← CNBC's "Fast Money"
CNBC's "Fast Money"
Rising Dollar, Rates Threaten Market… And Major Moves in Health Care 12/19/24
00:43:50
Two big risks facing the market, as rates and the dollar both continue to climb. What the rise means for equities, and where the 10-year yield is heading from here. Plus A slew of health care headlines impact the space. The pressure on insurers, a weight-loss shortage update, and the disappointing study results pushing one pharma stock lower. Fast Money Disclaimer
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Melissa Lee
At PGM Expertise across public and private markets today helps build resilient portfolios tomorrow. As a leading global asset Manager with over $1.2 trillion in AUM, PGUM has navigated over 30 market cycles with active investing and disciplined risk management. Our combined global expertise and local insights give us these strategic perspectives we need to help you reach your long term goals. Pgum Our investments shape tomorrow today 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 courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu 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. The Dow just barely breaking its 10 day loop, losing strength at the dollar and yields both continuing their tracks higher after yesterday's Fed decision. Will that spell gloom and doom for equity markets in the new year? We'll debate that and health concerns from weakness in the insurers to another disappointing drug trial. The sector getting hit hard today. We'll dive into all the headlines and dig in on whether the sector is worth another look. Plus, Nike and FedEx surging after hours. We'll go inside the numbers. Shares of french fry maker Lamb Weston getting skewered, shredded maybe. And how private equity could completely change the landscape for college sports. I'm Melissa Leco to you live from studio. Be at the NASDAQ on the desk tonight. Tim Seymour, Karen Feinerman, Dan Nathan and Mike Coe will join us shortly. We start off with the two major moves that could threaten stocks in the months ahead. The 10 year treasury yield climbing towards 4.6% after yesterday's Fed meeting. It spread against the two year now its highest it's been since June 2022. The dollar also continuing to strengthen, hitting a two year high of its own. Those moves as the central bank revised its outlook for 2025, now expecting just two more cuts that sent stock markets reeling on Wednesday while the major averages tried to claw back some of those losses yesterday. Today, I should say a late day fades on the S and P and Nasdaq just into the red and the Dow well off its highs. So it did manage to break that 10 day losing streak. The Nasdaq currently the only index with a gain in this historically strong month. So will the new year hold new troubles for stocks or can the rally get back on track? And I guess the key here is we mentioned the dollar and the yields, if they keep going higher, what kind of headwinds will they be? Look, there's no question that significantly higher yields are bad for the equity market. But as we talk about quite often we, I don't think anybody wants to see yields diving and I don't think, I think a ten year below three and a half also isn't a great sign here. The dynamic that we're going to talk about, you know, budget deal, you know, new government spending, no government spending, no limit to government spending, new administration. I mean, this is part of the dynamic that I think is what was driving yields over the last couple of days. I mean, typically when we talk about the Fed and what part of the yield curve they can control, we typically talk about the short end, but, but not necessarily the long end. And that's more of a barometer of inflation, but it's also a barometer of other factors, including technical factors, but including budgetary factors that I think are, at least in today's headlines, part of what I think we would be talking about. I think for now, this move is more of a function of how significant you've had a breakout now above some of the recent resistance. The dollar moved to, you know, 108, almost 109, at least at some point today, and really through at least the top of the old range, where you had a bit of a double top at 108, probably feels for people out there that are fearful that the dollar could go to 114. And in that case you start to have this question about multinationals. By the way, a dollar that high is certainly going to at least damp down some of the inflation. I mean, it's a, it's at least a, an alternative to at least what's been going on with inflation. So today's, today's action after the volatility of yesterday is a little concerning because again, these would be factors that I think could lead to more volatility if you have these kinds of big moves. But I think we can't lose sight of the fact that going into yesterday's Fed meeting, you had the markets that had rallied almost 14% from Fed meeting to Fed meeting. I mean, I think we need to relax a little bit in terms of talking about the equities. But these two factors that we're leading the show with are things we have to be watching. Yeah. And what is also interesting is that going in, you know, looking ahead to next year, a lot of shops in the street were anticipating the dollar to peak sometime in the beginning of 2025 and then to decline. But here we are. I mean, if the Fed is taking out 50 basis points of cuts next year, then those estimates need to be revisited. And so then you think, yeah, is that hit, plus the geopolitical uncertainty abroad, will that make the dollar even stronger? Well, it's interesting. I mean, for the Trump administration, they do a lot of things that would be supportive of the dollar. And yet also he talks about not wanting a strong dollar. So I don't know where that's going to end up. I think is he, by the way, it's what either does he, by the way? Well, none of us know actually. Right. I don't know. I think about when I, you know, when multinationals, it's not great for them when they're importing those dollars where they sell abroad and get fewer eps back. I don't know. I always sort of discount those as really