← CNBC's "Fast Money"
CNBC's "Fast Money"
Stocks Drop As Oil Surges, Jobs Shock…And Rising Gas Prices Impact On Your Wallet 3/6/26
00:42:47
Oil is ripping higher as the war in the Middle East disrupts fuel supplies — with WTI Crude posting its biggest weekly gain on record. We break down what rising gas prices mean for the consumer with Moody’s Mark Zandi, and the stocks that could benefit as the Strait of Hormuz stays closed. Plus, banks stay under pressure, UBS upgrades pharma, and Wells Fargo’s Michael Schumacher joins to game out what oil — and the latest jobs data — mean for rates, Treasuries and the broader macro picture. Fast Money Disclaimer
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What does it mean to live a rich life? It means brave first leaps, tearful goodbyes and everything in between. With over 100 years experience navigating the ups and downs of the market and of life, your Edward Jones financial advisor will be there to help you move ahead with confidence. Because with all you've done to find your rich, we'll do all we can to help you keep enjoying it. Edward Jones, Member, SIPC not every sale happens at the register. Before AT&T business Wireless checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sale or two. Sometimes I do miss the bonding time. Sometimes.
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AT&T business Wireless connecting changes everything.
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Live in the NASDAQ marketsite in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Oil prices Spike. Crude topping $92 a barrel, trading near two and a half year highs. The impact it is having on every sector of the market and just how much it could affect the consumer. And turbulence for the travel trade. Airlines, cruise lines, hotel stocks all under pressure amid flaring tensions in the Middle East. Much pain is left for these names. Plus the stocks that could benefit from disruption in the Strait of Hormuz bank, stocks that pummeled again today. And we are counting down to Oracle earnings. Will next week's report help the stock climb back to records? We'll debate that. I'm Leslie, come to you live from studio. Be at the nasdaq on the desk tonight, Tim Seymour, Karen Feiderman, Bono and Ison and Steve Grasso. We start off with another red day on Wall Street. Stocks dropping across the board with major indices all closing at their lowest levels of the year. The Dow falling 453 points, notching its worst week since last April. The ESS SV and Nasdaq both dropping about 1 1/2 percent. The conflict in the Middle east spiking oil yet again. WTI breaking above $92 a barrel at one point for the first time since 2023. Posting its best week since contracts started trading in 1983. I think it is not 81. Prices surging 36% this week and nearly 60% since the start of the year. Treasury yields ticking higher early in the day before retreating. The ten year hitting its highest in nearly a month, breaking above its 50 day moving average all the Equity, oil and rate swings coming as investors digested the latest jobs data this morning. US payrolls unexpectedly falling by 92,000 in February, the third time in five months that the economy has lost jobs with the unemployment rate rising to 4.4%. What a wild week we've seen. And yet still 3 1/3% away from record highs in the S&P10.
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B
Interesting. And you know that payroll number adds another layer to what was already a concern. And you know, stagflation is coming up now. We can't do this but it would, it is interesting to think about what would the market have done on a day when you didn't have a payroll number that contracted and you had downward revisions to the three previous months. And this concept of higher inflation with a real at least fear that the job market is weakening quickly, that gets you to a growth scare. And if you look at some of the allocations in the markets, some of those trades over the pre Iran days were rotation trades into small caps equal weighted value. And those are trades that I think made sense given fear around AI and fear and some other parts of the tech world. Now in a growth scare you don't want to own small cap. Small caps really underperformed today. A lot of the Dow components also and even value. So it's, it's a fascinating day. It's a week where we digested, you know, the first comments earlier in the week we were sitting here saying, you know, doesn't feel like the market really cares that much. And it seems like this is going to be relatively quick. We've seen oil disruption before but there's no question we're going into a weekend where everyone's now doing their calculus. They're looking at their calendars. We don't know the uncertainty carries out longer. And that's the old story we say all the time uncertainty markets hate it. And I think we have for some time.
- [04:04]
A
But then, okay, so growth scare. But then you layer on top of that inflation fear and all it takes, I mean Kuwait has already cut back on output. We just need a hit to infrastructure. Something that will further disrupt the infrastructure. Not just the passage takes time of oil. Right. Which will take longer to rebuild and longer to come online for that inflation to persist.
