← CNBC's "Fast Money"
CNBC's "Fast Money"
More Tariff Concerns Send Markets Lowers, and Is a Breakout Coming for Biotech? 7/7/25
00:43:42
President Trump announcing 25% tariffs on goods from Japan and South Korea, and a handful of other countries are also in the crosshairs. What it means for markets, as they back off record levels. Plus biotech stocks have been on the upswing since April. Can the trend continue? We talk to one top analyst to find out. Fast Money Disclaimer
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- [00:00]
Melissa Lee
What does it mean to live a rich life? It means brave first leaps, tearful goodbyes.
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Karen Finerman
And everything in between.
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Melissa Lee
With over 100 years experience navigating the ups and downs of the market and of life, your Edward Jones financial advisor will be there to help you move ahead with confidence. Because with all you've done to find your rich, we'll do all we can to help you keep enjoying it. Edward Jones, Member, SIPC.
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Karen Finerman
On WhatsApp, no one can see or hear your personal messages. Whether it's a voice call message or sending a password to WhatsApp, it's all just this. So whether you're sharing the streaming password in the family chat or trading those late night voice messages that could basically become a podcast, your personal messages stay.
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Melissa Lee
Between you, your friends and your family.
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Karen Finerman
No one else, not even us. WhatsApp message privately.
- [01:05]
Melissa Lee
Live from the NASDAQ marketsite in the heart of New York City's Times Square, this is fast money. Here's what's on tap tonight, a tariff tussle. President Trump announcing 25% levies on Japan and South Korea sending US markets tumbling. Is this a sign that the record rally has hit a wall or is there more gas left in the run? And a biotech breakout. One top analyst saying the group may be poised for an updraft. He'll lay out his case, give us his best picks. In the plus, Tesla tumbles on Elon Musk's latest political announcement. MGM gets a bearish call from Goldman Sachs and America's deficit reckoning. We take a look at the potential fallout from President Trump's budget bill. I'm Melissa Lee, come to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Feineman, Dan Nathan and Steve Gossip. And we start off with a break in the record rally. Stocks dropping today after President Trump announced a 25% tariff on goods from Japan or South Korea as well as a handful of other countries. The s and P falling 8.10of a percent from the all time high hit on Thursday. The NASDAQ down nearly 1% while the Dow shed 422 points. And take a look at the Japan and Korea linked ETFs taking a big leg lower after the levies were announced. A slew of other countries receiving letters and tariffs in just the last hour. For the very latest, let's get to Megan Casella who is at the White House.
- [02:17]
Megan Casella
Meghan hey Melissa. Everything moving fast in this hour, but 14 countries as of now have received letters from the president laying out the tariff rate that all of their exports to the United States will face as of August 1st unless they strike a deal in the meantime. These are tariff rates ranging from 25% up to 40% on the high end. And as you mentioned, Japan and South Korea, by far the largest trading partners on this list, both seeing tariffs of 25% kicking into effect. Other ones on the list, Bangladesh seeing something like 35% all the way up to Cambodia and Thailand, both at 36%. So a big range here and you can see these clashing along the screen. But what I'll do well emphasize are some top line details here on all of these, all effective August 1st. And they'll be separate from any tariffs that are already in place or forthcoming on sectors specifically. They're all subject to change higher if countries do retaliate or they could be moved lower if countries agree to drop some tariffs or non tariff barriers. And the pattern that I would flag here, Melissa, is that all of these rates, while these letters are blustery and they're quite forceful, all of these rates either match or are slightly softer, lower than they were announced back on April 2nd. So what we're mostly doing here is moving the goalposts and saying from the July 9 deadline moving that to August 1. Now for these higher country specific tariff rates to take effect. We do expect the president to sign an executive order to that effect. He was set to sign executive orders this afternoon. We don't believe that has happened yet, but we'll keep watching it and we'll be reading through the text of that executive order once we have it.
- [03:46]
Melissa Lee
It's interesting, Megan, because all these countries, you would imagine that we don't buy that much in goods in terms of dollar value and we can't possibly expect to have a trade balance with any of these countries. And the bigger countries are still targets that have yet to be announced. I mean, Secretary Bessington mentioned this morning in squawk that he was off to China or meeting the Chinese counterpart sometime in the next few weeks. Where do we stand on some of the bigger trade deals to come?
- [04:09]
Megan Casella
That's really important to emphasize because China, Canada, Mexico and the European Union are by far the US Largest trading partners and they are not being impacted by any of the of these higher reciprocal tariffs. They are all sort of on separate tracks here on China we have that very fragile trade framework that's in place that was first established in Geneva and sort of cleaned up in London. Now we're waiting to see whether China lets some of its rare, rare earths Exports start flowing before we can sort of move further. They have an August deadline before those tariffs are set to ratchet back to 145%. So a lot at stake there. The EU has been saying they still expect strike a deal by July 9. We haven't heard any updates officially from the White House about the European Union. They've just continually said that things remain difficult there. And then with Canada and Mexico, you know, we know there's been some back and forth with Canada in particular recently. Both of those countries being really impacted, particularly by the steel and aluminum tariffs. Those negotiations are ongoing. They were never part of the reciprocal tariffs, so a separate track entirely. But you're right to flag that those four are the ones that matter the most. The rest of it, while it matters somewhat, it's by far not the majority of the US's trade.
- [05:16]
Melissa Lee
Megan, thank you. Megan Casella at the White House. So what was this pullback all about in your view, Tim?
