Stocks Drop After Historic Rally… And Banks Ready To Kick Off Earnings Season 4/10/25

Summary

CNBC's "Fast Money" Podcast Summary Episode: Stocks Drop After Historic Rally… And Banks Ready To Kick Off Earnings Season
Release Date: April 10, 2025

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Introduction

In this episode of CNBC's "Fast Money," host Melissa Lee and a panel of top traders delve into the turbulent market movements following a historic rally. The discussion spans across significant stock declines, persistent tariff fears, bond yield fluctuations, the weakening dollar, and the impending bank earnings season. The panel provides in-depth analysis, expert opinions, and forecasts to help investors navigate the current volatile landscape.

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Market Overview: A Wild Ride on Wall Street Timestamp: [00:00] – [03:50]

Melissa Lee opens the discussion from Studio B at the NASDAQ in Times Square, highlighting a dramatic sell-off across major indices. The S&P 500 experienced a sharp drop of over 6%, partially recovering by the end of the day but still closing down 3.5%. The Dow Jones fell more than 1,000 points, and the NASDAQ plunged over 7% at its nadir. Concurrently, 10-year Treasury yields surged above 4.4%, marking a 50 basis point increase since Monday's lows.

Notable Quote:

• Melissa Lee [00:00]: “Here's what's on tap tonight. Relief meets reality. Stocks get back a chunk of yesterday's massive gains of tariff fears persist, bond yields remain stubbornly high and the dollar continues to weaken.”

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Analyzing the Sell-Off: Perspectives from the Panel Timestamp: [03:50] – [10:51]

Panelists Steve Grassman, Mike Koh, and Chris Varrone discuss the implications of the sudden market volatility. Steve Grassman emphasizes his optimistic outlook despite the tumultuous day, stating, “I'm always long... It was a painful day though” ([03:50]). Mike Koh points out the significance of the market holding onto key support levels, noting, “It was important that we didn't give up 5075. That would be giving up about 2/3 of yesterday's move” ([04:54]).

The conversation shifts to bond markets and the dollar's instability. Koh highlights the rare occurrence of the VIX remaining above 40 for multiple days, indicating heightened fear and potential for violent rallies ([05:18]).

Notable Quotes:

• Steve Grassman [03:50]: “I'm more optimistic than that. I think that ultimately cooler heads will prevail.”
• Mike Koh [04:54]: “These moves are far more emblematic of bear market price action than it is bull market price action.”

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Tariff Policy Pivot: Economic Implications Timestamp: [11:15] – [19:40]

Karen Feiderman and Leslie Picker delve into the impact of President Trump's tariff policies, questioning whether the recent pivot effectively mitigates economic risks. Feiderman explains, “Current rate now is still the highest since 1904... Yale Budget Lab says the Trump pivot means 0.6% lower in GDP and a short run increase of the inflation rate of 2.7 percentage points” ([11:30]).

Leslie Picker from BCA Research maintains a bearish stance, asserting that the tariff rates could continue to pressure the economy unless there is a significant rollback ([16:03]). The panel discusses the broader economic indicators, including declining consumer spending, rising delinquency rates, and stagnant income growth, all contributing to fears of an impending recession.

Notable Quotes:

• Karen Feiderman [11:30]: “Current rate now is still the highest since 1904... the risks were only slightly lower but still high.”
• Leslie Picker [16:03]: “There's absolutely no guarantee that these negotiations are going to result in any major deals.”

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Data Centers and the Tech Sector: Mixed Signals Timestamp: [24:01] – [28:34]

The episode transitions to the technology sector, focusing on the semiconductor industry and data center investments. Christina Parts discusses the conflicting signals from major tech companies like Google and Amazon, which have announced substantial investments in chips and servers despite economic uncertainties and tariff overhangs ([25:06]).

The panel debates whether these investments are sustainable or if companies will need to scale back amid rising costs and reduced profitability. Steve Grassman notes the potential negative impact on suppliers like Nvidia, while Mike Koh suggests that alternative, cheaper chip solutions could stabilize the market ([27:22]).

Notable Quotes:

• Christina Parts [25:08]: “Any pullback would impact chip suppliers like Nvidia... and the outlook for data centers is uncertain.”
• Chris Varrone [27:45]: “This administration cannot tolerate a 10-year above 450.”

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Bank Earnings Season: Navigating Uncertainty Timestamp: [32:34] – [38:55]

As earnings season approaches, the focus shifts to the financial sector. Steve Liesman highlights the widening credit default swaps (CDS) for banks, signaling growing concerns linked to market volatility and rising yields. While not indicating an immediate crisis, Liesman warns of an "intensifying loop" that could pressure bank stocks further ([32:52]).

Chris Marinac from Janney Montgomery Scott discusses expectations for major banks like JPMorgan, predicting a mild recession similar to 2001 and emphasizing the need for banks to build reserves to navigate future uncertainties ([34:43]). The panel agrees that while banks remain relatively strong, the economic outlook remains precarious, with reserve-building potentially impacting future earnings ([35:42]).

Notable Quotes:

• Steve Liesman [32:52]: “...the loop is starting to intensify which is becoming alarming.”
• Chris Marinac [34:43]: “If we have a recession, it's going to be mild, similar to 2001.”

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Auto Industry Outlook: Downgrades and Challenges Timestamp: [29:21] – [31:36]

The discussion moves to the automotive sector, with Ford and General Motors facing downgrades from Goldman Sachs and UBS. Concerns include international competition, weaker demand, and higher costs due to tariffs. Peter Berezin notes the problematic incentives like 0% for 72-month auto loans, indicating financial strain on automakers ([30:34]).