- [04:24]
C
Yeah. So I mean I agree with Tim actually on the rotation back, you know, the Vix at 29 and a half. My guess is we'll see higher than that some point next week. But here's the thing about we haven't seen oil move like this in a really Long time and we definitely haven't seen it yet flow through to the consumer. That will happen. But also thinking about that a little beyond when that happens. Even if oil comes all the way back down, there's a stickiness to rising oil prices, right?
- [04:52]
A
Prices don't come, they don't come all
- [04:54]
C
the way back down. So you know, this has now become a more difficult job for the Fed where you do have the real threat of inflation but also evidence that the job market. This is a difficult time for, for Powell and will be for Wash. But you know, for me a week like this, I'm always long. It's terrible. But I kind of like what I own. I, I like to have things that have great balance sheets, good market position. The banks have been horrific but I still like the space.
- [05:24]
D
Yeah, I agree with Tim's take on rotation. You know we kind of saw, you know, the rotation away from software related into more old economy cyclical heavy names and I would expect to see that reverse. Along with that reversal you're starting to see breadth narrow a bit, which is I think is a bit concerning, particularly if you're not going to kind of get that broad strength within mega cap tech, et cetera. I think today's job number as you mentioned, three or five readings showing contraction. I think that is really where the focus is going to be on and I think that's what leads to the stagflation and the growth stairs. Now you know me, I'm not really one to panic. Clearly when I start to see names get dislocated and I start to see 10 and 20% type of pullbacks, you're looking for an opportunity to buy. The real question is where, you know, you've seen regionals start to come under pressure, you've seen some of the money center banks even start to come under pressure. I think those are going to be your highest quality names. I mentioned XP last week. Now I do think that some of the spending concerns are real. You probably don't want to be overexposed to retail. You probably don't want to be overexposed to discretionary names like Wal Mart have shown that they've been able to perform within an upmarket. And when you start to see this, the K shape type of dynamics that we've seen between higher and lower income earnings, I think names like your Capital One Financial, you know, you start to question, you just really want to start combing through your balance sheet. But I, I really do think to Karen's point as well, sub 30 Vix is not showing you that there's panic. And I really would caution investors from running for the doors. I'm not saying close your eyes and buy all dips. What I am saying is do not create like unsustainable losses in your portfolio by over churning when everything is red. I mean, but, but you know the correlation drawdown, the hole already.
- [07:12]
E
I wish I would have listened to your last. So, so what happens if the spike in WTI crude is deflationary? Have you, has anyone thought about that?
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A
The spike?
- [07:23]
E
I'm going to tell you the answer. I'm going to tell you the answer. It's a rhetorical question. Tim knows it by now. I ask what do you think? But I really don't care. So does that work?
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A
Can you, can you.
- [07:33]
E
Okay, so because I'm not in the dots. So the Fed's preferred inflation gauge is the core pce. Do we believe it's a zero sum game with dollars? So if you have energy gobbling up more of your wallet, you have less money to spend on retail, restaurants, travel.
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A
Sure.
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E
Correct. So if the Fed's core PCE doesn't include energy, that's where all the inflation's coming from. And if you're spending less on the things that it does include, inflation actually goes down in their mind.
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B
Well, wait a minute.
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C
So let me ask you.
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E
And it's a supply and it's right in behind.
- [08:15]
C
By that logic, if oil were to plummet, that's highly inflationary.
- [08:20]
E
So if oil were to plummet. It is, it is inflationary to a certain degree. But this is the scenario that we're in now. It's a supply shock, right? So supply shocks aren't in their nature inflationary because booms are inflationary. Too many dollars chasing the same thing, right? Too many dollars. That's what inflation is. Too many dollars chasing the same basket of goods. But if we only have one basket that the dollars are chasing, all the other ones by effect are deflationary.