- [05:21]
Tim Seymour
Well, it was a combination of we now have headline risk. Right. We just don't know that there's going to either be follow through on where we are. The nice as Meghan referred to, we have this implicit extension. Seems like we actually got an August one extension is the good news today. But that there are definitely places where the administration is going to dig in. Japan and South Korea are really important trading partners. I'm sorry, I understand that the European Union and China go ahead of them but I, I do think that the headline risk for a market where we had a Vix Sub 16 last week, that's really what this is. We're coming from all time highs, we're coming off a holiday period where people I think also were lightly positioned and remained somewhat lightly positioned but still very much overweight equity. So I think we're at a place here where this effective tax rate, I think we're going to hear a lot of chief economists around Wall street begin to kind of chime through and begin to come through with some numbers on what these imputed tariffs mean because we are getting real numbers here.
- [06:16]
Melissa Lee
Yeah. By the way, the tariffs also don't include sectoral tariffs. So there can be more specific tariffs on steel, etc. Depending on, on the industry and what the, you know, what the US finds.
- [06:25]
Dan Nathan
So Tim touched on it. I mean if you look at the VIX today, you know, up 0.31 so 1779 and the last time we had a big announcement on tariffs obviously was a very, very, very different story. So we've had an extraordinary run. If you, I Mean, we're just going back to Wednesday afternoon with this move today, which is really nothing. And then we had that levitation on, on the very light trading day. So I think this is just that people don't believe there is a tariff problem here, that it's just rhetoric, that they're going to kick the can down the road till they figure it out that this isn't what it's ultimately going to be and sort of a, you know, just a head fake. But I think we are far from seeing this kind of ultimately those kind of tariff numbers.
- [07:10]
Steve Grasso
Yeah, it comes down to credibility. Right. So we came out in early April and, you know, this seemed like the perfect storm if you think about it. There was a lot of trepidation about this. There was a lot of chaos going on, I think, in and around just new policy that was being implemented away from economic sort of stuff. Right. And so you had this situation where the market was actually selling off into this. Now it fell out of bed, this, that first week of April. And then they blinked and they blinked, maybe because the stock market. But I think for many reasons, we all have come to learn that they were worried about the bond market. Right. They were worried about, you know, interest rates going higher. If you look at where we are right now in the 10 year, we're at like 4.4% now, you could say that's for other reasons. But the stock market is also obviously much, much higher than it was. So now you have the situation where, like Tim just said it, you're going to have to have strategists start to, like, figure out what the implication might be on a base case scenario with, with, you know, tariffs across the board. Maybe it looks like 15%. You also have a Fed that seems to be worried about growth. Right. They just lowered their sort of growth expectation. Make no mistake about it. If the President is going to try to say, well, we're going to take in hundreds of billions of dollars in tariffs from these other companies or countries, like, that's got to come from somewhere, right? It either has to come from the supply chain, it has to come from the exporters, it has to kind of, you get eaten by consumers or the companies and that's going to slow growth. So at the end of the day, you could say that we're in a much more calm environment about this, that we realize that, you know, the taco trade, right. That they're always going to cave in or continue to push this down the road. But, you know, who knows? I mean, the President may Go further with this. You have tax that went through last week. Right. You have the situation geopolitically where it seems like he's got a handle on some of these big situations. They may say, listen, stock markets all time highs. The interest rate situation seems kind of in check here. Like let's see how far we can push this thing right now.
- [08:56]
Melissa Lee
Don't forget about that jobs report to the jobs report came in was pretty good. I mean in the data there isn't yet any real read through in terms of impact from tariffs. We haven't seen that yet. Right.
- [09:06]
Guy Adami
And we haven't really seen any inflation spiking because of tariffs. So that was the main result. I, I think I'm somewhere in everyone's camp, but I like Karen's approach.
- [09:17]
Tim Seymour
Karen's approach to what camp I'm in.
- [09:20]
Guy Adami
I sat back, I listened. It was very entertaining. If you look back in April, we slid at 19%. The first day was down 10%. So to Dan's point, we become a little bit numb to it. To Karen's point, maybe, maybe this will work out a lot quicker than it did then. But it was a handful of days we rallied 10%. It was the biggest rally since, oh, eight after it resolved itself. So it was April 1st or April 4th and then on the 9th we were in rally mode again and never looked back. Do you want to short this market in rally mode? That's what I think the real, the real scary part is where do you dig in as a bear? Look at how much higher we are from April, look at what rallied. Do we really think, whether you call it taco or whether you call it pragmatic or whether you call a carrot in the stick, do we really think that President Trump is going to allow this to ruin the market? And the ten year the line of the sand might be four and a half. I think that's the point of pain.
- [10:24]
Melissa Lee
I think that the real sort of debate or discussion is, you know, you can lay out all these cogent rational bear arguments in the market and yet the markets still go higher, the data is still strong. So what do you do when you have these two things sort of pulling at each other? You have, you know, the rational sort of tariffs should be impacting the economy. We should be seeing it in the data and yet we're not in the markets are at all time highs.
- [10:49]
Tim Seymour
Well, I don't think you're doing a lot and I think what this is the camp I'm hearing is I'm not sure you're supposed to Do a lot here and this is markets that have come a long way but I know we're about to have a conversation that really digs into sector by sector where, where we do have issues. And it's just interesting because whether it's Vietnam or whether it's, you know, the brics over the weekend, I mean these are places. India is a place where a lot of companies were thinking about moving supply chain, moving manufacturing. So, so you know, to assume it's all going to go away. I don't think it's going to go away. And, and as someone that feels that the mega cap tech stocks are still pretty decent place to get growth at a pretty decent valuation even though they're expensive relative to themselves. I'm not sure the last couple of days do anything but we've had a parade of strategists, we've had a parade of people coming on. All we do is talk about what's been a V shaped recovery in new all time highs and position.