Meanwhile, Mike Koh observes that European automakers like BMW and Mercedes are suffering significant losses, whereas Tesla shows relative resilience. The panel debates the future of EV leaders and the necessity for automakers to adapt to regional markets ([31:28]).

Notable Quotes:

• Peter Berezin [30:34]: “...leasing out at 72 months at 0% is indicative that they're under a lot of pressure.”
• Mike Koh [31:28]: “Electric is actually coming out of us better than most might expect.”

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Japanese Yen: A Safe Haven in Turbulent Times Timestamp: [39:01] – [43:18]

Chris Varrone and Mike Koh analyze the strengthening of the Japanese yen against the US dollar, framing it as a return to a safe-haven currency amid global uncertainties. Koh explains the correlation between yen strength and declining 10-year yields, suggesting that continued yen appreciation could hinder the tech sector's recovery ([40:17]).

Varrone adds that the yen carry trade unwinding will support Treasury yields, potentially capping future increases. The panel connects these currency movements to broader market leadership dynamics, emphasizing the yen's role in international capital flows and its impact on sectors like technology ([41:44]).

Notable Quotes:

• Mike Koh [40:17]: “...strong yen is the best reflection of disrupted trade and capital flows.”
• Chris Varrone [42:52]: “...the yen carry trade unwind will create a lid on Treasuries.”

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Retail Sector: TJX Shines Amid the Sell-Off Timestamp: [43:18] – [45:25]

Amid widespread declines, TJX Companies emerges as a bright spot. The retailer has been on a three-day winning streak, with shares up 5% this week. Analysts attribute TJX's resilience to its effective inventory management and customer-centric strategies, even in a challenging economic environment. Mike Koh and Peter Berezin commend TJX for maintaining attractive operating performance and leveraging subscription models that provide stability ([44:18]).

Notable Quotes:

• Mike Koh [44:18]: “...they should do well in these tough times.”
• Peter Berezin [44:18]: “Costco is a little rich for me, but TJX does deserve a premium.”

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Conclusion: Navigating Through Uncertainty Timestamp: [45:25] – [46:45]

As the episode wraps up, the panel reiterates the importance of staying informed and adaptable in volatile markets. They underscore the interconnectedness of various sectors and the need for strategic decision-making to weather ongoing economic challenges.

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Final Thoughts

This episode of "Fast Money" provides a comprehensive analysis of the current market turmoil, examining the multifaceted impacts of tariff policies, sector-specific challenges, and global economic indicators. With expert insights and forward-looking perspectives, Melissa Lee and her panel equip investors with the knowledge to navigate these uncertain times effectively.

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Disclaimer

All opinions expressed by the Fast Money participants are solely their own and do not reflect the views of CNBC, NBCUniversal, or their affiliates. The information provided is for educational purposes and should not be construed as financial advice.

Transcript

[Melissa Lee]

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[Steve Grassman]

What did I miss? I was aware.

[Melissa Lee]

I was well aware.

[Steve Grassman]

I mean we were just talking before the show. I mean it feels very different to have up 2900 and then down a thousand is way worse than up 1900 and flat.

[Melissa Lee]

Right.

[Steve Grassman]

That would be fantastic. So I mean you know the moves in the moves in the dollar which we'll get to more but the moves in the bond market and the volatility index, I mean feels like things are sort of breaking. Right. I don't, I'm more optimistic than that. I think that ultimately cooler heads will prevail. They start to prevail. So you know, I'm always long I didn't do a lot today. I am not a seller with the VIX at this level. It's hard to be a buyer with all these things are kind of going crazy. But two moves I did make today, I covered some treasuries and instead of and then put out some more hygie. So I want to sort of exchange some of that interest rate risk and be short more of that credit spread or long the idea of credit spread widening.

[Melissa Lee]

Right.

[Steve Grassman]

So it was a painful day though.

[Mike Koh]

Yeah. You know, I think when you look at the price action today it was important that we didn't give up 5075. That would be giving up about 2/3 of yesterday's move. Don't want to give up 2/3 of the move. So you kind of just go back and play the week in some sequence here. You know what we had develop early in the week were the three signals we always look for to get some type of a tactical low. Indiscriminate selling. Certainly saw that over the last several days, particularly in the bond market. Very indiscriminate there. Capitulative price signals. You had 80% of the S and P make a new low that's in the 2020-2228 type category. And you finally got something out of pocall ratios. For weeks and weeks and weeks we've been lamenting that you've seen nothing in poke all ratios. So the protection was there. It's like a beach ball under the water. It's hard to keep it down. That's why it takes some comfort that we rally roughly into the close this afternoon. Kind of looking out, though the tactical call feels easy. We've done a lot a short period of time. The longer term call I think is more challenging. You do tend to go back and retest these lows. I would not be shocked by that. Over the next, like four weeks to four months. That's what our data was.

[Chris Varrone]

Your tactical call, you said that was easy. Was your tactical.

[Mike Koh]

I think the tackle. I think the tactical view here is we've done a lot a short period of time. Expect 5650, 700 as a rally here. The longer term call, I think gets more challenging.

[Chris Varrone]

Right? Yeah. I think if you look at the volume on this. So you left out the volume part, but you've been thinking about that out of the last five days, three record volume days. That's probably something you focus on, right?

[Mike Koh]

Yeah, of course. And not only just the volume, but what the volume reflects, it reflects this indiscriminate nature, this emotional market. You see it in Vix, Karen, as well. I think three or four days with Vix above 40 is extremely, extremely rare. You can get some very violent rallies out of that. I think yesterday was the start of a violent rally. I don't think it ended today. We obviously got pushed up against the ropes. Holding 5075 is important. But when we start looking more structurally, we went back 100 years, 85% of the time. These, these moves, you retest your lows between four weeks and four months in the future. I don't think that's out of the question.

