CNBC's "Fast Money" Podcast Summary
Episode: "Staples Struggle and Chips Surge as We Head into New Year"
Release Date: December 23, 2024

Hosted by Melissa Lee and featuring a panel of top traders—including Steve Grasso, Dan Nathan, Guy Adami, and Carter Braxton Worth—CNBC's "Fast Money" delves deep into the critical market movements and sector analyses that shape investor decisions as we approach the new year.

1. Rising Rates and Their Impact on the Markets

Dominic Chu opens the episode by highlighting the steady climb in interest rates, with the 10-year yield reaching 4.6% (00:28), a level not seen since late May. The discussion centers on whether stocks can maintain their rally in the face of rising bond yields and the potential repercussions for various sectors, particularly housing.

Dan Nathan emphasizes the impact of rising rates on the housing market, noting that higher yields increase borrowing costs, which in turn can dampen housing demand. This has led to a significant downturn in housing stocks, suggesting investors may need to exercise caution in this sector moving into 2025.

2. Consumer Staples: A Sector Under Pressure

The consumer staples sector has been the worst performer in the S&P 500, with notable declines in companies like Walgreens Boots Alliance, Dollar General, and spirits maker Brown-Forman. Guy Adami questions the attractiveness of consumer staples in an environment where rising yields make Treasury dividends more appealing than those from staple stocks (04:06).

Guy Adami adds, “Dividend stocks, which may have been attractive, are no longer all that attractive,” particularly with the strength in the dollar acting as an additional headwind (04:50).

Steve Grasso explains the technical aspects, pointing out that the XLP ETF tracking consumer staples has encountered congestion and flattening in its charts, indicating a potential stabilizing point for the sector (05:00). However, he warns that valuations across the market are steep, suggesting a possible 5% decline to prompt investors to seek value in more attractive stocks (05:43).

Carter Braxton Worth further analyzes the concentration within the sector, noting that the top two stocks, Wal-Mart and Costco, comprise about 20% of the XLP ETF. He contrasts this with the consumer discretionary sector, where top stocks like Amazon and Tesla make up a larger portion, leading to more significant market movements (08:17).

3. Semiconductor Stocks Surge Amid US-China Tensions

A key highlight is the surge in semiconductor stocks following the US government's new probe into China's chip manufacturing. Guy Adami observes that despite a temporary relief rally, valuations for leading semiconductor companies like Broadcom and Nvidia remain stretched, making future growth projections uncertain (10:05).

Steve Grasso underscores the strategic importance of companies like Broadcom, which offer less competition to major tech firms compared to Nvidia, positioning them as more favorable long-term investments (11:52).

Carter Worth discusses the broader implications of this surge, suggesting that while concentrated market leadership can drive growth, it also introduces significant volatility and risk (08:17).

4. Energy Sector: Struggling but Finding Potential Upsides

Despite being one of the worst-performing sectors this year, the energy sector shows signs of potential recovery in 2025 driven by LNG growth and demand from generative AI applications. Pippa Stevens highlights companies like Cheniere Energy and pipeline operators such as Kinder Morgan and Williams as key players poised for growth (26:03).

Guy Adami concurs, pointing out that Cheniere Energy remains undervalued and could serve as a dark horse in the natural gas space, especially with increasing LNG exports (26:50).

Carter Braxton Worth notes the sector's concentration, with giants like ExxonMobil and Chevron making up a significant portion of the S&P, suggesting selective investments in these heavyweights could yield dividends and value growth (29:00).

5. US Steel Takeover Proposal: Regulatory Hurdles and Market Reactions

The podcast covers the high-stakes takeover proposal of US Steel by Nippon Steel, with the Committee on Foreign Investment in the U.S. (CFIUS) set to make a decision. Steve Grasso predicts a short-term bounce in US Steel shares due to potential protectionist measures, such as increased tariffs, which could bolster domestic steel prices (21:45).

Guy Adami offers a contrasting view, emphasizing the strategic importance of maintaining strong alliances and the potential long-term benefits of the takeover for job preservation and operational investments in U.S. Steel (23:11).

Carter Braxton Worth remains skeptical, pointing out the concentrated nature of the steel industry's market presence and suggesting that unless the deal proceeds, US Steel might remain stagnant or face further decline (24:24).

6. Housing Market Forecast for 2025

The discussion shifts to the housing market, with Orfey Diving from Zillow providing insights into mortgage rates and home sales. She anticipates that slower economic growth in 2025 could lead to more Fed rate cuts, potentially easing mortgage rates and boosting home sales. Orfey Diving expects new home sales to continue their upward trend, supported by increased inventory and improved affordability (32:01).