- [11:34]
Guy Adami
And maybe it is just that, maybe it's not even. Maybe it's coming off of all time highs. Last week that a lot, maybe it was 50% or 80% coming off of all time highs. And the algo has read the trade headlines and sold off a little on the back of that. But I think it has more to do with all time highs versus trade.
- [11:51]
Steve Grasso
Yeah. And when you talk about not showing the data, I mean that might be something pull forward. We talked about that. We saw a lot of importers doing that, we saw a lot of consumers doing that. Now if you think about multinationals, which are huge components, S&P 500 earnings, this tailwind, I think of a US dollar index that is trading at three year lows, that's going to be something that's evident in their earnings. But I think the back half of the year probably gets a lot harder if you think about it, especially if they keep having this sort of uncertainty kicking the can down the road. If you start like seeing you know, CEO sentiment weakening and I think that's going to be the case and especially in the small and mid cap sector. Look at the Russell 2000, it's flat on the year, it's downish or something like that. So to me I think it gets harder. And then if you took it a $275 S&P earnings number which a lot of the most bullish strategists have, you're.
- [12:36]
Tim Seymour
Still at 25 and a half times. 275 is a big number.
- [12:40]
Steve Grasso
You're still right there at 22 and a half times.
- [12:42]
Melissa Lee
Yeah. Speaking of sector impacts, we have a out with a note today looking at the impact of retailers of tariffs on Vietnam. While the levies announced last week put pressure on profits, analysts say the announcement provides some certainty ahead of the holiday order season. Joining us here on set is the analyst behind the note, Lorraine Hutchinson. Lorraine, great to have you with us.
- [13:00]
Karen Finerman
Hi, thanks for having me.
- [13:01]
Dan Nathan
Thanks for coming down the block. Yeah.
- [13:06]
Melissa Lee
It'S a trek in terms of, you know, we saw the retailers when the Vietnam announcement was made last week. We saw some relief. Should there be relief or have we not factored that into forecasts?
- [13:17]
Karen Finerman
You know, I think, I think the biggest news was certainty. And as we were just talking about where these retailers are about to place their most important holidays orders, so they're getting ready to be, you know, finalize everything for Christmas, which is when they make all their money. And up until last Thursday or Wednesday, they didn't know how much it would cost. They're placing orders for goods and they didn't know how much it would cost. That is a very difficult thing to do. And so Vietnam coming out at 20, I think, you know, poses some slight downward estimate revision risk, but really it just gave the retailers some certainty around the price that they'll pay for these holiday goods. And Vietnam is the most important country for most public apparel and footwear retailers. So this was a really big moment and I think that's why you saw the relief rally was just finally some.
- [14:06]
Melissa Lee
Certainty, the most important. Even more so than China.
- [14:10]
Karen Finerman
Absolutely.
- [14:11]
Melissa Lee
Really?
- [14:11]
Megan Casella
Yeah.
- [14:11]
Karen Finerman
We've been in a decade long shift of apparel and footwear manufacturing out of China into other less expensive Southeast Asia, Asian countries. And Vietnam was the primary beneficiary of that.
- [14:22]
Tim Seymour
What does this mean for the companies themselves either in terms of passing that on or how much of a margin hit is this going to be? What are you doing to your models?
- [14:28]
Karen Finerman
Yeah, so they, they've all come out effectively. All of our companies have come out and said, okay, a 10% universal tariff and a 30% China tariff. Here's our new guidance. So we have that all in the numbers. And for the most part, you know, there was a slight hit to numbers, but there's a lot of mitigation. And so the way the 10% tariff worked is about half of it was being taken care of by the factories and fabric mills in Asia and then the other half was being taken care of by retail. And what does that mean? They're cutting costs, in some cases, they're raising Prices and in some cases they're letting it flow through to the bottom line. So there were some slight downward estimate revisions when they all came out with these numbers. And now with Vietnam at 20, you know, another tens of basis points, not hundreds. So really it's not Armageddon for the bullish.
- [15:17]
Melissa Lee
Yeah, yeah. In terms of mitigation and price increases, how much of, you know, if a sweater costs 10% more, 15% more is put on that one sweater versus across a portfolio of products for retailers, most.
- [15:32]
Karen Finerman
Of them are saying that they will just touch North America because that's where the tariffs are coming in. And many of them are saying only they're higher priced products. They're trying to protect the low end, protect kids, things like that. But I think the important thing to remember is this is a highly discretionary category. The retailer thinks they set the price, but we set the price.
- [15:53]
Melissa Lee
Right.
- [15:54]
Karen Finerman
If I walk into a store and this $10t shirt is now $12, I just don't buy it, right. I walk out and I wait and I wait till it goes on sale sale or I wait till I find something better and eventually usually the price comes down to me. And so that's what's happened. When we've, we've seen other inflationary times for the, the apparel sector, the price increases don't usually go through, particularly at the low end. Now at the higher end, where the consumer has more disposable income, they're less likely to notice $5 on 200. I know that sounds crazy, but a dollar on 10, not really finding sneakers.