[Chris Varrone]

So if you.

[Karen Feiderman]

It.

[Chris Varrone]

We have, we have the volume and we, we thought that President Trump was going to be focused on Powell when he first started his presidency. Then it was the market. It's Treasuries. So he wants. So when you see Treasuries pop, expect a tweet. So it reminds me, it reminds me of. You remember when Amazon had us, they could turn the spigot on and off so they had shorts leaning on the stock. When they reported if they wanted to have shorts cover, they made money. So with this one, if you're laying out a short in this market, do you feel more confident or less confident than yesterday? I would feel less confident in laying out a short in the market. Would you? I know you're.

[Steve Grassman]

I'm always long. Right. So the only thing I did was just take more credit widening. Right. So that was via short.

[Melissa Lee]

Right.

[Chris Varrone]

So I just think that things are going to be chaotic. We know that things are going to be volatile. We know that I bought stocks last week, I held on to stocks this week. I'm not selling yet. I think we're going to bounce aggressively.

[Melissa Lee]

Mike, where do you stand on all this?

[Peter Berezin]

You know, it's interesting what Karen was just talking about and what concerns me here is the intraday volatility. It's, you know, obviously what we saw yesterday and then what we saw today. You know, these are, these are big day to day moves. But it's the move movements that we're seeing intraday that made it a very difficult trading day. You know, for me personally, I have to say, because, you know, we had, I think the average 10 minute move in the S&P was about 1.07%. Now obviously when you're trading options you have gamma, which means you have to adjust your deltas, which is one of the reasons why I sort of have my eyes on this kind of thing. And I was wondering what might be contributing to that because investors don't do that. They don't suddenly switch horses in the middle of the race. But the participants that do are those that are hedging and day traders. I don't know that there's a lot of day traders going on in this market and pushing things around. So I have to think that what's contributing to the volatility we're seeing are people who are short convexity. What would those things be? That could be things like levered ETFs and that sort of stuff. Those are entities that have a lot of aggressive hedging to do intraday and I think that might be contributing to what we're seeing.

[Melissa Lee]

What should we make of, of this volatility intraday? I mean, Mike was citing that every 10 minutes a one plus percent move in the S&P 500. The bond market is also showing extraordinary volatility as is the dollar index. We don't see a move like this on a single day in the dollar index, hardly ever.

[Mike Koh]

Well, if you start with stocks on the volatility, Yesterday was the third best day for the S&P since 1950. That sounds fantastic. The problem is when you look at the historical comps, you're surrounded by 2008 and 2001, 2002 comps. This, this type of volume is far more emblematic of bear market price action than it is bull market price action. And then you go to the macro. I thought the big story today was Just the persistent selling in dollar. We saw strength in euro. We saw strength in yen, I think yen. We'll talk more about it later in the show has really reemerged as the safety trade here. So the dollar seems unsettled. I think it's really critical, Karen, to your point, that we keep credit somewhat contained here. It was never leading of this whole event. Its weakness has been coincident with the weakness in equities. I don't want to see it start leading now on the downside.

[Melissa Lee]

I mean, Rebecca Patterson, who was just interviewed on overtime, former Bridgewater strategist, just said, you know, in a trade war, usually see dollar strength. Right? We are. It is just the opposite. And you would think that this would be one of the things the administration took to, you know, paid attention to. And it may well be. But when we had Howard Lutnick, the commerce secretary on yesterday on the show, he said the markets had nothing to do with it as a market decision to do with the decision. I would think a market participant, I would think a market participant would feel more solace and comfort if the administration did pay attention to what was going on in the bond market and in the dollar in the currency markets.

[Mike Koh]

What I think is a little overblown about what we've seen in the rate market. I think the New York Times read an article yesterday. This was a Liz truss moment in U.S. treasuries. I'm a little skeptical of that. You're not seeing it across the curve. This is long and exclusive to your yields were really well bid all day today. I think twos were down 10 or 12 basis points. Look at global yields. Germans had a bid, UK had a bid, Japanese yields came in. So this seems to be a very specific event. On the long end, it sounds like for selling or liquidation, that's that indiscriminate selling. When you have to be a seller or something, you sell what's safe. I think the bond market got caught the long end of the curve got caught on the wrong side of that.

[Chris Varrone]

I think it's silly to say that the US Is going to lose its reserve status with the dollar. I think it's silly to think that anyone's going to go anywhere else besides Treasuries.

[Karen Feiderman]

Now.

[Chris Varrone]

They can, you've mentioned this. They can hold off. They can postpone. But I don't think, you know, the US has 58% of just trading and global status on the dollar side and the treasury side. It's the most liquid, it's the most stable. There's no Real alternative besides the US Dollar, so you could fluctuate, but no one's going away from the reserve status of the dollar.

[Melissa Lee]

Well, Wall street economists still broadly pessimistic despite the President's tariff policy pivot. Steve Liesman has the latest on the recession calls to watch. Steve I thought, I thought with the pivot everything went away. Goldman Sachs pulled it back. I mean, things are looking rosier.