- [08:50]
B
What we've seen every time we've had a spike in oil is that oil feeds into the entire basket. And I hear where you're doing, you're doing your math on Fed computations and whatnot, but there's no question, what we've already seen in the price of steel, aluminum, fertilizers, and we're, you know, we haven't even gotten into the food shortage story and what's going on with 30% of the world's nitrogen and whatnot coming from the Middle East. So I mean, I think the, the greatest fear that I have as a market participant is not inflation, is not stagflation is not. It's that the market is not priced for a recession. Okay, so the growth slowdown, to me, the things that we're talking about, whether they're inflationary or not, you can get on either side of this. To me, the biggest issue is that a slowdown and we started to see that in certain parts of the market, the banks weren't down today on private credit, they were bank. They were down today on a slowdown on the slowdown in the consumer from a jobs perspective, from the economic perspective. And to me, this is a market at 22 times. All the other times we've had spikes in oil and it goes back to 1980. You've had the S&P at 14 to 16 times forward. We're at 22 times forward. And that's a very different scenario.
- [10:00]
A
So by that logic, I mean, if, if we are, if you're worried about the growth scare and you layer on the inflation scare, what does that pricing in the market look like?
- [10:11]
B
Well, first of all, we heard from Fed' dollar today that they're not that worried about inflation right now. And maybe as Steve saying, it's a supply shock. They don't, they don't think it's that big a deal. I get that. I think though, what we are really seeing is that we had ISM and manufacturing numbers. We were seeing this prices in this input component of it. I think, I think prices are going higher. I do think also there'll be tons of service or I would say they kind of add ons to different types of utility bills. You're going to be seeing from this. It really gets back to though, I think the market just doesn't have any certainty on two or three very important levels. By the way, you know, this is a day when we digested blackrock actually gating one of their funds. We've been talking about private credit for a long time, but this is really. You finally got some of this news bubbling through to the surface. We have Oracle and OpenAI saying they're going to pull back on a data center that hit the chip stocks. So there's different pieces of what was the mosaic coming into Iran that today didn't play out so well on top of a weaker labor market yet the indices are only down 2%. That's why that's all anybody's talking about.
- [11:16]
E
Now you just said what does that do? If you're afraid of growth and you have the inflation spike on just energy
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A
do you think there's a deflation spike?
- [11:23]
E
No, I think, I think what you're going to see is high prices are the cure for high prices. So I think what you're going to see is the Fed is going to get pulled back into this where everyone thinks they're pushing off the cuts. I think you're going to see cuts and even if you don't see them now, you're going to see them in May.
- [11:41]
B
Right.
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E
So that's what we have to prepare for in the markets, which means higher equity prices.
- [11:45]
A
All right, we have a news alert that we want to get to and some changes at the fda. Our Angelica Peebles has the details on this. Angelica? Hey, Melissa. Well, the FDA's top vaccines and biologic drugs director Vinay Prasad is leaving the agency at the end of April. That's according to an FDA spokesperson. Now the Wall Street Journal is quoting FDA Commissioner Marty Makary saying that Prasad wanted to help implement a series of new policies that have all been announced and that quote, he's been successful and gotten a lot done in a year. Now, Melissa, you know that this has been a very controversial Director Prasad has been at the center of a number of recent rejections, at least eight reversals in the past year or so. And so this has all come to a head in the past week with Unicure's gene therapy for Huntington's disease. And there's been this noise, this back and forth all week between the company and the agency. And now it seems like you're seeing that come to a head with his departure at the end of next month. Mel so this is actually his second departure, correct? Angelica? Yes, this is his second departure. I don't know if this will be the final, but you would have to assume that this is probably the last for him. Yeah. Okay, I thought the last of the last. Angelica, thank you. Angelica Peebles. All right, for more on just how much of the consumer spending is being eaten up by rising oil prices, Moody's analytics chief economist Mark Zandi joins us now. Mark, great to have you with us. You know, it's everybody says, oh, you know, gas prices and energy, it's only 1.8% of consumer spending, but as a percent of non housing spend, it's actually much greater. So and we haven't seen, that's just the straight math on the impact of, of gas prices and energy. It's not the flow through. So how do you think about this in total?