- [16:29]
Melissa Lee
Right.
- [16:29]
Steve Grasso
Are we in a situation where like a US consumer is not doing particularly great and a lot of US retailers are not doing particularly great. And so at some point someone's got to eat that. And if margins start to degrade a little bit, we're coming off peak margins for the S&P 500 also.
- [16:44]
Karen Finerman
We are, but we're not coming off peak margins for retail. You know, they've been struggling a little bit, as you said. We've been, you know, if you look at our BAC credit and debit card data, clothing has been negative for three years. Right. Because the consumer has a lot of demands on their wallet that on product they need. Right. You have to buy milk, you do not have to buy the $10 T shirt. You can wait. And so we've seen clothing really struggle for a while. And so I think especially at that low end, right, where you're a month to month spender, if groceries are inflationary, you're having a Lot more trouble buying that discretionary item. We've seen a lot of success at the middle, upper middle tier for price increases, prices because that consumer is still okay. Markets near all time highs. Right.
- [17:26]
Dan Nathan
So Lorraine, first of all, thanks for coming. Some of the names you talked about that have the most exposure or Lulu and Decker, I think Crocs and some others. Do you think they're going to be thinking, all right, we have to even diversify further? We moved away from China, now we have to keep doing it. How do they respond to this on the diversification point?
- [17:44]
Karen Finerman
It depends. You know, we just got a whole other round of tariffs as I was walking up to see you guys. So it depends what happens where. Vietnam at 20 actually looks pretty good right now. So I don't think that there is a lot to be gained by diversifying further. We get a lot of questions about onshoring domestically. It's a very labor intensive process to make clothing or footwear. I don't think that's realistic at all. So I think the moving around of production is probably, probably behind us. And now it's negotiating with the Fab, with the fabric mills, negotiating with the factories, trying to consolidate your orders so you're more important to each individual manufacturer, things like that. They're also trying to get more efficient domestically with their cost structures and things.
- [18:30]
Melissa Lee
Lauren, thanks for stopping by. Doctor.
- [18:33]
Karen Finerman
Thank you.
- [18:33]
Melissa Lee
Bank of America. How are you feeling about the retailers here?
- [18:36]
Guy Adami
Yeah, I think most of this is what we said in the A block originally when we kicked it off, that a lot of people have already thought this through and you go with Wal Mart has a more diversified supply chain. Costco is more reliant on membership fees and they don't really buy source from China or Vietnam. Nike, everyone knows that they source 50% of the sneakers and 30% of their apparel from Vietnam. So I think it's all in the numbers already. It might actually be a buying opportunity.
- [19:08]
Dan Nathan
So I think, I mean she was saying basically they find a way to absorb it. I think that's right. I don't know how much the Vietnam currency has moved, if that's any absorption there, if that's interesting. Currency, right.
- [19:18]
Melissa Lee
The dong.
- [19:18]
Tim Seymour
The dong.
- [19:19]
Dan Nathan
Dong, right. I knew you would enjoy that.
- [19:21]
Tim Seymour
Well, you said the currency. I just thought I'd mention it to people out there.
- [19:25]
Dan Nathan
Right. So Nike did long. Nike. I think that the upside from Nike comes from, from a lot more than just how the Vietnam tariffs were.
- [19:34]
Melissa Lee
Turnaround coming up, the arms race heats up as Cor weave seals a $9 billion data center deal. The details, what it means for hyperscaler M and A next. But first, Elon Musk is getting back into politics and Tesla investors are not happy. What is next for the company as its CEO takes on yet another responsibility?
- [19:56]
Steve Grasso
This is Fast Money with Melissa Lee right here on cnbc.
- [20:08]
Karen Finerman
At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at Capella.
- [20:21]
H
Eduardo which American states are driving business Surviving and thriving.
- [20:29]
I
America's top states for business is back.
- [20:32]
H
Which state will take the honors this year?
- [20:34]
Guy Adami
The list revealed July 10th and streaming on CNBC.
- [20:43]
Melissa Lee
Welcome back to Fast Money. Tesla is the worst performing stock in the S and P and Nasdaq 100 today, dropping almost 7%. This after William Blair downgraded the stock to market performance, saying that losing the EV tax growth credit along with the elimination of corporate average fuel economy fines could be too much for the stock to handle. Also worrying investor CEO Elon Musk seeming to get back into politics, announcing that he plans to launch a new political party, the America Party, which of course Trump blasted shortly after his announcement on Truth Social. So the feud goes on here, which is not also good for Tesla shareholders.
- [21:16]
Steve Grasso
Yes, when you think about the loss of potential profitability coming from those emissions credits and then obviously demand issues that you might have if you lose those EV tax credits for consumers, what is going to fund cybercap? I mean that was the whole point about this, is that the high end EVs is going back 15 years ago. We're going to basically support the build out of the mass market. And they never even did that. They never even built a $25,000 EV because he wanted to focus on cybercaps. Now there's no shortage of, of folks, the banks, whoever, who might fund that cybercap. Okay. But at the way it's going with competition and the like, at least on the autonomous vehicle thing, it's going to be hard. And I don't think the market is pricing that right here with an $800 billion market cap, if you look at.
- [22:02]
Guy Adami
It, if Trump was a tailwind to Elon Musk when he was involved, he's this, it's a pendulum. He's the same headwind as he was a tailwind.
- [22:10]
Melissa Lee
I think it's worse. I think Tesla's more, it's more negative now because it could be Tesla's a target as opposed to neutral.