[Karen Feiderman]

Everything would be good. Well, Melissa, on second thought, it wasn't that big of a pivot. While the market was brilliantly rallying 3,000 points yesterday, economists were crunching the numbers. Melissa, on the new tariff rates and found little reason to rejoice. The reason is because even after all the excitement, excitement, tariffs remain historically high. Before President Trump took office, we had 3% tariffs. The Rose Garden announcement jacked it up to 30%. Current rate now is still 25%, the highest since 1904. If you take out China because all that China trade may go away, it's still the highest is 1934 at 18%. Yale Budget Lab says the Trump pivot means 0.6% lower in GDP and a short run increase of the inflation rate of 2.7 percentage points. As a result, economists said the risks were only slightly lower but still high. Goldman remember they went down from 65 to a still high 45. MetLife says we're 75 to still 60%. I called JP Morgan. They say they're maintaining their recession outlook. They say though the risks have moderated. And Morgan Stanley says the pause lowers the immediate downside risk but prolongs uncertainty. Comments by count on four Fed officials today reflected this really lack of change to A1. They said the Fed continued to face a dilemma between lower growth and higher inflation and could do little at the moment to help either the market or the economy. That's to say, President Trump can perhaps briefly fool the market with pronouncements of a pivot and a victory. But investors, they look to figure it out. The numbers didn't really add up to very much.

[Melissa Lee]

Melissa and then, I mean, this was just crunching the numbers based on tariff policy. STEVE it's not even taking into consideration some of the other policies like immigration policy. I know you know this. The Dallas Fed had research out about the impact of immigration and just how the deportations have been much faster and how that could actually have a much bigger impact on GDP than expected than a lot of people are expecting.

[Karen Feiderman]

Yeah, that's a big deal. Melissa I've talked to some people who are big into the demographics of the country and they just wonder where all the growth is going to come from if we don't have the population growth. Productivity can do some, some work, but it can't do all the work without population growth. One of the interesting things here, Melissa, that is also not mentioned is just the uncertainty. And you had Susan Collins talk about the idea that a wait and see approach is becoming very, very commonplace among households and among businesses. And Steve Grasso, I agree the idea, the US position as the world's reserve currency is not challenged. But if we keep not being a place where flight to safety works for you, over time you can erode that position.

[Melissa Lee]

Yep. Steve, thank you. Always great to get your take on things. Steve Liesman also we should add that not only do foreign foreigners own a lot of Treasuries but they also own lot of equities. 20% of the total equity market is owned by foreigners foreign holdings if they decide to sell because the US is risky, I mean look at what the markets are doing then that could also be some, some force downward on the market.

[Steve Grassman]

One thing that's sort of interesting is is US Holders selling US equities to own overseas to own foreign equities. Not, I don't think that was a commentary on this. Part of the, you know, this tariff situation was more wow, we've had relative outperformance for so long.

[Melissa Lee]

Yeah.

[Steve Grassman]

And then there's some positive things sort of happening in Europe and this is much better, you know, growth outlook. Yeah, much better growth and value proposition. And so that's part of the selling.

[Mike Koh]

I'm just, I'm just struck by that. The Fed is still debating whether this is inflationary or a hit to growth. I mean look at crude, crude's on the lows. Look at five year, five year forward, they're on the lows. Look at consumer discretionary.

[Steve Grassman]

How can they go without having seen tariffs?

[Mike Koh]

Because I think it's a one time price adjustment is the definition of a tariff. And when you look at all the hits to growth on the screens, look at all the cyclical stocks, look at oil, I think it's hard to say that you're more worried about inflation here when everything on our screen says growth is the risk. I think the two year yield says growth is the big risk. And we all watched Powell last Friday. He seemed calm and cool. I don't think that really reflects the reality of what the market's telling us about the risk to the growth side of the equation here.

[Melissa Lee]

Our next guest sees a high likelihood of recession tied to the Trump Administration's tariff policy and is doubling down on his call for the S and P to drop to 4,450 by year end. Peter Berezin is chief Global Strategist, Director of Research at bca. Peter, great to have you with us.

[Leslie Picker]

Good to be on it.

[Melissa Lee]

What is remarkable about Your call for 4450 is that you entered the year with that call. So as all these Wall street strategists have been scrambling to take down their forecast lower in response to what has gone on, you were low to begin with. Does the pivot change? The pivot does not change anything. So what would have to change in order for you to reverse that call in any way since this is all policy induced? Right.

[Leslie Picker]

Well, I think we would need to see a much more dramatic walk back from these tariff announcements. I mean, right now, as of this moment, the effective US tariff rate stands at around 20%, close to where it was during the 1930s as a share of GDP US trades three times as much now as it did back then. So this is a really big hit to the US Economy. And there's absolutely no guarantee that these negotiations are going to result in any major deals. So the tariff rates could rise and that would put further pressure on the economy.

[Melissa Lee]

The 4450 call, does that assume that a recession takes place?

[Leslie Picker]

Yes, Yes. I think the fundamentals of the economy weren't particularly strong going going into this trade war. If you look at real personal consumption expenditures, they're actually down half a percent in February relative to December. We're seeing increasing stresses in the consumer area. Rising delinquency rates on credit cards, auto loans. There's 10 million Americans who are delinquent on their student loans. The pandemic savings that once exceeded 2 trillion are gone. And income growth has also slowed. In February, real wage and salary income was only up 1% over the prior year. If you look at the CPI swap market, it's telling us that inflation is going to rise to three and a half percent more than a percentage point higher than where it is now. If that happens, we're looking at negative real income growth later this year. That's going to sink the consumer and that'll sink the economy.

[Chris Varrone]

So, Peter, when you look back and you said there was the highest rates or the equivalent rates in tariffs back to 1930. We were just coming out of the Great Depression there. We're going into this with a much stronger economy. Does that change your mind? And I promise you this is not an I got you question. 2024 what was your target? I'm just trying to get a handle on if you're, if you're a little bit half empty glass or half full.