Steve Grasso raises concerns about corporate policies requiring employees to return to office, which might influence housing preferences and secondary home markets. Guy Adami notes that homebuyers are increasingly looking closer to job centers, shifting demand patterns (34:17).

Carter Braxton Worth advises remaining cautious with homebuilder stocks, citing their significant underperformance relative to the broader market despite past strong gains (35:22).

7. Berkshire Hathaway: Technical Analysis and Future Outlook

Carter Braxton Worth conducts a technical analysis of Berkshire Hathaway shares, noting a recent 10% sell-off and suggesting potential for a rebound if the stock finds support at key trend lines (36:57). Guy Adami supports this view, highlighting Buffett's substantial cash reserves as a buffer that could benefit the company during market downturns (38:13).

Carter Braxton Worth concludes that Berkshire Hathaway may be poised for a technical bounce, emphasizing the importance of watching trend lines and moving averages for trading opportunities (36:57).

8. Future of FinTech: MoneyLion's Strategic Moves

Dee Chaube, CEO of MoneyLion, discusses the company's recent acquisition by Gen Digital and its partnership with influencer Mr. Beast. This collaboration aims to enhance financial literacy through engaging content, leveraging Mr. Beast's massive following to educate millions about financial wellness (39:45).

Dee Chaube explains that post-pandemic, fintech companies like MoneyLion have focused on profitability and operational efficiency, positioning themselves for strategic partnerships and growth opportunities (41:48).

Guy Adami commends MoneyLion's resilience and adaptability, suggesting that the evolving regulatory environment could further benefit fintech innovations and streamline financial services (43:30).

9. Final Trades and Investment Recommendations

The episode concludes with panelists sharing their final trade recommendations for 2025:

• Carter Braxton Worth suggests investing in the SPDR S&P Biotech ETF (XBI) as a catch-up trade, considering the biotech sector's lagging performance this year (45:10).

• Steve Grasso humorously recommends betting on "Man of Steel" with US Steel's stock, anticipating short-term volatility (45:19).

• Guy Adami echoes Carter's sentiment on energy stocks, particularly LNG-focused companies, aligning with Pippa Stevens' earlier analysis (45:44).

Key Takeaways and Insights

• Rising Interest Rates: Persistent increases in bond yields pose challenges for growth sectors like housing and consumer staples, making fixed-income investments more attractive relative to dividend stocks.

• Sector Concentration Risks: Both the consumer staples and energy sectors exhibit significant concentration in a few large companies, presenting both opportunities and vulnerabilities for investors.

• Semiconductor Industry Dynamics: Geopolitical tensions and regulatory probes into China's chip manufacturing are driving volatility and opportunities within the semiconductor space, with companies like Broadcom and Nvidia being focal points.

• Energy Sector Resilience: Despite current struggles, strategic investments in LNG and pipeline companies may offer growth prospects in 2025, supported by technological advancements in AI and energy exports.

• Regulatory Influences: The outcome of regulatory decisions, such as the Nippon Steel takeover, has immediate and long-term implications for sector performance and investor sentiment.

• FinTech Evolution: Companies like MoneyLion are navigating the post-fintech winter landscape by focusing on profitability and strategic partnerships, positioning themselves for future growth amidst evolving regulatory frameworks.

• Investment Strategies: Diversification across sectors, focusing on quality stocks, and being mindful of technical indicators are essential strategies recommended by the panel for navigating the market in 2025.

Notable Quotes:

• Guy Adami (04:06): "Dividend stocks, which may have been attractive, are no longer all that attractive."

• Dan Nathan (02:37): "We do not need those staples in their dividend yields; we can just get them in Treasury."

• Carter Braxton Worth (08:17): "We have a concentrated market. We've had a concentrated market. And that is both a virtue and a vice."

• Pippa Stevens (26:03): "LNG growth and demand from AI could drive the energy sector's recovery in 2025."

• Dee Chaube (43:14): "We were growing 20 to 30% at increasing margins. And once that happens, it opens up the aperture for a lot of optionality."

• Carter Braxton Worth (36:57): "It's one of two things: either weakness to take advantage of or weakness to stay away from."

This comprehensive analysis by CNBC's "Fast Money" provides investors with actionable insights into the current market landscape, emphasizing the importance of sector-specific strategies and the potential impacts of macroeconomic factors as we approach 2025.