- [22:17]
Guy Adami
Yeah, I don't think he, even when Trump was running, he was not a full, he was not full bore into EVs. He was negative on EVs right from the start. So I don't think it's going to be a, okay, he did this, now I'm going to get negative on him. I think he's always been negative on, on EVs, but I think this is a heavy, heavy headwind that you want to see how it clears out first.
- [22:38]
Dan Nathan
First, I'm just wondering that if it goes some retribution, right? That is so painful, particularly to Tesla. So let's say, you know, obviously doing big robotaxi launch, let's say all of a sudden they don't, they don't get approval for whatever reason, on whatever level of government, whether it's local, text or broader. Could that happen? If I were a Tesla shareholder, that's something I would be worried about. It's so central to the valuation story, even if it's not right now a revenue story. But that's something I would be afraid of. The EV thing that's sort of been happening in slow motion for a long time. This would be something, I mean, think.
- [23:12]
Melissa Lee
Of all the things that have happened that might be, you know, negative, like tariffs or whatnot. CEOs can go to the White House and talk to the President, right? They're called a roundtable discussion. Whatever. Elon Musk is not going back. I mean it's, it's probably off the table. So there's no avenue to even resolve something.
- [23:30]
Tim Seymour
No, there's no avenue and there's, there's obviously there could be acrimony, there could be something on the other side of this. I think it's, to me just, it comes back to a combination of things which include those second quarter delivery numbers where they missed consensus. You're going to see more downgrades, I think, to full year guide on eps. I think the risks on execution as they move into these higher margin products that the bulls out there are hanging on to, you know, good luck.
- [23:55]
Steve Grasso
There is a certain sense of irony about this. So Elon had this political turn because he was not invited to a Biden administration event at the White House for EV makers. Do you remember that? That's going back all these years and now like you just said, he's not going back to the White House for, for a whole heck of a lot much. I just think it's really important not just to think about Tesla here, but he's also talking about Space X. They're also talking about Starlink There's a ton of regulatory stuff around this. And you know, we've talked about this in the past. I mean, he has huge margin loans from the banks and he uses Tesla stock to do so. So like if he starts losing sort of contracts on both sides of the thing, it could be a real problem.
- [24:34]
Guy Adami
You know, when you look at the stock, though, just very micro, very granular. When the stock sells off to this extent, it does rebound historically pretty aggressively in days from that. No, it could be a trading event. But all you have to do is look if you look at it. So whether I'm not whether I think it's a headwind longer term, I think it's a tradable period right now for it to rebound.
- [24:56]
Melissa Lee
There's a lot more fast money to come. Here's what's coming up next.
- [25:00]
Steve Grasso
And I buy Core Weave splashing the can in a $9 billion infrastructure bet. Is this just the beginning of more Hyperscaler M&A/ Big Short? Trader Steve Iseman says size doesn't matter when it comes to the budget deficit. What he sees in the treasury market that screams buy.
- [25:19]
Guy Adami
You're watching Fast MONEY live from the.
- [25:21]
Steve Grasso
NASDAQ market site in Times Square. We're back right after this.
- [25:31]
Karen Finerman
Is it time to reimagine your future? The right business skills may make a difference in your career.
- [25:37]
Melissa Lee
At Capella University, we offer a relevant.
- [25:40]
Karen Finerman
Education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella.
- [25:59]
Melissa Lee
Edu.
- [26:02]
Guy Adami
Which American states are driving business Surviving and thriving?
- [26:07]
I
America's top states for business is back.
- [26:10]
H
Which state will take the honors this year?
- [26:12]
Guy Adami
The list revealed July 10th and streaming on CNBC Plus.
- [26:19]
Melissa Lee
Welcome back to Fast Money. Core. We've confirming plans to acquire data center provider Core Scientific in a deal worth about $9 billion. That's almost a 70% premium to Thursday's closing price. Both stocks were down today but have been in rally mode. The Wall Street Journal first reported the two were in talks at the end of June. So it's been out there for a while. Announced today. What do you make of the moves? Particularly because both stocks move down, which is unusual, right?
- [26:41]
Dan Nathan
I mean, I guess people, you know, the target shareholders were much more optimistic about what it would end up being. It's a fixed rate. So with Core, we've trading down a little. Not only that would have the target trade down a little, but also that the valuation was lower than people thought. Remember, this is up from when was that bid for $1 billion a year ago.
- [27:01]
Megan Casella
Right.
- [27:02]
Dan Nathan
Nine times that now.
- [27:03]
Guy Adami
And when you look at the problem for me is the revenue concentration. So Core Weave is reliant on, on Microsoft and Nvidia for 75% of revenues. Core, Core Scientific. That's the core scientific Cores, exactly is reliant on Core Weave for almost all of the revenue. So I don't like, I don't like the concentration on that side of it. I think this is a home run deal for Core Weave because they x a lot of expenses. It helps them with leases. They have the software, the AI and they need the infrastructure.
- [27:34]
Tim Seymour
Yeah, I mean, I don't have a strong opinion on core. We've, I think this deal, though, you have an expensive currency in your shares and you do a deal that's, you know, 10% or a little bit less in terms of dilutive and you've become a wide, a more vertically integrated platform. That's the call. They've obviously taken a lot of expenses. Still not sure it's cheap.
- [27:54]
Steve Grasso
Yeah, it just seems like so 1999. It seems like the sort of thing where you're trying to vertically integrate, you're trying to use your currency to do something. It just really does seem like the sort of thing that we're going to look back in two years from now and just say, all right, that did not make a whole heck of a lot of sense.