[Leslie Picker]

So I moved to a bearish view on stocks at the end of June of last year, prematurely in retrospect, but I was actually one of the few bullish strategists in 2022. And in 2023 we had kind of this call for an immaculate disinflation, arguing that inflation would fall with variable cost to grow. So hardly a perma there. I don't think that the fundamentals of the economy were that strong going into this year and the trade war now has pushed it over the edge.

[Melissa Lee]

Peter, you, you say that when you take a look at CPI swaps, which is something that you, you like to do. Apparently it foreshadows a significant amount of tariff induced inflation to come. If the Fed were to be preemptive and say, you know, we're going to listen to this guy Peter at bca, could, could we avert a recession or can we avert those high levels of inflation or. No, this is just, we're past that point right now.

[Leslie Picker]

I think we're past that point. I mean, the Fed controls short term rates, they don't control long term bond yields, which is what matters more because those long term bond yields set mortgage rates and that is what helps to drive the economy. And those long term bond yields are going up and they're at very restrictive levels right now. And as a result, we're seeing pressure in all sorts of interest rate sensitive parts of the economy. I mean, if you look at the inventory of newly built unsold homes, it's now back to the highest level since 2009. So that's a problem for the economy because housing is the only leading, the only true leading part of the economy and it's telling you that we're going into recession.

[Melissa Lee]

Peter, we got to leave it there, but we'd love to have you back on. Peter Berezin of BCA Research. Interesting. You know, we should note that 4450 is his call for the end of the year on the s and P.500 plus or minus 250 is what he calls a neutral range. That's where stocks would start looking attractive. Mike Koh, what do you, what do you make of that call?

[Peter Berezin]

Well, I agree with it. I think a week ago I was saying that, you know, my sort of fair value range for the S and p was between 42.50 and 5250 and I was basing that on a couple things over ambitious I think revenue growth assumptions for the S and P overall, the fact that when you do see a slowing economy typically you're going to trade at a lower turn. And on top of that most of the strategists with the higher price targets all were using net operating margin assumptions that were basically at 25 year highs. So you know if you happen to think that the S and P is going to earn 310 bucks a share and you think it deserves to be trading at 20 times then that gets you over 6,000. But if you think that number is closer to maybe 270 and that 18 is about as good as it could be in terms of the turn and that if people are going to get negative it's going to be less then clearly you're going to put a lower price target on all of that. And net foreign investment which we've previously talked about if we did constrict the trade deficit that restricts net foreign investment. And that's a lot of the cumulative Treasuries that are owned. A lot of the cumulative foreign ownership of stocks was a result of that.

[Melissa Lee]

Yeah, below 4,200. So a thousand points lower from where we closed today on the s and P500 is where Peter says he would be overweight stocks which would be a very painful place to be. But I guess I buying you could.

[Steve Grassman]

Get there by lunch tomorrow.

[Melissa Lee]

That's true. That is true.

[Mike Koh]

I would watch one thing he said. He talked about these housing stocks. Remember the housing stocks peak relative the S and P all the way back last June, last July they actually bottomed relative to the S and P in February. So for the last four or five weeks you've actually seen some relative outperformance from housing. I think if that turns probably a good sign.

[Melissa Lee]

Coming up much more on today is relief reversal. Why Wall Street's throwing on the hazard lights for auto stocks. Where next guest sees excessively negative sentiment for bank stocks and Chris Verona's technical take on the Japanese yen. But first shares the Taiwan semi dropping of today's sell off. Why a surge in sales isn't beating the tariff overhang. And the outlook for data centers as tech giants signal a spending pullback. All the details from fast money returns back into every day. Thousands of Comcast engineers and technologists create connectivity solutions that change the way we work, live and play. Like Kunle, a Comcast engineer who is focused on revolutionizing the in home wi fi experience today and for the next generation. Kunle builds powerful Xfinity WI Fi devices that deliver a fast, reliable connection with capacity to connect hundreds of high bandwidth devices at once and next level latency for the applications of the future like augmented and virtual reality and cloud gaming. Learn more at comcastcorporation.com wi fi finding.

[Peter Berezin]

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[Mike Koh]

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[Melissa Lee]

What ingredients are hiding in your groceries? Let us take the guesswork out. We're Thrive Market the online grocery store with the highest quality standards in the industry. We restrict 1000 plus ingredients so you can trust that you'll only find the best high quality, organic and sustainable brands all free of the junk. With savings up to 30% off and fast carbon neutral shipping, you get top trusted groceries at your door and you can stop worrying about what your kids get their hands on. Start [e-mail] podcast for 30% off your first order and a free gift. Welcome back to Fast Money Taiwan Semi shares falling nearly 5% today even as the chipmaker announced a 42% increase in first quarter revenue that was better than Wall street estimates. The stock falling with the rest of the semi space. The SMH ETF down nearly 7% today after posting its best ever day on just yesterday. Names like on semiconductor, intel and Micron in video all being hit hard. Well, tariff turmoil also hitting the data center side of the trader. Christina Parts, novelist, joins us now with more on this. This had been suspected that there would be some hits to the data center trade. Do we have data now?

[Christina Parts]

Yeah, well, let's go through it.

[Melissa Lee]

There's a lot.

[Christina Parts]

There's a lot of commentary, right? So sustainability around AI spending just remains a constant concern. Yes, Google reiterated yesterday they would spend 75 billion this year on chips and servers. And yes, Amazon CEO Andy Jassy told CNB early this morning that he didn't see them attenuating their building of data centers. Great word, essentially confirming no reduction in their $100 billion plans. I've never used that word in a sentence, but Jassy noted I won't be as expensive in the future due to chip costs, implying Nvidia either needs to drop prices or face alternatives, which Amazon hopes to step in the Stargate AI project. Don't forget them from OpenAI SoftBank Oracle plants to spend $500 billion over four years starting with the construction in Texas which should be completed by mid next year. Microsoft Reuter plans to spend8.80 billion in 2025. But yesterday this is the news walked away from the lease deals and delayed construction on sites including a $1 billion Ohio project. So these mixed signals really are sending questions about this investment cycle's durability. Any pullback would impact chip suppliers like Nvidia. We talk about networking companies like Arista, real estate developers such as Digital Realty Trust. And then of course the big question you started with was looming tariffs. They really could force companies to reconsider capex plans and that's why you have so many people concerned about Q3 earnings and what the signals for this trillion dollar AI buildout and hitting any speed bumps.

