not important, but it's really about the software. Well, the software, we don't need it. And by the way, I don't think Uber or in its price is a Tesla bid. So you know, this is, this is noise to, to me. You know what I think you listen to more at Uber is the fact that management recently reiterated at some kind of an investor day they're expecting 30 to 40% EBITDA growth and 90% conversion of that to free cash flow. I mean this sounds like a machine to me and I think there's a lot of levers they can pull.

[Joe Moglia]

I think Uber is a really good company number one. And number two, I think just the fact that Musk said, well we don't need Uber, we don't need to do anything about it is the reason why it wind up taking a bit of a hit today. Today Uber is a pretty solid company and Musk is convinced of course he's a pretty bright guy. But the future of the world is going to be the self driving and the optimist with regard to the robots. But that's not around the corner. Even David Faber was pushing him on that that night. Is it 2030? When is that going to be? So that's down the road, but that's well down the road and I think between then and now Uber can continue to build what it's doing and somebody else might be able to come in one day and take over Uber. Tess is not quite there yet.

[Steve Grasso]

Yeah so. So I do believe you know Tesla could has enough money and Tesla has enough know how to do anything they want to do. But if they wanted to buy Uber, what you say is I don't need to buy Uber. You know you're not going to, you're not going to up the price before you, before you actually buy buy it. I'm playing this with Lyft because I think Lyft is climbing the mountain. Uber is the one that gets all the sunlight. I think Lyft has a lot of ground to make up and I think it's look at the move Lyft has had recently and I think it continues.

[Brian Gildenberg]

That I don't know if some of the Waymo tie up prohibits a maybe not contractually purchase. Yes. Or some sort of deal with Tesla for.

[Melissa Lee]

Yeah that's a good point.

[Brian Gildenberg]

Coordination but they can't wait.

[Melissa Lee]

Coming up, Open Air landing a massive coup getting Jony I've tech design firm and the legendary iPhone designers talent. More on Sam Altman's grand designs right after this. Missed a moment of fast Catch us anytime on the go Follow the Fast Money podcast. We're back right after this. Welcome back to Fast Money. Apple shares taking a sharp leg lower today after OpenAI announced it is acquiring the startup of former Apple designer Johnny I've in a $6.5 billion deal I've will take over OpenAI's creative and design direction for what this could mean for Apple. Gene Munser of Deepwater Asset Management joins us here in a rare appearance here on set in the house Gene in the house. Always good to have you. Is this really as bad as as it is for Apple as the market cap drop would imply.

[G]

So I think the next two years it's not as bad. I think Apple has some time to kind of work through this. But I won't even take a step back to the bigger picture here. And then the little picture and the bigger picture is something dramatic is going on in terms of how the people who are closest to AI and how they're building this technology, those people have a broader vision in terms of how AI is going to be used in our lives. And if you believe they're competent, we can read today's development as a sign that is going to be more impactful than maybe what we thought six months ago. Second is that Apple and Google over the past 15 years have largely been unchallenged. And when you turn the page to AI. This now sets up a new situation where they are going to be challenged. And I think that today was a wake up call for Apple and to a lesser extent, lesser extent Google, but.

[Melissa Lee]

A push into hardware by the designer who basically brought the world the iPhone. This implies that there needs to be a device that is different from what we know today in order to, to navigate the AI world, which implies also a disintermediation of computers, of iPhones, of all the devices that we have. Do you think that is the road? We'll have another kind of device.

[G]

We will have another kind of device. I mean that's what they teased today and with Sam and, and Johnny did a video, they teased this. So we're still going to have many devices and there's going to be a new device that they're going to start with. It's likely going to be some form of a wearable that will listen to what's going on, it will see what's going around us, you'll be able to interact with your voice and some form of a gesture to it. It's going to be out next year. But to answer your question is that they will insert this into all the devices that we live. Just like how our content consumption started out small and grew over time. Devices will just be everywhere and there's that opportunity, opportunity they think Johnny's going after.

[Melissa Lee]

Tim wants a wearable brooch.

[Tim Seymour]

Yeah, look, I mean I have a couple for a couple of different occasions but, but I know you're always quick to point out the 2.7 billion installed base and the dynamic there and it just, that to me has often been where I've felt very comfortable with Apple because I don't know that they need to win anything in AI. They just need to be serving it up to people in the platform from which they draw from. And I know we can't speculate and you're not today that suddenly this interface is going to change, you know, without a screen, you know, the way people live their lives. But, but why can't Apple also be partnered ultimately with, with, you know, with open AI and deliver this and maybe even with this hardware. It just seems to me Apple is still the platform.