just wanting to see how the business is rather than what the EPS is in the short term. So I think to me, the things that weigh more heavily are tariffs, which obviously are tied in. But that to me has a bigger, you know, if we are in a tariff war, that's more problematic to me to the market than the dollar, even though it relates to the dollar. Yeah. I would just say this. If you have that dollar that remains strong or gets stronger and you have these multinationals that are selling into, they're generally selling into weaker economies. I mean, that's also something that I think is really important. And then there's another thing to look at. You know, a lot of people thought, well, let's look at the Russell 2000, let's look at small caps. They're not going to have the same pressures as they would from a strong dollar. But, but they also, now if rates are going to stay higher for longer, they have a higher interest expense, they have a higher access to capital. And I think those are all things that are probably restraining growth to some degree. And then to start, you know, your question was like the dollar strength, the yields, this or whatever. I think we got to focus on like why this is all happening right now. Right. So, you know, everyone predicted a recession that Never came in 2023. And then we had this kind of spending boom in and around. Generally, if you look outside the faithful, eight over the last year or so, there's what. Trying to push what. But I think embedded in a lot of those consensus estimates for 15% year over year earnings growth next year is that other sectors are going to kind of pick up the baton a little bit. And I'm not just so sure in that environment where we're talking about higher for longer and we're talking about a stronger dollar. So. And then I go back to like Goldman Sachs who, you know, remember in October they suggested that annual returns for the next 10 years would be about 3%. Yet their economist thinks that growth in the US next year is going to be better than expected. I think about 2 1/2% GDP growth versus consensus at like 2%. Now I'm not like putting those things at odds. I just think there's a lot of folks who think both of those sort of things. Low returns but better than expected growth. And I don't think both of those things can be true. I think part of what exacerbated the move possibly drew at least more attention. The move and had markets react to the move, which is what markets do. They look at central bank differentials. This is a day when you had a BOJ decision. They kept rates on hold. This is the BOJ that no one believes rates is ever really going to hike rates as maybe they should or should have. And at some point maybe they'll have missed their spot. But it does mean that the Fed suddenly is out there looking significantly more hawkish than the rest of the world. That will do something to interest rates that will do these differentials. I think a dynamic where you could continue to see rates higher here. This is on top of all these technical factors which I think we're probably going to start to get into that conversation later in the show. Seems like a heap of risks to the markets which are sitting close to record highs. But we're already there though, right? I mean what of them is new of the risk? I mean, I guess you had the budget deal higher rates, higher rates for a longer period of time. The Fed being higher for a higher dollar longer than. Or a hawkish Fed. And I'm not saying this Fed was hawkish. Your hawkish cut that you talked about that we got. Yes, right. Like more hawkish. That's. Yes, it was more hawkish than I had thought. A couple other things are happening. I mean as we get later in the year, I think you'll see desks slower. I think there are no buybacks right now which had been very supportive of the market. I think we'll see those re engage earlier next year. So. And it was interesting to me that that the vix it came in a little bit, but that was a very significant move yesterday and it's still pretty elevated. So I wouldn't be surprised to see more volatility, but overall, I'm still optimistic. Mike, what's your take on where we sit right now? Well, I mean, first of all, speaking to Tim's point, we have to see these central bank differentials because we have very different economic pictures in these, in these places. China, Japan and certainly Europe and Germany are really in, in the throes of it, frankly. So they're going to have to be accommodative on their side. And our economy is relatively strong. Right. So, or quite strong, I would actually argue. So that in combination with inflation sort of ties the hands of monetary policy around the world. And so we're going to see how that plays out, although I do agree that, you know, some of this stronger dollar is going to help offset the inflationary impacts. And I also suspect that when we're looking at China specifically, even if they are faced with some tariffs, they really are in a demographic pickle and they have to encourage continued exports. The whole notion that we had only five years ago or so that they were going to sort of mature as a developed economy and sort of focused more on services domestically doesn't hold much water when you have a demographic population that's upside down in terms of age. So, you know, you put all of those things together and I think basically the monetary policy is that's, it's, you know, not something that we can really control for. All right, we want to get to a news alert here on the latest developments in Washington. House lawmakers reaching agreement on a stopgap spending bill to avoid a government shutdown. CBC's Emily Wilkins is on Capitol Hill with the very latest. Emily? Hey, Melissa. Well, yes, we do now have a plan B for keeping the government funded after the Friday night deadline that is coming up. The question is, of course, can it actually pass? Now, this funding bill, it has a couple different components in it. It does include that disaster aid, relief aid for farmers, and it also extends the debt limit for another two years. So instead of January of 2025, lawmakers now don't have to deal with it until