CNBC's "Fast Money" Podcast Summary
Episode: Stocks Drop and Climb Back On Tariffs… And The Impact On Pharma
Host: Melissa Lee
Release Date: February 3, 2025

1. Introduction: Navigating Tariff Turbulence

Melissa Lee opened the episode from Studio B at the NASDAQ, highlighting the volatile trading environment influenced by recent tariff announcements. She introduced the panel members—Karen Feiderman, Dan Nathan, Nathan Gaidami, and Julie Beal—and outlined the key topics for the night, focusing on the repercussions of paused tariffs on Canada and Mexico, ongoing tensions with China, and sector-specific impacts, particularly in the pharmaceutical industry.

2. Trade War Developments: Pauses and Potential Continuations

Karen Feiderman initiated the discussion by detailing the latest trade war developments:

• Pauses on Tariffs: Canadian Prime Minister Justin Trudeau announced a 30-day pause on U.S. tariffs in exchange for increased border security measures. Simultaneously, President Trump agreed to a similar 30-day suspension of tariffs on Mexico, contingent upon Mexico deploying 10,000 troops to focus on fentanyl smuggling.

  "Canadian Prime Minister Justin Trudeau tweeting that there will be a 30 day pause on U.S. tariffs for border security measures." [01:00]

• Uncertainty with China: Despite these temporary halts, tariffs on Chinese imports remain imminent, set to take effect at midnight. The lack of direct communication between Trump and Chinese officials keeps the future of these tariffs uncertain.

  "We know that the two leaders have not been in contact, but Trump said earlier today that he does expect to speak with Chinese officials within the next 24 hours." [02:21]

3. Market Reactions: Extreme Whiplash and Valuation Concerns

The panel discussed the market's reactive volatility:

• Volatility Expectations: Dan Nathan referenced past panels predicting ongoing market volatility due to the trade war, urging investors to brace for continued fluctuations.

  "Volatility great again... next 75 to 100 days I think you're going to see more of them." [03:58]

• Market Valuations: Concerns were raised about the vulnerability of markets trading at excessive valuations, making them susceptible to sharp declines amidst policy uncertainties.

  "You see the vulnerability of a market that's trading at, I think, excessive valuations and how sort of tenuous things can be." [04:36]

4. Sector Analysis: Winners and Losers in the Current Climate

Julie Beal and Guy Adami highlighted sector-specific impacts:

• Software Sector as a Resilient Player: Despite broader market turmoil, the software sector emerged as a relative winner, benefiting from its insulated position against trade disruptions.

  "Names that seemingly are outside of the purview of this to me at least now software names I think are winning in this environment for a myriad of different reasons." [08:22]

• Defense and Aerospace Under Pressure: Dan Nathan noted that sectors like aerospace and defense were under significant pressure, reflecting diminishing investor confidence.

  "Aerospace, defense stocks... have been under considerable pressure since the election." [08:22]

• Currency Impacts: Jens Nordvig emphasized that no sector is entirely immune to the effects of a trade war, as inflationary pressures and consumer confidence indirectly affect all industries.

  "I think there are really no sectors that are completely immune from a trade war." [10:33]

5. Currency Markets: US Dollar Strength and Ancillary Effects

The discussion shifted to the forex markets:

• US Dollar Trends: Carter Braxton Worth presented an analysis suggesting a bearish outlook for the S&P 500 while highlighting the US dollar's strength.

  "We're at an interesting juncture... the bull would say we're going to move up... others would say no, this is a very difficult level." [11:20]

• Impact of Tariffs on Currencies: Carla Rizzuto explained the erratic movements in currencies like the Mexican peso and Canadian dollar due to tariff uncertainties, cautioning against overreacting to fluctuating headlines.

  "It's extremely erratic market move, probably some of the most erratic trading I've seen in my career." [16:32]

• Key Currency Indicators: The panel highlighted the importance of monitoring the US dollar's response to impending Chinese tariffs and the potential spillover effects on other currencies and associated equities.

  "What could be a big move that could also spill into all the, you know, ADRs and so forth of Chinese companies that are listed." [20:56]

6. Spotlight on Palantir: Earnings Surge Amid Valuation Concerns

A significant portion of the episode focused on Palantir's impressive earnings report:

• Earnings Performance: Seema Modi reported that Palantir exceeded both top and bottom-line expectations, driving post-market shares to a new all-time high with a 22% surge.

  "Shares hitting a new all time high of about 22% in after hours." [25:14]

• Analyst Divergence: Despite the strong earnings, only three buy ratings contrasted with 14 holds and six sell ratings, primarily due to concerns over valuation being unsustainable.

  "Analysts at Jefferies... it's valuation that they think is unsustainable." [25:38]

• Valuation Debate: Panelists debated whether Palantir's growth justified its hefty market cap, with concerns over its 20+ times sales multiple versus actual revenue growth.