[G]

So Apple's a platform today and they could definitely do some form of a partnership. They're working with OpenAI today. But the fact that they brought on a design team, a hardware design team and the fact that that's one of the Apple's core competencies I think was a shot across the bow. And so I think that this is, as I mentioned, I think it is a wake up call for Apple and to a lesser extent Google. And I would say even the bigger picture here is at least for, for Apple as it pertains to what's to move forward is that if you look at Tim Cook is an incredible CEO, I can't say enough good things about him. I think the same as Sundar is a great CEO Jassy. But these are peacetime CEOs and what happened today, this is a shot across the bow that this is war when it comes to AI. It's not just going to be stick to your models and we'll do our thing and we'll partner with you. We're going to get into your business is basically the message here. And when you think about wartime, CEO Zuckerberg was peace. Now he's war. Elon just lives in war. He can't, he can't operate in peace. He, he doesn't like that. But I think that there, I actually think that there's going to be some, as an Apple investor, which I am, our firm is invested in Apple. I think there's going to be something good that's going to come across this which I think it's going to really promote Tim and the culture to really step up and say we've got to innovate.

[Joe Moglia]

But if you're open AI, if you're open AI, you're always looking for, no matter who you are, you're always looking for a competitive advantage. So if you open an eye, what better way is there to find a competitive advantage than go out and actually buy the guy that it created, the number one product in the history of mankind other than the wheel.

[G]

I mean it's, it's as good as it gets from like a product design standpoint. And it's not just Johnny. Johnny has a team that comes along with him that used to be at Apple. They've been loved from more recently. But so he's got this great team with them. And, and I think when you think about what Open Air is doing and Sam and some of the questions about his leadership to land the gold standard of Johnny I think really validates him as a leader.

[Melissa Lee]

Why didn't Apple do this?

[G]

I think if we go and rewind the clock, why did Johnny leave Apple is, is kind of the start there is that. I think Johnny needed a break. This was five, seven years ago. But I also think that there has been. The innovation piece has been so focused on hardware. What makes, what draws Johnny into this is there's a hardware piece, but what's going on under the hood with AI And I think that that piece is, of course, Apple just wasn't there. They're not there right now when it comes to large language models. So even if Apple said, johnny, come over here, let's do this, it just doesn't have the tools that OpenAI has to bring this vision, this product vision to life.

[Melissa Lee]

Jean, always great to see, Great to be here. Come by anytime.

[G]

Thank you.

[Melissa Lee]

Gene Munster, Deepwater Asset Management. What do you think this means?

[Steve Grasso]

So when you look at Apple, I think if they make an investment and they go past and they go to quantum versus just, I like a quantum kicker on AI, they've only spent a tenth of what everyone else's capex has been. So that was an actual tailwind to them. But now they're falling so far behind they need to pull a rabbit out of a hat. You're starting to see the bifurcation where today you had Google up, Netflix up in video up, and you look at the other side, you had Amazon down, Apple down, Microsoft down. Apple has the ability to pull something out of a hat and make a bigger investment.

[Brian Gildenberg]

I never want to count Tim Cook out. He's extraordinary. But I'm happy to have. Happy to have no exposure to Apple collared. I do feel like they are just falling increasingly behind in a world that's moving super fast. And then they have all these other issues of tariffs and where do we manufacture and could you even possibly manufacture.

[Melissa Lee]

That in the U.S. right.

[Joe Moglia]

You know, I think the metaphor that Gene used, I thought was really a brilliant one with you've got peacetime CEOs at peacetime businesses, and you've got wartime CEOs and wartime businesses. And the reality is that Apple has been so effective, so successful for such a long period of time, they've gotten a little bit complacent. And the world today as we know it with regard to AI is totally, absolutely changing before our eyes. And there were a lot of firms that got in trouble in the 1990s because it didn't acclimate enough to the Internet.

[Tim Seymour]

Well, and so I'll extend that matter. When you have peacetime stocks, you have wartime stocks for the market's perspective. And in a world where the market is being is questioning what multiple the S and P should be for facing growth, I mean, Apple's P makes zero sense. I think Apple is very defendable and is defensive because it hasn't really told. I mean, Apple intelligence has been Kind of a disaster. But it wasn't something that the valuation of this company company was built on. It was built on services and yes, this should be the ultimate service but Apple stock doesn't have a lot of air in it. The question is, are we, is the market coming in? Because if the market's coming in, so is Apple.

[Melissa Lee]

Coming up, a bright spot of the tech trade. Alphabet shares jumping on day two of its IO conference. The headlines boosting the stock that is next more fast Money into. Welcome back to Fast Money. Alphabet, the only Mag 7 stock in the green today. Shares up almost 3% more than erasing yesterday's losses. The company was hosting day two of its Google IO developers conference today. Announcements included updates to Gemini, Gmail and much more. Just yesterday we were talking about how maybe their announcements were disappointing in terms of developments and here we are. Stock completely reversed, I think.