[Melissa Lee]

Karen, you're a big investor in a lot of these names that are investing in these data centers. Would you rather hear them?

[Steve Grassman]

Rather would you rather you can take.

[Melissa Lee]

It with your other. They're sticking with the, with the CapEx or that they're going to reevaluate due to the volatility in the market? You know, just the unknown business environment.

[Steve Grassman]

I think that probably wouldn't be received that well. The unknown business environment but because remember. Well, it seemed like so long ago but when Metta announced her first quarter and actually talked about the spend being higher, people like that, right. That they are seeing, oh we're going to get positive return on that and so that was good. I think them reversing course here. I mean they make a lot of money even while they're spending so much money on capex. So I don't know, maybe it's the dependent. If I told you they said it, how would it react? I'm thinking down.

[Christina Parts]

Yeah there it's to your point. Nobody's really commented on tariffs thus far except there was the cloud infrastructure unit that the general manager at Google and he said the cost of importing hardware might climb but customer demand continue to necessitate the increased environment. So maybe we'll hear that that they'll say demand is really strong and so we're going to eat the costs or they'll use tariffs as an extension excuse to pull back.

[Melissa Lee]

Big question there. Christina. Thank you. Thanks Christina. Parts nabilus.

[Chris Varrone]

The one who gets hit on this is in video. All the rest are probably working on their own chips to Andy Jassy's point. And you're going to wind up seeing Nvidia fall and the others could probably stabilize or rally because they're working on cheaper chips. The world doesn't need what Nvidia is selling right now as sophisticated a large language model. They could do it with a lot cheaper, cheaper chips.

[Melissa Lee]

Coming up, a rough outlook for the auto industry as analysts tally up the true cost of the tariffs. A slew of downgrades and price target cuts coming out of Wall street next. Plus, if the wild swings in the market weren't enough, we are gearing up for bank results tomorrow. And our next guest is flagging some extremely negative sentiment for the group ahead of those numbers. You're watching Fast Money live from the NASDAQ markets in Times Square. Back right after this.

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[Melissa Lee]

Welcome back to Fast Money. Ford and General Motors in the red today after a series of downgrades. Goldman Sachs cutting 4 to neutral from buy, citing international competition, weaker demand and higher costs due to tariffs. UBS also lowering its rating on GM to neutral with similar concerns cutting its price target from 64, 251. Mike Co I don't know, I feel like it's a little bit of a statement of the obvious in terms of what the stocks have been dealing with. But what do you make of the auto stocks at this point?

[Peter Berezin]

Yeah, I mean it's a difficult situation. I happen to be reviewing the rates because it occurred to me that if, you know, a lot of these are offering incentives, you know, very low, long term, low rate loans, then that obviously is indicative that they're under a lot of pressure. And for most of these automakers it seems like it's the hybrids and the EVs in particular where they've got loans going out as far as 72 months at 0% and that's true for Lexus, that's true for Ford, it's true for Kia. And one of the names I didn't happen to look up was Tesla. But of course that's all EVs. And so I have to think that this is not good news for them. And you know, it's, it's obviously down a lot from its peak, but, you know, we'll see what Steve has to say about it. I think there could be more downside there.

[Melissa Lee]

I mean, that's news. You can use 0% for 72 months on an auto loan.

[Chris Varrone]

Yeah, I was shocked when you first read that blurb. You said they downgraded as far as international competition, demand, everything. And when you look at it, this, this, if anything, should increase domestic demand for it. Because you can't buy a car if you, if you have an Audi Q5 in here, it gets priced out of the of, of your sweet spot. You can't sell a Ford. We all know the stats, right? You can't sell a Ford, you can't sell a GM in Europe. They're not just 10% more, they're 25 to 50% more when you're talking about everything other than that tax and everything else. So I think at a certain point Ford and GM have to have a come to Jesus moment and say, do we want to focus on these regions? And then with the hope of doing better. I think you should be upgrading Ford. I think you should be upgrading.

[Melissa Lee]

Are you buying it?

[Chris Varrone]

I would buy GM over Ford because I haven't heard GM whine one bit. I've heard a lot of whining from Farley.

[Mike Koh]

Well, Steve, I think the market kind of agrees here. If you look at what are the relative losers in this, it's the European automakers. Look at the nasty reversals today in BMW and Mercedes. There's actually been some modest relative improvement in Ford and gm. Where you've actually seen the biggest relative improvement though is Tesla. I do think Tesla is trying to forge some type of a bottom. They're the electric leader here. And then look at the electric leader in China. BYD actually acts great through all this. So it seems like electric is actually coming out of us. Maybe better than most might expect.

[Melissa Lee]

Coming up, what to expect out of bank earnings tomorrow and why our next guest is eyeing one of these names is the bellwether for the rest of the space. Don't go anywhere. Fast Money is back into. Welcome back to Fast Money. The tariff sell off resuming after yesterday's historic rally. Stocks sliding but closing well off the lows of the day. The Dow falling more than 1000 points, the S&P down 3 and a half percent and the tech heavy NASDAQ leading the losses down 4.3%. Check out gold surging amid the sell off the precious metal notching its best day in five years. Now up more than 20% this year. Well, moves in the credit default swaps of banks may indicate more trouble for the market. CNBC's Leslie Picker's got the details on this one. Leslie.