- [28:09]
Melissa Lee
Well, by the way, Jim, Jim Cramer sitting down with the CEO of Corey. You can catch the full interview tonight on Mad Money. That is coming up at the top of the hour, only on cnbc. Meantime, coming up and fast, a deficit reckoning. Some veteran investors say the president's biggest budget bill could lead to a major debt spiral. But big short trader Steve Isman says size doesn't matter in this case, why the treasury markets are telling him to go long. Next.
- [28:34]
Steve Grasso
Missed a moment of fast. Catch us anytime on the go follow the Fast Money podcast. We're back right after this.
- [28:50]
Melissa Lee
Welcome back to Fast money. President Trump's tax and spending bill expected to add trillions to the budget deficit over the next decade. Leslie Picker joins us now with the CNBC special report on the potential economic fallout. Leslie? Hey, Melissa. It's likely if there is a fiscal crisis, the first place it pops up is the markets. I asked Bridgewater founder Ray Dalio before the latest tax and spending plan was passed what he thinks the likelihood is that America experiences a crisis related to its death, deficit or debt levels.
- [29:19]
Guy Adami
I think that there is more than.
- [29:21]
Tim Seymour
A 50% chance that in.
- [29:26]
Steve Grasso
Three years, give or take a year or two.
- [29:31]
Tim Seymour
That we will experience a trauma if we don't deal with this well.
- [29:39]
Melissa Lee
Over the weekend, Dalio posted that the bill is expected to boost the debt in 10 years and warned that unless this path is soon rectified, big painful disruptions will likely occur. Pimco CIO Dan Iverson a bit more sanguine when we spoke a few months ago. He said the risk that the market loses confidence in U.S. assets because of its debt load remains low. The firm had been cutting exposure to long dated US Treasuries, diversifying towards sovereign debt that they see as having more pressure prudent fiscal policy.
- [30:13]
Guy Adami
If we don't see signs of attempting.
- [30:15]
Steve Grasso
To get debt under control, those probabilities.
- [30:19]
H
Of a more crisis level type situation.
- [30:22]
Steve Grasso
Occurring will steadily go higher with time.
- [30:25]
Guy Adami
Then again, when people worry about these tail scenarios, including Pimco, we want to.
- [30:30]
Steve Grasso
Get paid a little bit more to combat against those types of risks.
- [30:35]
Melissa Lee
Still, the bond vigilantes have been dormant lately, something Edgar Denney has recently attributed to the prospect that a new Fed chair will lower rates and refinance the long end of the curve. To learn more, check out our special report America's Deficit Reckoning at cnbc.com deficit reckoning or by following and listening to the Fast Money podcast. Mel Leslie, thank you. Leslie Picker. Well, one of the investors profiled in the Big Short is not worried about the size of the budget deficit. Steve Eisman is host of the Realizing Playbook podcast. He's former senior Portfolio manager at Neuberger Berman. He joins us here on set. Steve, you said this before. It doesn't matter. People have been rallying at this for decades.
- [31:18]
H
40 years.
- [31:19]
Melissa Lee
40 years. When do you think will it, you.
- [31:22]
H
Know, say about all this?
- [31:24]
Steve Grasso
Stop.
- [31:25]
H
God sake. You know, I'm going to say this, maybe it's a little too obnoxious, but I can't help myself. How many times they can ask you this question. People want to be me. They want to predict the end of the world. And I have a news for all of them. The position of Steve Eisman is taken by an optimist. By an optimist.
- [31:52]
Tim Seymour
Go figure.
- [31:55]
H
I don't know how to say this. More ways the world functions. Put this way, there's a great slogan that says that I think really applies to politics and international affairs, which is when someone tells you who they are believe them. But in the market, when someone tells you who they are, don't believe them and they actually do something with their money. So all the people who are pontificating about this, what's happened to the price of this risk is a 10 year treasury yield. And what's happened to the 10 year treasury yield? It's been directional since December of 2022. So the more important question is, given that all these people are pontificating about it, why hasn't it moved? And again, I think the reason is there's no alternative to Treasuries. So when, if there was an alt, if there was a real alternative to Treasuries, then all of this stuff about the deficit is something that I would pay attention to. But as long as there's no alternative, there's nothing to talk about.
- [32:48]
Tim Seymour
So if there's no alternative, well, let's put it this way. So if we don't think there's going to be a Treasury blow up, it means that generally that the equity market is just expensive. And so talk about that because, you know, clearly you're right in terms of.
- [33:03]
H
Something I even pay that much attention to.
- [33:05]
Tim Seymour
Ok, so valuations don't matter.
- [33:06]
H
It's not that valuations don't matter, they always matter in the long term. But you know, go back to when people really complained about valuations, the Internet bubble. So people shorted Internet stocks and got carried out. What broke the Internet bubble was not valuation. What broke the Internet bubble was a recession that caused some of these companies to go bankrupt and to do badly. So look, the US Economy in my view, is more dynamic than it's been in my lifetime, maybe in many lifetimes. So until there's something really bad happening like a trade war, which is still a possibility, I think the valuation is not something I really pay that much.
- [33:47]
Melissa Lee
Attention to in terms of foreign investor perception of the safety of, of U.S. treasuries and confidence in, in our assets. Are you concerned at all about President Trump appointing a new Fed chair who will be perceived as some sort of a puppet questioning the independence of the Fed? And so therefore investors lose confidence in Treasury. It might not be the deficit, it might be this.