- [13:29]
F
I think it's a big deal. I mean if it's sustained if the prices, higher prices are sustained, I mean every $10 a barrel increase in will raise the cost of a gallon of gasoline by 25 cents. And that costs the American household 250 bucks a year. And then that's just the gasoline. You know, obviously this affects diesel, which goes into the price of everything, you know, anything that's put on a truck, you know, groceries, anything that you could deliver to your door. So you add that all in, it's about 450 bucks per hour for a household over a period of a year. Now, you know, for many high income, high net worth households, you know, that's no big deal. It's not going to make a dent in what they do. But for many lower and middle income Americans, that's a big deal. I mean they got to make some hard choices. They're living paycheck to paycheck. So if they're putting more of their dollars in their gasoline tank, that means they got to make the decisions about cutting back somewhere else or not paying on their credit card bill or make a typical choice. So I think it's a really big deal. And the other thing is, as you were alluding to, it's not just about the dollars and cents. There's no price that is more central to the way Americans think about the cost of living. And obviously that's top of mind here at this current time than the cost of a gallon of regular unleaded. They see that price every day when they're going to work. They have to fill their gas tank twice a week. They know that price. So when that goes up, that undermines sentiment and confidence. And the mood of the American people is already pretty bleak. And we're just talking a $10 barrel increase right now. If we stay where we are for any length of time, that's a $30 barrel increase. So I don't know. I wouldn't dismiss this. I think this is a deal. Obviously it depends on how long it lasts and what the President does in. Sure he is going to respond, but nonetheless I pay close attention.
- [15:16]
A
How, how long is a lengthy amount of time for it to be a concern for you? A longer lasting concern where we start seeing the numbers?
- [15:24]
F
Yeah, a week or two. You know, I think we digest it, we move on. If it's a month or two, that's a deal, it's a big deal. And then, you know, think about it in the context of no job creation. I mean we are literally creating no jobs. We haven't created jobs since Liberation Day back last April. Unemployment is low, but it is definitely moving higher, steadily higher. We're up a percentage point from where we were three years ago and it's moving steadily higher here. So in that context, with that backdrop, you know, this kind of numbers, you know, I think really hurt. So not a week or two, month or two. Yeah, that, that could be a real problem. Particularly we stick around $90 a barrel.
- [16:01]
B
Hey Mark, thanks for joining us. I want to dive into what you just talked about, the sensitivity on gas prices to the household spend and, and WTI back in, in late last year was at a five handle had, you know, 56, $57. And I'm just wondering as we look back at where some of the consumption trends, let's face it, we went into 26 with a stronger economy than we had expected. We went into 26 with on our side of the desk, you know, EPS trends are a whole lot better. Are we as good as we're going to have it for a long time? And I think this feeds into the Wal Mart move. I'm not asking you to opine on Wal Mart's valuation but, but in hindsight, taking the other side of what you just talked about, were we in almost a Goldilocks scenario right now back then, excuse me, in terms of commodities and what that meant for the economy and we might not see that for a long time, independent of the war.
- [16:49]
F
Yeah, Tim, that, that feels right. I mean, you know, we're not going back to $56, $60 a barrel at least not any time in the. Unless we go into recession. I mean, I just don't see that that occurring. And you know, the one thing though, the one thing that might save the day here, at least temporarily, is all this fiscal stimulus.
- [17:07]
G
Right.
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F
It's deficit finance for businesses, but also for individuals. I mean, refund checks are coming in at quite large or 300, 350 bucks more than last year. And so that really helps out those folks that are getting those refund checks. So that could save the day. It's temporary. It'll help for a month, two or three. But that might save the day if gas oil prices come back in. By the way, I was listening to your conversation before I came on this whole thing about oil prices not being inflationary. It's inflationary. And the other thing to consider is that the Fed doesn't target the core PCE deflator, it targets the PCE deflator. That's the, if you look in their framework, that's what they focus on in terms of their 2% target. So I don't think I make this argument that higher oil prices leads to less inflation. It's going to lead to more inflation, and the American people are going to be telling us that pretty soon.