[Steve Liesman]

Hey Mal Bank's credit default swaps, that's security that allows professional investors to hedge or offset their credit risk. Risk have been widening over the last week or so. I spoke with Ben Emmons of FedWatch Advisors about what's going on under the surface here and he said this does not indicate a financial crisis. I repeat, it does not indicate a crisis but it is tied to the recent market volatility. Emmons said because banks hold Treasuries on their balance sheet, there's a feedback loop. Bank CDS widens as VIX jumps on rising yields which puts pressure on bank stocks and widens the CDS further. Emmons told me, quote, the loop is starting to intensify which is becoming alarming. Still, levels are not quite as high as they were during the regional bank turmoil turmoil in 2023 and nowhere near where they were during the onset of COVID Bank. CBS is one security to watch as the market continues to assess whether the economy is heading into a recession. Credit quality on bank and non bank balance sheets is another S and P Global data today showing 188 bankruptcies were filed among large companies in the year through March. That's the biggest first quarter number in 15 years since 2010. There many of these were in the consumer discretionary sector. Think the owner of Forever 21 and Joanne, the arts and crafts retailer. Tomorrow we get fresh read on borrower health from a host of banks executives and bank earnings. First quarter in the sector. There's credit is expected to continue normalizing to pre pandemic levels but we should get clues about their expectations for the future based on what they do with their reserves. Mel?

[Melissa Lee]

Yep. Leslie, thank you. Leslie Picker, let's get more on what we can expect from banks when they report tomorrow. Chris Marinac is director of research at Janney Montgomery Scott. Chris, great to have you with us. You say it's all about JP Morgan and what it says. It'll set the tone for earnings season.

[Chris Marinac]

Absolutely. I mean Jamie is the leader of our industry and I think his Talking tough about both the balance sheet at JP Morgan being a fortress capital growth as well as sort of being careful about credit going forward. I don't expect credit issues to be a problem in first quarter. I think it's, it's the second and third quarter outlook that's very uncertain. And I think Jamie's going to talk about the need to build reserves and need to be careful. The good news is he has the earnings and so do all the other banks to handle any increase of both credit losses as well as the reserve. I look, I look at this very similar to what we had in the second quarter of 2020 when Covid first banks built reserves very aggressively for two quarters and then they backed off.

[Melissa Lee]

You cover a swath of banks, not just money centers but also regional banks. Chris, and I'm wondering, you know, what is your assumptions in terms of the economic outlook? Are you assuming recession because you say that there are no, no touch banks out there. So what is that backdrop that you're assuming?

[Mike Koh]

Sure.

[Chris Marinac]

So I think if we have a recession it's going to be Mild, similar to 2001. I think that if it happens, it's not happening right this minute. I think it could be later this year. But more importantly, the loan growth for the banks was very limited to begin with. So we enter in this quarter with a falling cost of funds, improved credit marks and interest rate marks. That is going to enhance tangible book value. And I think most of these companies have a relatively limited loss set up for the rest of the year. What it could be surprising is how banks address the unknowns of what happens next year with trade war, the tariffs, etc. So I think reserve building is going to change estimates. But the market has said about a 20% haircut to bank stocks implying that estimates come down 20% which I think is way too high. I think 8 to 10% more appropriate primarily to counter for slower loan growth and also some build on the reserve side.

[Steve Grassman]

Chris, it's Karen. So JP Morgan's come down an awful lot from the high of just about to 80, almost 20% or so. Do you think it is better here now with what's happened in the world, the uncertainty in the economy versus at 280 with animal spirits and feeling flush and you know, a lot of good things to think about that that haven't material M and A and that sort of thing?

[Chris Marinac]

Well, if you think of it from a price to earnings standpoint, it's better here. I also think that it's better on a price to book I mean not the Morgan gets traded on a book basis but they're going to generate a fair amount of capital this year. So being able to come in at a lower price is just a better buy. I think the animal spirits can come back. We still have deregulation. We still have the opportunity for the economy to do better. Beyond this, this sort of, you know, negative spot that we're in, I haven't given up hope that that can improve. That's why I look at this as back to 2001 as a better analogy than, you know, 708 environment.

[Mike Koh]

Hey Chris, it's Chris. When you look at the banks kind of going into this over the course of the last several months, I mean they were really, really carrying the flag of leadership for the broader market. They weren't the problem going into this. Do you think that puts them in a decent spot to come out the other side still kind of retaining the market leadership? Maybe first question and then just very quick, if you look at the, the non banks that may have some credit exposure, Apollo, Carlyle, Blackstone, are you watching those for some message here as well?

[Chris Marinac]

Well, yes and yes. I think that the banks can stay a leader because they come out of this quarter with less credit issues than perceived. I think that the outlook for the future is more uncertain than it is bleak. And I also think the bank's capacity to make money in many type of markets is quite good. That gets back to the capital build that's going to feed buybacks and buybacks. I think will enthusiast will create enthusiasm for investors, particularly with JP Morgan tomorrow. On the private credit side, I think it's early innings. I think a lot of the private credit has been extending higher leverage at a higher rate. And yes, that will be a problem eventually but I think it's very early innings. So I don't think you're going to see those disruptions occur. I'm not sure it even happens this year. I look at it as a next year issue but something that we have to monitor and obviously the prices are going to take, take that off of up front which sort of already has occurred.

[Melissa Lee]

Chris, great to see you. Thank you.

[Chris Marinac]

Thank you.