January of 2027. And this bill has already gotten the green light from President Elect Don posted on Truth Social earlier today, encouraging both Republicans and Democrats to vote yes on the bill and to do it tonight. Now, of course, while there's a lot of momentum around Republicans, Democrats have not been big fans of this bill. The Democratic leader in the House, Hakeem Jeffries, spoke with us a little bit earlier. Listen to what he had to say. The Musk Johnson proposal is not serious. It's laughable. Extreme MAGA Republicans are driving us to a government shutdown. Right after that, Jefferies actually went into the room behind me where he's meeting with Democrats. And just a little bit ago we heard cheers and chants of hell no, Hell no coming from the room. So it looks like if this bill is going to pass, it's going to have to be with Republican votes only. That could be a concern because there are a number of Republicans who are concerned that the debt limit is being raised without trying to decrease government spending. It could be a long night ahead. And at this point, Congress is certainly not out of the woods when it comes to a shutdown. Melissa so just to get to the votes needed for this to pass and avoid a shutdown, Emily not advocating that this is a great bill, whatever. Leaving that all aside, every single Republican would have to vote. Do they need any Democrats? So at this point, and to not get too wonky here, we are expecting votes to come up. If they do it through an expedited process, they're absolutely going to have to need Democrats to pass it. However, if this next vote fails, they could try a different process. It takes a little longer. They could do it with just Republican votes. But remember, we're just talking about the House here. Then this bill has to go over to the Senate where it is controlled by Democrats. So I think a lot of question marks, a lot of hurdles remaining this evening. How many Republicans can they lose? Emily I think at this point it's about three or four Republicans. It depends on what attendance today looks like. And we already know there's at least one Republican, Chip Roy, who has raised massive concerns about the fact that extending the debt limit was included in this bill. It's a very thin margin. Emily. Thank you for keeping us posted. Emily Wilkins in Washington. Let's get more from Andy Constant, CEO and Chief Investment Officer at Damped Spring Advisors. Andy, great to have you with us. Nice Christmas tree. No thanks, Melissa. In terms of what, what do you make of the Fed and what they did yesterday and where long term rates will go? Yeah, I mean, I think the big takeaway from yesterday is the Fed succeeded in out hawking the risky asset markets which were expecting more dovishness while they failed to outh hawked the bond market. And so the bond market did the work for them and moved fairly meaningfully after the what was a hawkish outcome. The meeting was a big shift because after 13 months of decidedly dovish posture, the Fed acknowledged that it may have been premature to act as if the mission was accomplished. You know, it took 13 months to reach this decision. It's not going to be reversed. I don't think. I don't think there's going to be a re pivot until the inflation is dead or the economy tanks. So this was a significant pivot. Do you see any room in 2025 for an even more hawkish pivot? And I'm asking you this because Bloomberg was citing a trade in the options market linked to SOFR, which basically bet on a very hawkish pivot in 2025, which would indicate perhaps a right hiking path. Yeah, I can't get there. I think with interest rates rising as they have and likely to continue to rise, I could see the, by the 10 year drifting out to 4 and 3 quarters or 5%, I don't think they're going to rise significantly more than that. But with that and potentially the, a slightly weaker equity market, you could actually start to see the economy if, if these rates stay higher for something more than a few weeks, if they stay higher for a few months, I think you're going to start seeing the economy soften a little bit and that should allow the Fed to basically stay on path. Andy, it's Karen. Thanks for being on today. I know you often talk about how they refund not just how much it is, but how they actually do it. Do you think that's going to change a lot and if so, how? Yeah, I mean, I think the fiscal outlook is uncertain and the sequencing of the agenda for the Trump administration is not certain. But what we do know is coming is on February 3rd, the TBAC will meet the first time that Treasury Secretary Besant will have the mantle and one of his underlings will run that meeting and they'll have to decide whether they're going to change the policy that the prior administration had, which resulted in over the course since quantitative tightening started, resulted in 50% of the nation's debt being financed with bills. Secretary Bessen has been very public about saying he thinks that is manipulating the economy via the Treasury Secretary role, which is not their role, and that they should extend the debt financing. That could have an impact on the long end as well. But it's unclear whether that'll happen at this meeting upcoming or the next one, given all these uncertainties. Annie, short term, are you constructive on equities? Do you think the environment is good? Yeah, ahead of the, ahead of the Fed meeting. And earlier this month I started selling equities short and I was also, I'VE also been short bonds since, since the Fed cut the 50 basis points in September. I covered a lot of my equity short today and I covered all of my bond short. I think the rest of the month could be choppy, but I think if the economy that the destination is higher for the 10 year bond because two year bond is going to stay around Fed funds until a cutting cycle starts again. So the drift up on the 10 year should be bearish bonds in the, in the new year and that should keep equity multiples in check, which to me means that, you know, the easier path is downward in the first quarter. All right, Andy, thank you. Great to speak with you. Happy holidays. You