- [17:59]
A
All right, thanks for straightening that out, Mark. Appreciate it. Great to see you. Have a good weekend. Mark Zandon of Moody's. Yeah, so it's just inflationary, Steve.
- [18:09]
E
So it's okay. But what I would like to address, though is the WTI Brent spread, right? So that's normally in normal life, it's 6% Brent over WTI. It's 2% now.
- [18:24]
A
So.
- [18:25]
E
And the reason for that is one's landlocked, right. Cushing. And the other one is Seaborne. And now we're collapsing on each other. There's no reason for WTI to be up this much. It's sheer panic. So the point is, is that one of these is wrong. And we know Brent's right.
- [18:42]
B
Right.
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E
Because Brent is Seaborne Global. And it's a thicker. It's a heavier. So WTI should be, in theory, if it's historically tracked the way it's tracked, it should be trading around $70, $75. So when Tim talks about where we were in the 50s, why were we in the 50s? Because we're in a glut. We're in oversupply. US, Guyana, Brazil, non OPEC pumping, OPEC oversupplied. So I get it, the infrastructure problem. But that's a Brent problem. That's not wti. So be careful if you're looking at wti, because the bottom can fall out of WTI a lot quicker than it could fall out of Brent.
- [19:24]
A
All right. Meantime, chemical stocks seeming to benefit from the disruptions in the Strait of Hormuz. CF Industries and Lyondale Basel among the names moving higher, the stocks have seen as alternatives as traders grapple with tight oil supplies and higher prices due to the conflict urea, which is a key component for fertilizer, that is impacted by the Strait of Hormuz. Ethylene and polyethylene for Lionel Basel as well as Dow, which got a number of upgrades this week on the back of the, the capacity being sort of cut off or limited. So these, but this goes back to our conversation of how, you know, how all of this filters into the broader economy because obviously they make inputs to make other things.
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C
Right.
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A
And so if you're, if you're saying, okay, down line Del Basel, your earnings are going to look great because of this. Somebody is paying the price, right?
- [20:13]
C
Right. Definitely. Someone's paying the price. Though to similarly to the way some other things have spiked, I wouldn't be chasing this either as quickly as it happened. If there is a quicker resolution, they'll turn around and go right down. But it's fascinating to see that this situation work its way through the entire economy pretty quickly.
- [20:32]
D
Yeah, I mean listen, the bull case for these companies is inflationary. I, I am very receptive to all points of view, particularly when there's a disruption. So like I acknowledge Steve's point. This in particular like CF Lyndale, Dow, I think this is speaking to inflation and I think if you're looking for a short term hedge or somewhere to hide, that's probably a short term trading position that like you may want to take in. You're probably underweight chemicals or industrials anyway. But again, to Steve's point about the bottom dropping out, if margins, you know, start to compress again, then you're going to want to be out of this trade pretty quickly.
- [21:10]
A
Or if there is a growth scare and growth is a problem, you don't want to be in the sector.
- [21:14]
B
No, you don't want to be in the sector. I think we're all saying something similar. This is, this is, this doesn't read well. And also the geopolitics of food shortages that come from lack of, of, of access to fertilizers is going to get ugly in a hurry. And again, I think there's a lot more in terms of the dominoes that are falling here that'll play out next week.
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A
Coming up, banks in the tank. Financials down again today as private credit fears just won't go away. Just how shaky is a space? Next? Plus a good prognosis for big pharma. One Wall street firm sees tailwinds for the group where the upside could come from right after this. Do not go anywhere Fast money's back in two
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E
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D
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A
Well, many thanks good sir. Here is my Discover card. They accept Discover at Renaissance. Yeah, they do here. Discover is accepted at the places I love to shop. Get it with the times.
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B
With the times.
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You're playing the loot. Yeah, and it sounds pretty good, right?
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Not every sale happens at the register before AT&T business Wireless checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sail or two. Sometimes I do miss the bonding time. Sometimes.