[Melissa Lee]

Chris Marinac. Mike, do you like financials here?

[Peter Berezin]

Well, I mean some of the investment banks are definitely going to see better transaction fees, aren't they? That of everything that's going on. So that's, that's a potential tailwind. It's not doing a whole lot for the value of the assets on their balance sheets. And you know, I mean he mentioned that people don't necessarily buy JP Morgan on its price to book. It has historically been pretty good buy if you bought it at less than, you know, 2x tangible book. We're I think on or about that number right now. I didn't happen to check it today, but Karen probably knows right off the top of her head what that number is. But I think that one in particular probably looks as attractive as any because it's the safest of them.

[Steve Grassman]

I agree with Mike, agree with Chris. I mean that's my biggest bank position now. Citi is close though. Different, different risk reward.

[Melissa Lee]

Coming up, a technical take on the Japanese yen. Why Chris Veron says it has become a safe haven once again and what that means for market leadership. Fast Money is back into. Welcome back to Fast Money. The Japanese yen hitting its best level against the US dollar since late September. One of our traders thinks the return of the yen safety trade could be a warning sign for technology. Chris Verone will go off the charts here. Chris?

[Mike Koh]

Yeah, you know, this has been a very important theme in our work. Not just the last number of weeks, but really since last summer when dollar yen peaked. Go back to those last weeks of July into August, you had a three or four sigma move lower down in dollar yen. I think what's very important over the last couple days is how the relationship between 10 year yields and Yen has changed pretty dramatically. It's why I'm a little bit more sanguine about rates here. I don't think we're going to lose 10 year yields a lot higher from here. They're very correlated to dollar yen. Dollar yen has broken down here in a big way. You've seen this big divergence now open up between what yields have done and what yen has done. I think ultimately yields will catch down to where dollar yen is now. If you think about what the implications of this are for market leadership, it's not a coincidence. Certainly I don't think it is. That dollar yen peaked July 10, the same exact day that tech versus S&P also peaked. So when you think about yen carry for so many years as really being a dominant reason of how money moved around the world yield, as that changed, so did tech's relative leadership in the US Change. I think very important relationship there. And we like dollar yen lower here. We've been using a 130 target. We're 144 on the screen right now. So I think ultimately as we look out over the next year, continued yen strength again will impact or prevent tech really from coming back. As the leader in this market that so many are used to.

[Steve Grassman]

So last summer when we had the dollar yen blowout, how big was that trade relative to what that is on there now?

[Mike Koh]

Yeah, so it's funny when you go back to late July, August and you had those three or four days where, you know, dollar again really fell apart and then you started to recover out of that and the logic or the thinking out there was, oh, look, we cleaned up this, this yen carry trade over a couple days. Cleaned it up over a couple days. This has been a feature in financial markets for 15 years. We always thought there would be a second leg here. I think we're certainly seeing that in dollar yen now. And you also kind of have this bank of Japan really up against a wall here. And I think the only outlet for that is stronger again. I think in a world where trade flows are being disrupted, capital flows get disrupted as well. I think strong yen is the best reflection of that.

[Chris Varrone]

You know, the yen carry trade was, it was in vogue and now we have the basis trade and they're similar in approach to it. But I think both of them walk away with the unwind ultimately will create a lid on Treasuries, which is what I'm hearing you say. I don't think this administration can tolerate a 10 year above 450.

[Mike Koh]

Well, Steve, I think you've certainly seen in your career all these carry trade or basis trades, they begin very modestly. Right when you go back to the beginning of Yen carry 2012, 2013, it wasn't sell yen to buy Nvidia, it was sell yen to buy something slightly, slightly higher yielding. But as these things go on unchecked for so long, the risk profile gets bigger and bigger and bigger. I think we've seen that again, I think to your point, we've seen it in the space of trade as well.

[Melissa Lee]

Meantime, Harley Davidson, some developing news here. Shares up more than 3% after hours Bloomberg reporting the motorcycle manufacturers exploring a sale of its financing arm that could raise at least $1 billion. The stock was down more than 9% during today's session. Earlier this week, the company said the CEO is planning to retire this year. Coming up, a green arrow in today's sea of red shares of tjx. How they were able to buck that sell off and how a price target raised on Wall street may have helped more fast money into. Welcome back to Fast Money. A bright spot of green in today's sell off coming courtesy of TJX. The retailer riding a three day winning streak and now up 5% since Monday. Wow. TD Cowan also reaffirmed its buy rating on TJX this week, boosted its price target on the stock to 140 from 137. With all the tariff dislocations, they should benefit from inventory. That's always been the case. The thinking for tjx.

[Steve Grassman]

Yeah, that's always been the case. It's not cheap, though. I mean, between TJX and Walmart, those are my two favorite. And I got two dogs in Nike and I can't even remember the other one. I'm blocking it out. But I do like the TJX story because in a good market, it does well. In a bad market like this, they are really in a great relative position.

[Melissa Lee]

Tjx, Walmart, Costco, which had good comps in March. Mike, I know that one's on the Holly indicator, but all of these names, even though they execute, they've got great, you know, standing with the consumer. They should do well in these tough times. They are all, you can make the case expensive.

[Peter Berezin]

They are all expensive. Tjx, they've just been doing so well in terms of their operating performance. Costco, it's a little rich for me, but I will give it this and that is that because they're getting it from subscription fees, it is a little bit more immune to discretionary spending concerns which might affect other retailers. And I think it does deserve a premium for that reason. This much of a premium? I don't know. Maybe Walmart's a better price if you look at it that way.

[Melissa Lee]

Up next, final traits. All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable. But neither CNBC nor its affiliates andor subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer how will you.

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