- [34:07]
H
Look, I think the institution is stronger than the person when it comes to the Fed. You know, the President of the United States cannot fire the Fed chairman. He can put someone in there and then once that person's in there, they'll do what they want and President Trump can complain all he wants. So there's nothing he can do about it.
- [34:22]
Dan Nathan
Would it Make a difference to you if they changed how they refinance, we saw they're going to do auctions, not going to change. But in the future, Bessen has sort of hinted that maybe there's some significant change. If they don't do coupons anymore, would that make a difference? You just.
- [34:39]
H
I think the demand for Treasuries on planet Earth is pretty insatiable. It could change this, it could change that. At the end of the day, the auction will be fine.
- [34:47]
Steve Grasso
Steve, anywhere in the equity markets that you see unusual exuberance, just something that maybe it's a concentrated trade in and around AI or something that you'd really want to keep your eye on.
- [34:57]
H
I don't see exuberance. I see something very interesting developing, which is there's a thesis out there, it's not my thesis, but that for years hardware stocks always underperform software stocks. And the last couple of years because of Nvidia, it's been the reverse. But the thesis is that we are the beginning stages of a derating of software. And the reason is that the cost of creating software because of AI is plummeting. I mean, there's something I read in an article that's called Vibe Software Creation, which is like morons like me can create software because I just, I say to perplexity, write me a program for whatever and it writes it. So I think that the software that's being created today is going to cost so much less than the incumbents that it's possible some of these incumbents will have problems. And you're actually, you know, if you look at the chart of Salesforce or Adobe, you know, those charts don't look so good. And you would think in a bull market, you know, those would be go to stocks, but they're not. And I think maybe that's what's starting to seep in. And that's a very long term thesis, a very long term derating. But if it's right, we're at the very early stages of it.
- [36:09]
Guy Adami
So when you look at it, if the deficit doesn't matter, because I agree with you there, the dollar doesn't matter. Weakness or strength doesn't matter. Treasuries don't matter. That doesn't sound why I'm so happy. Exactly, exactly. So when, when you look at it, I, for me, the market has collapsed on itself and there's very few things that matter longer than a week.
- [36:32]
H
So I don't agree with that.
- [36:34]
Guy Adami
So tell me what matters.
- [36:35]
H
I think what matters is that the story is still in its infancy. And the reason why I say that is what's a company with the largest market cap in the United States now? Nvidia. It's almost 4 trillion. Its revenue grew 69% in the first quarter. It's a staggering. The largest company in the United States had revenue growth 69%. That tells you this story is early. There's going to be a lot of appendages and there's going to be a lot to do.
- [37:01]
Melissa Lee
So long and strong. Nvidia still in all the trade and.
- [37:05]
H
The appendix appendages, for example, the need for electrical power is insatiable. So that's more of an industrial, certain industrial company story, which I find very interesting. But it's related.
- [37:17]
Melissa Lee
That's your highest conviction trade right now.
- [37:19]
H
Yeah.
- [37:19]
Melissa Lee
Yeah. Steve, always great to see you. Steve Iseman, Coming up, a biotech breakout. It's what Mizuho's Jared hall says could be on the horizon. The numbers behind, a huge surge in bullish sentiment next. Plus, a casino crap out for mgm. Why Goldman Sachs is cashing out of this gaming name right after this. Stay tuned. Welcome back to fast money. Biotech stocks under pressure today with the SBI ETF falling 2%. The group still firmly in the negative territory on the year, but up more than 25% from April lows. Our next guest thinks a bigger breakout could be on the horizon. Mizuho health care strategist Jared Holz joins us here on set for more, a breakout in the offing in biotech. Are you serious? Because you've been so negative for so long and so have investors.
- [38:12]
I
It's been admittedly a super tough sector to call really either way.
- [38:16]
Steve Grasso
Right.
- [38:17]
I
Because you've got hundreds of publicly traded stocks that in aggregate really don't sum up to anything.
- [38:24]
Steve Grasso
Right.
- [38:24]
I
You've got a lot of negatives, a lot of positives. I think for that reason it's been tough to make a broader industry call, but I just feel like the sector's trading a little bit better. It's making higher lows. It stopped going down every single day. I mean, it was kind of like indiscriminately trading horribly for so long. And I think we're finally at the point where all the negatives are very well understood. We've talked about pricing pressure and competition and the amount of assets in the publicly traded arena. All of that I think has just been well digested and it's time for a move higher. Maybe not a massive one, but certainly I'm less negative than I've been M&A.
- [39:01]
Melissa Lee
Is obviously it would be a huge, you know, help to the biotech sector. What sorts of are there sectors that you're looking at? Is it certain companies that have assets in a later phase trial that are more, more likely targets? I mean how do we sort of narrow this down?
- [39:15]
I
It's been very, very difficult to predict. We've seen public deal, large public deals, ITCI and Blueprint have traded this year. We've seen private deals, we've seen domestic, we've seen China. It's been all over the place. Very, very difficult to predict exactly where the deals are coming from. But I would probably be biased towards larger commercial stage. I mean pharma, we've all discussed this so many times. They're really in need of assets, they're in need of revenue. I would have to think that the commercial stage companies trade a little bit better on average.