[Brian Gildenberg]

Well some of the, some of the research came out wasn't they were not disappointed actually. And also there's, you know, people floated the idea of the sum of the parts and what if we were to spin off all of the pieces here? I'm happy to see a trade up although I did use that as an opportunity to hedge some today. All of this talk of well, how long till search is really affected but no one in the last few days or weeks has mentioned they've got this potential serious remedy issue of their search business. Right. And to antitrust. So I'm a little concerned about that. It's still very much a threat.

[Tim Seymour]

Yeah, I mean Sundar Pichai made it very clear that they are processing 50 times large language model in tokens, you know, where they were last year and that they're on the move. So everyone expects Google to not be there. I think this was a day when the stock had been kind of beaten up. Relative peers had a chance to come back.

[Melissa Lee]

All right, coming up, the New York Knicks making a wild run through the NBA playoffs. And the team's valuation is on a meteoric rise. Just how much ticket prices are being the team's worth. We'll go inside the numbers for the league's second most valuable franchise. More fast Money into. Welcome back to Fast Money. The NBA Eastern Conference finals tip off tonight. And for the first time in a quarter century, the New York Knicks will be on the court. The team was the second most valuable in the league at the start of the season. But what will its success mean for the future value? For a closer look inside the numbers and how the other teams left in the playoffs stack up, let's bring in CNBC senior sports reporter Mike Ozanian. Mike, how much more valuable are the Knicks? Now? I got to think that the knicks are approaching $8 billion.

[Tim Seymour]

You got to look at it this way, Melissa.

[Melissa Lee]

Each home game brings in an average of $10 million in incremental revenue during the playoffs. Your EBITDA margin on that is over 60%. We saw the Celtics sell for 6.1 billion. Last year's championship team certainly helped that sale price. But the bulk of the valuation is not meteorites, mostly. So how much do media, you know, how much more expensive or how much more can they bring in through meteorites being in the playoffs? Well, the Knicks could generate if they.

[Tim Seymour]

Go to the finals, let's say they.

[Melissa Lee]

Can generate 120 to 140 million dollars in incremental revenue from the home playoff games.

[Tim Seymour]

You got to remember with the national.

[Melissa Lee]

Media, yes, that's by far the biggest chunk of revenue. But that's divided equally among every team.

[Tim Seymour]

Doesn't matter if you win every game.

[Melissa Lee]

Or no game, you get an equal share of that. So the pecking order to a large degree of NBA team values is determined by how much arena revenue you could bring in and then how much playoff revenue you could bring in. Unfortunately for the Knicks and MSG Sports stockholders, the Rangers are bundled with that stock. And the Rangers, who went to the conference finals last year, missed the playoffs this year. So in aggregate for MSG Sports, the total number of playoff games between the Knicks and the Rangers will probably be less this year, even if the Knicks go all the way to the Finals.

[Tim Seymour]

Yeah, Mike is Tim. And although what the Knicks are doing also for the region, I mean, those watch parties, if you're a star owner anywhere near the Garden or I mean for the commerce of New York City, the Knicks are big business as well. How about these players? Players, Are they helping the value of this team? This team is so likable. Jalen Brunson, a couple of his college compatriots. These guys won a national title together. Big Cat. I mean, these are likable guys. Do they have any long term impact at least or medium term in that valuation?

[Melissa Lee]

Yeah, I think you brought up a couple of great points between the watch party and the players. Likability is very important. Short term. Yeah.

[Joe Moglia]

You know, we're talking about numbers, revenue, profits, etc.

[Melissa Lee]

But long term, what you're talking about, boost the value of the team because you're talking about sweet prices, sponsorship prices.

[Joe Moglia]

These are deals that are generally contracted.

[Melissa Lee]

In three to five years, maybe a little longer. So when you renew them, the likability of the team is very important, very important for TV viewership. Are you going to get on more national games as the Knicks become a more national brand? Hopefully with more playoff games? Yep. Mike, thank you. Thank you, Mike Azanian. Go Knicks. Up next, final trades, final trade time.

[Joe Moglia]

Joe Moglia, I like the Knicks at home tonight.

[Melissa Lee]

Great to have you here, Joe.

[Tim Seymour]

Tim I like having Joe on the desk. I like the Knicks and I like Utilities xlu.

[Brian Gildenberg]

Karen yes, I'm always long, but I gotta hedge some of my mag 7 exposure triple Q puts.

[Steve Grasso]

Steve I'm going with a quantum name, D Wave. I've been in it, out of it. I'm back in it now.

[Melissa Lee]

All right, thanks for watching Fast. See you back here tomorrow. Bye for Fast Money. Meantime, do not go anywhere. Mad Money with Jim Cramer starts right now. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company, or affiliates, and may have been previously disseminated by them on television, radio, Internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates andor 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 exclusively on cnbc.com, criminal gangs are attacking America's supply chain through widespread cargo theft. CNBC investigates.

[Tim Seymour]

They literally have a license to seal cargo theft.

[Melissa Lee]

End of the road.

[Tim Seymour]

Watch now on CNBC.com.