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We've got a news alert on some new additions to the S&P 500. Vertiv, Lumentum, Coherent and EchoStar will join the large cap S&P 500 being deleted. Match Group, Molina Health, Lamb Weston and Paycom. The changes will take effect on March 23rd. Well, banks under continued pressure today with all but One of the 101 stocks in the KB Banking ETF closing in negative territory. Citi, Wells Fargo and Bank of America seen the steepest declines among the money centers, each down roughly 2%. Asset managers also taking a hit after BlackRock said it would limit withdrawals from one of its debt funds. That stock down 7%. Ares, KKR and Invesco also sharply lower. What do you make of the move? Lower here?
- [24:06]
C
So we've been following the Blue Owl situation as it sort of unfolded in slow motion for a while and that's sort of put a spotlight on the whole space. And then we do know that the big money center banks lend to private credit. So there's some sort of add on fear there. I think there's sort of been a big mismatch between the idea of private credit and it's a semi liquid thing and if you have an idiosyncratic need for your money, you could probably get it back. But if everyone wants to get their money at the same time, that's the problem. It's, you know, the underlying assets aren't that liquid. So you know, I think we'll continue to see some pain for a while but I don't think they're all the same. But you know, in full disclosure, I'm married to a private credit guy so.
- [24:52]
A
Yes.
- [24:54]
C
So that makes me sort of long the space.
- [24:57]
A
Right. To believe that there's not a figurative. As you had mentioned, I mean private credit in recent years have opened their doors to Retail investors. And that was a growth area for them. And so now there is a fear, even if there's no credit issue with the underlying credits, that, that in the future people won't want to buy these products anymore.
- [25:18]
C
Well, also, just to go back to blue out for a second, just because it seems to be the sort of center of this, they raised an extraordinary amount of money. So it would sort of stand to follow that. Okay. If that's where the money came in, that's where the money start to go out. And then on top of that, you have. All right, well, to the extent that there is software exposure, how do we think about that?
- [25:37]
E
Yeah, and I think you, you know, to Karen's point, Tim has mentioned this, these large financial institutions are healthier than they've ever been. Right. We did that stress test. We've continued to do the stress test since the great financial crisis. So I don't know if the worry for a lot of these large banks is could it be systemic? And the answer is no, with a caveat until something really lights on fire. But for face value, what we're looking at now, these banks have been stress tested more than any other financial institutions for the last 15 to 20 years. So I don't think systemic problems are what you have do to worry about with the large banks.
- [26:16]
A
All right, there's a lot more fast money to come. Here's what's coming up next.
- [26:20]
B
A shot in the arm. UBS upgrading big Pharma on its ability to ride out a stormy market. But can this defensive sector play offense? We'll dive in. Plus, a disappointing jobs report taking a bite out of everything from manufacturing to big tech. The numbers and the market impact next. You're watching Fast Money live from the NASDAQ market site in Times Square.
- [26:46]
E
We're back right after this.
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A
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C
And the best part, they accept Discover.
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A
Except Discover in a little place like this? I don't think so, Jennifer. Oh, yeah, huh?
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C
Discover's accepted where I like to shop.
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A
Come on, baby, get with the times. Right. So we shouldn't get the parachute pants.
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C
These are making a comeback, I think.
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B
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- [28:22]
A
Welcome back to Fast Money Pharma stocks down almost 6% on the week and UBS sees a buying opportunity in the group strategists upgrading the sector to an overweight calling Pharma a defensive diversification play amid uncertainty stemming from conflict in the Middle East. The firm naming Merck and Lilly its top picks in the US Plus Roach and Astra Zeneca in Europe. Tim, you've liked this sector for a
- [28:43]
B
long yeah, I'm long AstraZeneca, I'm long Novartis and I devo. I just think the things that they're pointing out which didn't make sense or in the week we, you know, we, we came in one day, we're seeing 2 to 3% move down on one of the first real move downs in the market. But UBS points are low leverage, inverse correlation to at least a slowdown. So when PMI go up, up, you know. Yeah, it's the opposite. Now granted we had some good PMI this week, but if we're worried about a slowdown, they are major beneficiaries of the efficiencies from, from AI and R& D slowdown. So just the the usual defensive playbook hasn't been so defensive because some of those things we talked about this yesterday. Things like Staples rallied a lot going into this because of that rotation. But I like this call by ubs. I think you can be patient here and you can sleep on these companies that don't have bad balance sheets. If you're worried about credit, you definitely don't have that issue.