too, Andy. Constant Interesting, you know, the notion that if, if yields stay within the range but higher for a few months, that that will be enough grit in the wheels of the economy, so to speak, to, to slow it down. Yeah, I think a lot of us, you know, that move from 4% to 5%. What do we had about a year ago or something like that? I think the fact that it just kissed 5% and then came off really quickly, I think that's the kind of idea that a lot of folks think if we continue to go higher here and I think if it goes back there, I'm not sure it just does what it did last time, there might be enough reason for them to stay that way. And to your point, you asked it right away, I think, yes, of Steve Liesman last night as we were kind of parsing through what happened about an hour or two before. I mean, what if we actually go from a point where the, the dots suggest, okay, we went from three to two cuts to no cuts, to maybe, you know, raising interest rates. I mean, that would be a thing that the 10 year is going to, it's going to run in front of. Right. Obviously. And so at that point you have a stronger dollar. And Tim mentioned this, I think earlier, you know, if we go back to those highs in the dollar, the U.S. dixie or whatever the heck they call it, to 114. That's where it was when the 10 year was at 5%. You know, I mean, so that is at this point, that would be a hu. Huge headwind for stocks and valuations because if you were willing to actually put a couple of turns or two or three on the multiple of the S&P 500 when you were expecting, you know, 150 basis points of cuts about a year ago, you're going to have to do the opposite. You know what I mean? If we start getting up there. So we're at 23 times. You could see this at 19 times. Just on differentials alone. The dollar can go to 114. I mean, weakness, Canada in shambles. All of it for sure. And, and we are of the view, I think we, I mean, I am of the view that those differentials are real. I'm of the view that ultimately you've got a case where the dollar will at least represent some of that. I also think the, the market is not priced for any hawkish Fed. So I'm not talking about necessarily even rate hikes. But what we saw yesterday was a Fed that is, that is balanced in terms of their outlook. Outlook. It's also coming from one of the most extraordinary runs in equity markets in a long time. So I think Mega Cap Tech, maybe the favorite eight. What is it? Faithfully. Faithfully the favorite. I'm going to start my own favorite eight. But whether it's eight or seven or six, there's no question that the rest of the market has been significantly underperforming the stocks, not a little bit over the last two weeks. And that is something that I think would continue even more so in the rate environment we're in. All right, coming up, earnings season may be winding down, but we've got two big names on the move tonight. The details in the quarters from Nike and FedEx next. Plus a lot of movement in the health care space today, from an update on the murder of UnitedHealthcare CEO to a popular weight loss drug taking off the shortage list. Everything you need to know when fast money returns. If bonds are back today, why wait for tomorrow? At pjam, our fixed income strategies help investors uncover hidden value and unlock opportunities. Whether you're looking to enhance your income or diversify your portfolio, our broad range of strategies bring together local expertise and deep credit research to help you achieve your long term goals. PGM Our investments shape tomorrow Today 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 courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella. Edu. When it comes to hiring, the best way to search for a candidate isn't to search at all. 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Nike shares just taking a leg lower in the last few minutes. Well, it's barely, basically, barely right now in the green. Oh, it's climbing again. Interesting. The company beating earnings estimates. This is the company's first quarterly report under new CEO Elliot Hill. The conference call is underway, which accounts for a lot of that volatility. Courtney Reagan is here with all the numbers court. Yeah. So actually Elliot Hill just sort of wrapping up his opening remarks, but just to talk about the quarter really quickly, better than expected, certainly. But remember, the company came out and sort of warned, look, the holiday quarter is going to be weak. They pulled their guidance. They postponed their investor day ahead of Elliot Hill coming in. And so really everyone's focused on what's looking ahead because we knew things were kind of messy. And so I'm going to look down because quite, quite literally, he just sort of started making some of these remarks outlining his strategy for the first time. Elliot Hill saying, look, they need to be sharper in their product, especially with a focus on individual sports. They need to reignite sports marketing, focus on big events, big athletes. He noted that they become far too promotional. They also need to build back earnings trust with wholesale partners. And he named names, went through the executives that he's met with at different retailers like Dick's Sporting Goods and Foot Locker, which I found very interesting. He just noted that there was a lack of newness. They weren't delivering inspiring stories and those are the some of the things that they want to get back to. So really sort of outlining some big ideas really right off the top there. We don't yet have they had not yet given earnings guidance at least in the last, what, 45 seconds or so. So usually that does come on the call. We don't know if that's going to be the case this time around because he is just new to the CEO seat. Yeah. So we're up three and a half percent right now. Is there any sort of inventories were flat versus last year. Yeah. How do they keep that like that? What were they selling? That's you know what I wish they gave us more detail but to be quite honest, in the beginning of the first 20 minutes it was all forward looking. They really didn't give us much color at all about what happened in