- [39:45]
Tim Seymour
Jared sue, help us or help. And the folks at home understand the difference between what have been spec biotech stocks and then at this point, I mean is Gilead, you know, what do we call them? Are they really a biotech company? I know they're a major part of the IBB and so, but, but you know we really have seen an extraordinary run in a couple of these names and Gilead being one of them. I'm just kind of curious also. So definitionally some of these mega cap biotech stocks.
- [40:10]
I
Yeah, I think that's totally right. I mean to me Amgen, Gilead, Vertex, they're much more similar to the large caps than they've ever been because most of the biotech complex has traded very poorly. So you've seen this evaporation of market cap that kind of has led to the Gileads and Amgen separating themselves and maybe moving into that higher class. Gilead's been a little bit of a, of a one off because of all this excitement around the HIV medication which is launching as we speak. So that's been one that's been great.
- [40:44]
Melissa Lee
I'm curious the call for a biotech breakout, is that you, is it, are you keying off of what investors are saying to you in terms of sentiment turning? Are we actually seeing the sentiment improve in the sector?
- [40:55]
I
Yeah, it's both. I mean the investor conversations have been far more bullish over the past couple of months. I think part of that is, you know, talking about the pharma dilemma. Some of it is actual ma that's transpired, some of it's been better clinical data. You know, the thought process. Now I'm not a big believer that interest rates are some sort are super tied to this sector, but others are and they think rates over time are going down. So it's a little bit of both. I also just look at the technicals and it just seems like the index stopped going down when the market was up and stopped going down when the market's down. We're finally I think at a better place.
- [41:30]
Guy Adami
How much do you put into the patent cliff starting basically this year and by 2030, 300 billion in annual sales are going to fall off patent protection. That makes the hunt for all of these smaller companies possibly a lot more lucrative for them. How much of that goes into your analysis?
- [41:47]
I
A little bit.
- [41:48]
Guy Adami
A little bit.
- [41:49]
I
Just because we've been talking about this M and a fervor for so long and to me it's a little bit of a somewhat trite thesis because we know everyone knows this is coming in the future.
- [42:00]
Guy Adami
When I ask you a question, say a decent amount sounds so much better.
- [42:04]
I
In actuality what we should be seeing based on what you alluded to, which is to say the patent clip being so severe and it's spot on, we should be seeing mergers of equals in pharma. We're at the point where that could be the only way out. Now I don't think we will because of all the, the regulatory issues and whatnot. But this is one sector that has really not consolidated nearly as much as others have. Like when you look at airlines and industrials, large cap pharma has not consolidated nearly to that extent and you're talking about 200 to $300 billion in revenue. That I think is actually the way it should go. It won't go that way I think for obvious reasons. So yes, I think you have to kind of delve into smaller cap biotech demand. Make that happen.
- [42:47]
Melissa Lee
Bold call coming from you Jared. Great, thank you. Thank you. Jared holds Mizuho Coming up, Goldman Sachs bets on red for one casino stock and goes all in on another. The big call sending MGM shares lower. That is next more Fast Money into welcome back to Fast Money. Goldman Sachs seeing a mixed picture for some big casino players. MGM initiated with a stock accelerating analysts citing a significant lease burden and large scale projects that don't open until at least 2030. Meanwhile, Goldman says buy win, which serves a higher end clientele. That stock hitting its best level in more than a year. Of course, more exposure to China as well. Tim?
- [43:29]
Tim Seymour
Well that's clearly where when Las Vegas Sands and other players but you know, the Chinese players are the ones that I think are still very well positioned. And on valuation, remember what Covid did to the casinos, they, they took them down almost by two thirds of what their traditional was and I think they've only gained back a half of that. So I think the valuation for the space is actually still really interesting. But yes, I think you can have exposure to those properties in Asia and when is definitely been the higher margin play in Asia.
- [44:00]
Guy Adami
And you have to go to the digital online gaming as well because there's, there's going to be another event. There's going to be another Macao event that, that kills the stocks that are overly exposed to Macao. So you want to have that growth. So is it DraftKings or is it Caesars that has been growing their online. Very small, but it's been growing. It's very small piece on revenue basis but it's been growing at 20%.
- [44:24]
Melissa Lee
Right. If Macao is improving, do you have more optimism about the luxury trade in China?
- [44:29]
Dan Nathan
Should I have any optimism about the trade? A little bit. A little bit. I have more optimism. Optimism about like something like a baba. We'll see. We don't have actually earnings till August, but my God, is this cheap.
- [44:41]
Melissa Lee
Up next, final trade. Time for the final trade.
- [44:52]
Tim Seymour
Tim, taking advantage of the weakness in the EWZ in Brazil on this whole BRICS snafu. I think you're buying Brazil, Karen.
- [44:59]
Dan Nathan
Yes, we just talked about it. I like Alibaba. It's down a lot from its March high. We'll see earnings in July, in August. I like it.
- [45:06]
Melissa Lee
Dan.
- [45:07]
Steve Grasso
Well, she just talked about it, I think. Kwebs. Okay.
- [45:09]
Melissa Lee
All right, Steven.
- [45:11]
Guy Adami
Wal Mart sounds very boring, but it's been building a base since late April.
- [45:14]
Melissa Lee
Wal Mart. All right, thank you for watching Fast Money. Mad Money with June Kramer starts right now.
- [45:23]
Karen Finerman
All opinions expressed by the Fast Money.
- [45:25]
Melissa Lee
Participants are solely their opinions and do not reflect the opinions of cnbc, NBC Universal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer@ Capella University.
- [46:04]
Karen Finerman
Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.