- [29:34]
A
I mean we were talking some time ago about figuring out the next sort of AI proof area. We're thinking about things that had moats like services like plumbing services and sewer, things like that. But this is truly, I mean you can't displace the discovery of drugs entirely by AI, the human clinical trials, but you can reap so many efficiencies, tremendous efficiencies.
- [29:55]
C
I think it is a benefit beneficiary by far. I like the piece too. I liked all the things that you cited. In addition, you know, as we were worried about the consumer, this is the last thing the consumer wants to cut back on. Yes or can.
- [30:07]
A
Right?
- [30:08]
C
Yeah.
- [30:08]
A
Yeah.
- [30:09]
C
So I like the space I'm long.
- [30:11]
E
Yeah.
- [30:11]
D
I mean I like the point about Tim mentioned the inverse between like high yield credit spreads, also the dollar. I mean these are beneficiaries from a stronger dollar which has been in decline for a long time and is starting to see a bit of a bottoming here. And then really drilling down into the AI winner to your point, I really think these have the potential to drive down R and D. Cause you're seeing names like Viking continue to be strong and a very poor tape. And I think, you know, it brings in the time. So the protracted time in R and D is shrunk and then the R and D spin is also collapsed. And I think, you know, that's the way to look at it. With that said, this call is definitely not bullish. That's the thing that should not get lost in this conversation. This is a defensive play. We have seen the rotation into Staples and this the argument here is that it gives you some of that Staples type comfortability without the price to earnings type of rates that Staples have now commanded.
- [31:04]
A
Coming up, an unexpected drop in payrolls, one of the factors weighing on investors today. We'll sift through the numbers and dig into the economic impact right after this.
- [31:16]
B
Missed a moment of fast. Catch us anytime on the go.
- [31:19]
E
Follow the Fast Money podcast. We're back right after this.
- [31:27]
C
Slide off.
- [31:29]
A
Welcome back to Fast money. Stocks down to end the week on the back of a rough February jobs report and skyrocketing oil prices. All three major indices closing out the week in the red since Monday. The Dow is down 3% its worst week since last April. The S&P 500 dropping 2% in the NASDAQ falling nearly one and a quarter quarter percent. Well, the 10 year treasury yield hitting nearly one month highs earlier today having gained about 20 basis points this week. Wells Fargo says surging oil prices are the number one reason for the move and he warns inflation is a clear and present danger. Michael Schumacher is behind the call. He's the Firm's head of macro strategy Michael it's always great to have you here and get your take on things. So the markets don't seem to think that oil like the shock is going to be anything lasting.
- [32:13]
G
I'm not sure about that. I think are struggling because none of us really in fixed income, most of us anyway are not really great at analyzing geopolitics and probably not oil in particular. It's tough to really think about how long it goes. I will say if you look at the prediction markets, Poly markets got about a 50% chance. Let's go into April 30th. That's a long time tough deal for bonds to digest. It's probably pretty negative actually. If that happens.
- [32:36]
A
Do you actually look at polymarket on a regular basis to inform you about what is going on?
- [32:41]
G
I look at all useful information. I'll take granules from wherever I can get them. So that's.
- [32:45]
A
I was, I was just curious. So it seems like then the fixed income market is sort of lined up with that thesis, but the equity markets may not necessarily be lined up.
- [32:54]
G
Great point. Yeah, big disconnect there, right? S and P is down what, a couple of percent this week? Not much really. European markets a bit worse. Bonds taking it on the chin. It's that inflation fear, it's that concern about oil. People say, well it was oil was sub 60 really probably a week and a half two weeks ago. Now it's 90 plus. What's the next stop? Is it done here? Does it go to 120? It's pretty difficult to call. And if you think about the move in the bond market, it's really very evident because in bonds you can price that inflation component, that break even component, it's gone way up and that very, very evidently is driving rates especially shorter maturities. So people are having a tough time.