the quarter. I imagine that's what the CFO is talking about right now interestingly. But he was all sort of looking forward other than saying that about 50% of what they sold online was promotional and only 50% at full price. And he wanted to change that. That was the one inventory nugget they gave so far. So the mix of online, not online was a little bit better. Yeah, Exactly. Down about 2%. So when you have Nike gross margin being somewhat better if the rest. Okay, so this was better than feared. Way better. Way better than fear, you know. And again obviously we've seen shares fall after each of the last earnings reports. I think expectations were pretty low. The company sort of gave us this level set look. This is going to be a kitchen sink situation. We've got a whole new reset coming and it does look like that's what Elliott Hill is trying to do here. Really enthusiastic. Obviously had been with the company for a long time, retired and now he's back really enthusiastic without a lot of detail. So this is and it said it's funny, it's different how if you read financial media they're going to say these numbers were better than feared as opposed to better than expected. Expected is better than feared from price action perspective, better than better than expected. And that's what we maybe got out of the gates. But ultimately what's the there there and that's, that's what I think it gets back to. We Nike's not lost in the forest. I mean, you know, there's an argument about innovation still, you know, needing to be upstarted, jumpstarted. But the reality is this is the biggest, the best global athletic brand in the world. But sales were down 8% year over year. I mean ultimately to take this stock higher, we need to see those numbers change. Yeah, each of the regions was slightly better than expected except for China which obviously has been a rough spot in a lot of ways for a lot of different retailers. But very important for Nike to figure that out soon. Yeah, I mean also, I mean yes, it's a big brand, it's a great brand whatnot, but there has been brand deterioration. Yes, I Mean, there has been reports that like if you look on resale websites, nobody wants those Nikes anymore. Those prices are going down. And it's funny, I stand, I even, I even saw some sell some data today from folks, folks that sort of look at social media channels, Alt index, I think they said that Nike had lost a million Instagram followers in the last 90 days, 4 million since April. Which is kind of interesting. Right? Since they're so big on imagery and those big marketing campaigns. I mean to unfollow that's, that's an active. Right. You know, action that you have to take. Right. So I found that interesting with that brand heat. Jeffrey is also talking about how the brand heat remains low. Right? Yeah. So you know, you said they pulled guidance, you know, analysts day, that sort of thing. So a headline that I'm seeing here is that turnaround plan may have short term negative impact. So if they're not giving guidance and that's what they're saying and the stock was up based on a better than expected quarter, that would make some sense. Obviously investors, you know, there's so many other stocks you could buy that are trading much better than this one that have much better fundamental stories that don't rely on China for growth. So as you think about the Athleisure space in general, are you, I know you listen to all these calls and you talk to investors. Are there other areas even after a lulu has come back a bit, are there other areas that, that investors are more interested in? I mean I think unfortunately for a lot of investors or want to be investors, some of these smaller hot brands are the ones where the money is flowing and they're not publicly traded. Right. The voris of the world. I think people are interested there aloe. I mean they picked up a decent amount of share and I'd be interested to say to see how honest Nike might be about losing out to some of these players on actually that's another one you could invest there. I think we are seeing some speaking of brand heat actually going in that direction. Courtney, thank you. Thank you. Tony Reagan. The stock Nike that is up about a percent bouncing around though after hours. Coming up, more earnings action. Shares of FedEx on the move after delivering results. The numbers out of that name next. And shares of Vertex Pharma dropping after a disappointing painkiller study. The results that had the stock selling off and other major moves today in the health care space. You're watching Fast Money live in the NASDAQ markets that in Times Square back right after this at PJUM expertise across public and private markets today helps build resilient portfolios tomorrow. As a leading global asset Manager with over $1.2 trillion in AUM, PGM has navigated over 30 market cycles with active investing and disciplined risk management. Our combined global expertise and local insights give us these strategic perspectives we need to help you reach your long term goals. PJUM Our investments shape tomorrow. Today is it time to reimagine your future. The right business skills may make a difference in your career. At Capella University, we offer a relevant 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. Edu welcome back to fast money. FedEx shares driving higher today after announcing it intends to spin off its FedEx Freight business business into a new publicly traded company. The conference call is about to kick off any minute. CNBC's Frank Collins got the details. Frank Weather Melissa, you know this spin, it wasn't just expected, but it was actually long overdue. According to an investor and several analysts who I've spoken to, they all think the stock was generally undervalued. So FedEx Freight is the largest less than truckload carrier in the U.S. fedEx freight generates significantly more revenue than its than its peers pure players like old Dominion and XBO. But as you can see, FedEx as a whole, which of course includes the trucking business it trades at a significant discount to those names would trade at more than 30 times forward earnings. So this spinoff