  "This is a very expensive stock." [27:34]

7. Impact on Pharma and Biotech: Rising Costs and Supply Chain Disruptions

The episode delved into how tariffs are affecting the pharmaceutical and biotech sectors:

• Increased Drug Costs: David Rosenberg highlighted that tariffs threaten to raise drug costs and exacerbate shortages by increasing the cost of contract research and manufacturing in China, a critical hub for US pharma companies.

  "China is a huge center for contract research and for manufacturing. And anything that increases the cost of that is going to make it more challenging in our space." [34:26]

• Supply Chain Dependencies: Emphasis was placed on the industry's reliance on Chinese partners for R&D and manufacturing, with Rosenberg stating:

  "Virtually all of them are using a Chinese CRO or manufacturing partner in some way in the R and D and development process." [35:25]

• Investment in Obesity Drug Space: Rosenberg discussed Versant Ventures' focus on innovative obesity treatments, addressing challenges like muscle mass preservation and maintenance of weight loss post-therapy.

  "Preserving muscle while still losing fat is a significant area for innovation." [37:07]

8. Retail Loophole Closure: Implications for E-commerce Giants

Carla Rizzuto and Guy Adami examined the impact of closing the de minimis exemption—allowing duty-free shipments under $800—to companies like PDD Holdings:

• Impact on PDD Holdings: The removal of this loophole led to a nearly 6% drop in PDD Holdings' stock, raising concerns about reduced package volumes and potential cuts in marketing budgets.

  "Temu parent PDD holdings dropping nearly 6% today after President Trump's new China tariffs closed a trade loophole." [40:30]

• E-commerce and Advertising: The tariffs could negatively affect advertising revenues for companies like Meta and Alphabet due to decreased sales volumes and marketing expenditures.

  "Fewer packages end up in the United States because of the exemption going away, growth could be hurt and that could lead to marketing budgets being slashed." [40:30]

• Opportunity for Etsy: Conversely, platforms like Etsy might benefit as consumers seek alternative marketplaces amidst increased tariffs on major e-commerce players.

  "A name like Etsy could actually benefit from this." [40:30]

9. Upcoming Earnings Reports: Alphabet, Chipotle, and Pfizer

Looking ahead, the panel prepared for the upcoming earnings season:

• Alphabet: Anticipation around Alphabet's reports focused on cloud services and search advertising. Julie Beal expressed optimism about Alphabet's cloud division following Palantir's strong performance.

  "I think two things. Cloud after Microsoft. That'll be interesting. And after Meta, search and advertising." [42:18]

• Chipotle: Dan Nathan highlighted Chipotle's resilience amidst tariffs, with expectations of margin surprises and continued growth despite supply chain pressures.

  "Valuation is concern... but I think they're going to actually surprise people to the upside." [43:33]

• Pfizer: As Pfizer was set to report, the discussion underscored the company's strategic partnerships and the broader implications for the pharma sector under tariff pressures.

  "How a health care venture capitalist is navigating the waters when Fast Money returns back." [33:24]

10. Concluding Remarks: Strategic Positioning Amid Uncertainty

In wrapping up, the panel emphasized the importance of strategic positioning in an unpredictable market:

• Long-Term Investment Opportunities: Jens Nordvig advised investors to remain patient, highlighting opportunities to acquire quality companies at better valuations amidst ongoing volatility.

  "If you're a long term investor, a lot of times we're going to probably get opportunities to buy good companies at better valuations." [07:15]

• Caution Against Overreaction: The consensus was to avoid overreacting to immediate tariff news and instead focus on broader market trends and company fundamentals.

  "Don't go anywhere fast when he's back in two." [24:41]

• Final Trade Insights: The episode concluded with final trade suggestions, tying together the day's discussions on tariffs, market reactions, and strategic investments.

  "Stock, XQ Holdings dropping nearly 6% today after President Trump's new China tariffs closed a trade loophole." [32:12]

Notable Quotes with Timestamps

• Meghan Casella on Trade Agreements:

  "At least two legs of this trade war are now on pause for at least a month." [02:21]

• Dan Nathan on Market Volatility:

  "Volatility great again... next 75 to 100 days I think you're going to see more of them." [03:58]

• Jens Nordvig on Investment Strategy:

  "Try to position yourself perfectly for one specific outcome is not going to be the thing to do." [07:15]

• David Rosenberg on Pharma Challenges:

  "Anything that increases the cost of that is going to make it more challenging in our space." [34:26]

• Carla Rizzuto on Currency Markets:

  "It's extremely erratic market move, probably some of the most erratic trading I've seen in my career." [16:32]

Conclusion

This episode of CNBC's "Fast Money" delved deep into the intricacies of the ongoing trade war, elucidating its multifaceted impacts on various sectors, particularly pharmaceuticals and e-commerce. The panel provided valuable insights into navigating market volatility, the strategic importance of currency movements, and the critical evaluation of high-growth stocks like Palantir. As tariffs continue to loom, the discussions underscored the necessity for investors to remain informed and adaptable in their strategies.

This summary encapsulates the key discussions and insights from the February 3, 2025, episode of CNBC's "Fast Money." For a comprehensive understanding, listeners are encouraged to tune into the full episode.