announcement is also coming at what could be a major inflection point for less than truckload. LTL gets about two thirds of its volumes from the manufacturing and industrial sectors. Tariffs are expected to boost domestic production and volumes of that high margin freight. And then speaking of margin, a huge beat when you look at FedEx Express, it came in at 6.7%. The estimate was for only 1.2% since June expresses both air and ground delivery. That segment now is now a total of 80% of revenue. So this margin beat it would lead you to believe that the cost cutting and right sizing efforts that FedEx is doing, they're making some progress. So FedEx did lower its full year guidance, but the street expected that a bigger question how will this spin? How is it going to happen and just kind of unfold over the next 18 months? Citi just out with a note saying they're expecting to get more details on the call. And for more on these results, you can tune into Mad Money. We're getting more details there as well. Tonight at 6pm, CEO Raj Subramanian will sit down with our Jim Crane. Melissa, back over to you, Frank. Thank you. Frank Holland. So they did lower guidance. Frank points out it was expected, but Karen, what do you mean? I mean, obviously it's all spin. It's all spin. Right. Because the rest of there was, you know, not a lot wasn't the best, but spinoff or spin, because. No, no, no. It was all spin off. That's what's driving the stock. And that is really an opportunity to unlock value. If you look at, you know, where some of the other ones trade, I always thought ltl less than truckload. Why? It's not lttl, but whatever. Less than. Oh, yeah. Less than load. Is it supposed to be? I don't. Less than is the L. Right. TL is the truckload, I guess. Oh, oh. Has it been bothering you for a long time? It has for a really long time. It didn't even occur to me until just when you said that. But it is annoy you, too. Ltl layer out there. Less than. Less than truckload. But that's unlocking value life. Yeah, but this freight business is, is their smallest of all their services and it's something that I think on some level has been running separate cargo and they, they've almost acted like they were a different business. I, you know, to the extent that there are ways to unlock value for FedEx, which relative to itself, is trading cheap, and I think that's part of where we are. Even though the company has, you know, arguably raised that multiple in the last 12 months versus where they have been over the last 24 to 30 months. I think FedEx is interesting. I think the idea that you're going to see other catalysts outside of the earnings story. No, and I think the real story is really pricing and where they can go with that. And right now that's been part of the issue. By the way, take a look at the chart of since Raj Subramanian took over as CEO, it's really outperformed UPS. Mike, where do you stand on FedEx? Yeah, I mean, first of all, on the point of the spinoff and the comment that Tim was just making, I mean, you're talking about 10% of the business. So if you take one of those competitors in the LTL space, if we're going to use that acronym to describe them and assign that to that portion. Then what are you going to add in terms of value to the business? Ultimately you could say, okay, that piece of the business or 10% of the business is now going to be worth 2, 2.5 at best, maybe 3x what it is right now. And if you get a 10% pop off of earnings on the basis of that, that's already accounting for a big portion of it. So there isn't a reason to buy the stock. I don't think the spin off. Basically that's the first thing I would say. Second thing of course is we're going into what has always been a really logistically challenging period for all of these companies, UPS in particular, which might be one of the reasons why the company's done very good job in their cost cutting initiatives. The Network 2.0 and their drive initiatives have really been quite effective. The management's trying to do a good job, but it's a tough environment. Government. All right, coming up, the pressure on health care stocks continuing today and a triple dose of stories are catching our attention. We will tackle what is driving the moves and whether the trade can make a comeback in the new year when Fast Money returns back. Let's take another check on Nike now. Well in the well was down 610 of a percent after hours Q3 revenues down low double digits. Q3 margins down 300 to 350 basis points. It sees a greater headwind in Q4 than in Q3 from the new CEOs plans. So we're watching this very carefully. It is now approaching a loss of a percent in the after hours. Meantime, suspected UnitedHealthcare CEO shooter Luigi Mangione arriving back in New York this afternoon after dropping his extradition fight in Pennsylvania. The 26 year old is facing new federal criminal charges related to murder, stalking and weapons violations. This amid ongoing pressure in the managed care complex some of the country's largest health insurers. Stigma, UnitedHealth, Humana, CVS all dropping today down double digits so far in December. And just in the last hour, House Republicans abandoning their efforts to include PBM reforms in the stopgap government funding bill. For more, let's bring in Mizuho Healthcare strategist Jared Holz. Jared, great to have you with us. Okay, so it's out of this cr but the clouds are far from dissipated from this group. So in terms of the bipartisan legislation that we would cause them to separate PBMs from pharmacy businesses, in terms of the potential regulatory scrutiny because of the murder of this UnitedHealthcare CEO, I mean, is that all there? Is that a concern to investors? Because I'm seeing more and more analysts come out and say, you know what? UNH is a top pick for 2025. The fundamentals look great, the valuations look great. Right. Well, I'm not surprised at that at all. I mean, it always comes down to valuation for a lot of the analysts, and they're looking at it like they're getting a really good deal on a stock that usually performs well. It's really tough to argue with that. But at the same time, so much noise. I don't really feel like the PBM problem has been solved, especially if the bill winds up not going through, which it sounds like it's not. Clearly, the government has it out for this complex of names. As Trump has articulated already. This was really not his bill to begin with. So I think the noise does not dissipate into next year. And we're in for probably a long road from here, I thought. Also interesting is the specific pressure that we've seen this week on Humana because of this report about the exposure that Humana has to veterans health care. So basically their Humana honors program, and if the government starts to look for efficiencies and cost cuts, that could be a place. Yeah, that was mentioned a couple of days ago. The stock got hammered. Yeah. There's really not that much that's known about this. It's a newer item. It's tough for me to see the government really going against the VA in such a harsh way that would take away benefits or limit them. So I'm really not sure where that stands. But again, just another headwind. Another news item that the sector doesn't need. Meantime, the FDA affirming today that the active ingredient in Eli Lilly's GLP1 dropped drug, tirzepatide, is not, in fact, in shortage. And it is telling the compounders to stop compounding this drug come March 19th. And that is a longer period than what is federally mandated. So they're giving them a grace period. But still, this would, in theory be good news for Eli Lilly, but the stock was not higher on this news. Jared, stocks have been brutal. I mean, Lillianovo have lost all the momentum they had earlier this year. It's really been a very tough stretch the last three months. Particular things like the supply demand metrics that we look at continue to favor the companies. Just not enough. Clearly a good headline for Lilly today, and I think that Novos will come in time. We've got a Situation now with HIMS and other companies in terms of can they compound, can they not does this, you know, is there any reversal here at any point? But I was surprised to see the stock down. Then again, pharmaceutical stocks in general have been super weak. Yeah. With the closure of the catalynt deal, do you think semaglutide will come off the shortage list as well? Because that would be another, I mean, Hams actually does not sell compounded tirzepatide and yet the stock, we saw the reaction today's session. So imagine if semaglutide comes off the shortage list, Right. Yeah. I think the Catalan facilities, it's tough to know exactly when they're going to get online and producing these drugs at scale, but it's just a matter of time. All right. And then we want to touch on Vertex. It has a painkiller drug in trial, but the results show that the placebo group had the same sort of results as the drug group, which is always disappointing in a trial. Right. I mean these pain trials are always hit or miss. The stock had a lot of value for the pain category and still has some, you know, they have a drug for acute pain. They're working on this chronic drug in other indications aside from what they reported today. So it's not dead in terms of the, the viability of this asset to make it to market. But I think the way that investors were looking at it was a blockbuster drug and now it just might be more niche. So has this, is this an adjustment for that smaller tam? I think the value for Vertex to me excluding the paying category is in the 350 to $400 range. I think that's where I shake out and a lot of other analysts seem to as well. So it's obviously trading towards the higher end of that. So there's still some optimism here. All right, Jared, thanks. Good to see you. Jared Holks, thank you. Coming up, the college sports revolution. How private equity is about to upend big time collegiate sports and why some of these top programs are now worth billions. The details are next. Fast Money's back in two. Welcome back to Fast money. Big money flowing into college sports like never before. And with the college football playoffs kicking off tomorrow, CNBC Sport in conjunction with athletic director Yu, debuting its inaugural list of the 75 most valuable college athletic programs. The top five are worth nearly $6 billion. Combined with Ohio State leading the pack and a new settlement allowing private equity to enter the fray could make the eye popping numbers from TV paths to student athlete nil deals even bigger. CNBC's senior sports reporter Mike Ozanian and athletic director Yu and student student athlete nil founder Jason Belzer joins us now on set. Great to have you guys both here. Any surprises here in this list, Mike? I was surprised actually, Notre Dame was not in the top five. Now, I'm a big Notre Dame fan, but, you know, as you look at the data, you see they don't monetize the assets as much as some of the SEC and Big Ten schools do. Also, usc, a longtime arch rival of Notre Dame, not up there. But again, you know, if you look at the model, it's based largely off of revenue. 4 times revenue. We made some adjustments for things like nil spend. How big is their football fan base? How big are their alumni? Do they require subsidies? But this list is, I think, something that's going to have a lot of impact over the next year as outside money looks to invest in college athletics. Right. And outside money includes private equity. And so, Jason, can you explain to the viewer at home who might not have paid attention to this whole way too this, to how we got to this point, how private equity is looking to get in and what is the appetite from traditional private equity investors like endowments, et cetera, for this kind of investment? Yeah, that's right. So four years ago, student athletes were able to start earning nil money, meaning they could actually earn revenue. And so over the last four years, about a billion dollars has flowed to those student athletes. Because of the new settlement for the house case, the NCAA is going to back pay $2.3 billion to student athletes over the last decade. And then starting in 2025, they're going to pay $2 billion a year to the athletes. Because of that, all of these athletic departments are going to have major budget shortfalls. And so they're seeking ways to be able to make up that money. And so private equity is the most logical place for them to go. And as you see with conferences being worth several billions of dollars, there's a real asset class to be able to be invested in. So I know for some of the other sports, private equity is 10% cap. Is that in existence here? No. Yeah. So there is no cap because there hasn't been any deals done yet. One of the biggest challenges that any university is going to face is that they're all nonprofits. So what's going to have to happen is that there's going to have to be the creation of a special purpose vehicle essentially that allows for the revenue producing assets. So media rights, sponsorships, ticket sales to be sort of bifurcated. A great example is Clemson, which is at the top of the ACC on this list, has created something called Clemson Ventures, and nobody has really understood why they've done that. But if you start thinking about it, it's logical because they're looking to get out of the acc, which is one of the smaller conferences now, and they're going to have to figure out how to compete with South Carolina and Texas and everybody else. And so it's likely that they're preparing themselves to potentially take on private capital. So, Mike, Jason, it seems to me competing, though, is a function of TV contracts, right? So there's, there's, there's the NCAA contracts, but individual schools, I mean, it gets back to even what you see, professional sports. I don't know if Ohio State has their own football network, but the SEC certainly does. The Big Ten certainly does. So talk about that relationship and how that's funneling into nil money. That's right. So, so Big Ten, SEC, the two biggest conferences, they distribute approximately $60 million a year to each of their teams. Right now, by the end of this decade, that's going to be closer to 100 million. So there's a $40 million difference. So if you're a school in the ACC or the Big 12, like a North Carolina or Clemson, you're going to have a 40 or 50 million dollars a year Delta that you're going to have to make up, which is pretty much impossible. Right? There's just no way, because that's, that's a quarter or a third of your budget. So either you take on private equity to close that gap or you figure out how to get into that upper echelon of the league. But most of these conferences, the SEC in the Big Ten, Big Ten is at 18 schools, SEC is at 16. It's not like they're looking to just continue to expand because they're just going to have to cut up their pie. Right? Mike, we've been talking about the big teams. What happens if you're sort of in the middle of the pack? You're not one of the top. Interestingly, I think, think those are the schools that probably need private equity the most. Right? Because they don't have the big TV deals. And as Jason just explained, going forward, the advantage the SEC in the Big Ten is going to have. But if, even if you're in that second division, what are you going to do? And also, I think a big part of this is these athletics departments are not experts at monetizing their assets and revenue streams. Their brands, even for the middle tier schools are up here and their revenues down here. So by bringing in some expertise in private equity, I know a lot of people think, oh, the wolves are at the door. Private equity is going to come in and, you know, destroy this. I don't think it's that way because the private equity firms are incentivized because they're only going to make money if this plan happens, if the schools make more money. But these schools are not experts either on the revenue side. And in many times, these schools, their costs are bloated. All right, we got to let you guys go. We could talk about this for my back. Mike, great to see you. Jason, thank you so much. Coming up, a delicious divergence in the food space. Lime west and darn restaurants heading in opposite directions as investors digest results. The numbers that had these food stocks forking next, more fast money. I don't know what that means, but we'll have more on that. Welcome back to Fast money. Two stocks in this food space heading in very different directions. First, Darden restaurants jumping nearly 15% to a new record. The parent company of Olive Garden Longhorn Steakhouse reporting earnings and revenues that beat expectations, raising the full year guidance. Meantime, shares of Lamb Weston getting fried dropping more than 20%. The worst performer in the S&P 500 today. The French fry maker slashing guidance, naming a new CEO as it faces ongoing pressure from activist investor Jana Partners to switch up its leadership team. Lamb Weston down 42% this year. Mike, where do you stand on either of these trades? Well, first of all, Lamb Weston, you know, I mean, this thing, obviously this is not the first time they've been punished post earnings. I mean, one of the problems was that, you know, this was a company that really boosted their prices during the pandemic. And they're just a commodity seller. And a lot of that vig that they were essentially squeezing out of the market is now unavailable to them. The options market was quite bearish, I have to say, traded about 65,000 contracts, which for a name not a lot of people think about is a lot. And we saw most of the activity on the opening side going into February, the 60 strike put. So it seems like some like there's more downside. Wow. All right, up next, final trade trades. Time for the final trade. MIKE co. Yeah, PBM reform is a risk, but I think UNH is looking pretty cheap here. Tim under unlike underperforming sectors like health care, I think energy actually has some legs here. KAREN so yesterday Hawkish cut I thought wasn't anything bad for the banks and in fact you had a chance to buy them lower. I didn't see them outperform today. I'd like Wells Fargo again Dan yeah, I think you wait to buy Nike until it has a 6 handle. Thanks for watching Fast Mad Money starts right now. All opinions expressed by the Fast Money 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. 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