- [33:31]
B
Michael, let's take you 10 to the other part of the is the dollar. And today was the day when equities, bonds and the dollar sold off and you had a dynamic at least where, you know, where do we start worrying that the flight to quality wears off and this becomes a little more concern about growth dynamics, you get more of a Fed involvement. And if we say that the Fed is more concerned about the job market than they are about inflation risk, you're going to see people start to look at the central bank differentials again.
- [33:56]
G
So it's a great point and I think Tim, you've got to say, well, exactly how comfortable the central bank officials have to get with the idea that oil is peaked or just how high does it have to go to really break that thesis? And I think it's quite a ways up. So we've looked at lots of previous episodes. With oil surging 15, 20, 50, 75%, it's difficult to find that tipping point in listening to the policymakers over the last couple of days, there have been at least a few. I get the sense they're quite a ways from making that determination. So we think that's a ways off still.
- [34:28]
C
So hardball for you. If you're the Fed, what do you do?
- [34:31]
G
You watch and wait. No reason to go in March, no reason to go in April. You've got the new chair coming in who people aren't really paying attention to right now, but still it's an issue. I think you hang out for a while and say let's just watch this unfold for a few months. We're just not really sure why make a big splash right now. No reason to do it.
- [34:48]
E
So, Michael, I look back on the jobs numbers and I was surprised to know that in the last five years health care was responsible for 40 to 50% of job creation in when you see the hangover from COVID is this a pullback getting back to an average, or is this a Covid over hire in both health care and the rest of the economy that we're sort of finding the right level?
- [35:12]
G
Really tough call. Probably need confirmation from a couple more reports, I would say. But it did strike people this is the time that health care didn't really step up. So it's got people a bit more nervous. I will say that the bond market concern about the jobs report probably lasted five minutes, maybe 10. So today too much is going on. But if this happens again next month and two months out, then I think you've got a really great story there.
- [35:34]
A
Michael, thank you. Great to see you. Michael Schumacher, Wells Fargo what do you think about how do you think about
- [35:39]
D
next week in terms of earnings, like in terms of setup and what are you doing?
- [35:44]
E
What are you hanging out with the kids? Like what's going on now in terms
- [35:47]
A
of the equity markets and you know, the point that we are only down 2% this week. We took everything pretty much in stride on the equity side.
- [35:54]
D
I'm looking at stock replacement strategies. Listen, I think the VIX has higher to go when you, if this truly is a shock and I'm not going to sit here and try to handicap the duration of that, but if you, if you truly do see a shock to the stock market, you would Expect VIX to probably be up at least another 10%. So I'd be expressing my, my calls via options, whether it's stock replacement or put spreads or for something that I actually like looking at calls or call spreads. Because the argument there is that the volatility will probably spike or at least stay sustained for at least another week or so. That allows me to kind of carry that position whether or not I get that move that I'm looking for immediately in the next couple of days.
- [36:34]
B
I think a lot of institutional investors came into those, especially hedge funds. Not, not long on these, obviously came in very hedged into this conflict. And some of the reason why you've had some defensive positioning in the indices. What you typically see, though, is that single stock volatility is, and I'm sure Bono sees this, you see single stock volatility is very excessive in the early stages in the index. The indices don't do a whole lot. I actually think as much as I've been trying to find the, the glass half full, if you're hedging up, this is a good place where ETFs will help you. I think this first phase of the market move has been single stock oriented. But if you're hedging with spies or queues, you know, that's something to think about next week.
- [37:11]
A
Coming up, a ground stop for airline stocks. The group down nearly 15% just this week. And Deutsche bank is warning it could face an existential threat over the war in Iran. More fast money right after this. Welcome back to Fast Money. Airline stocks getting crushed as the Iran war sends jet fuel costs soaring. Analysts at Deutsche bank warning today that without relief, companies could be forced to ground thousands of aircraft globally and that the industry's weakest carriers could actually halt operations altogether. Our Phil Bow joins us now with more on these moves. Phil?
- [37:48]
E
You know, Melissa, what's interesting is that the Deutsche bank analyst, Michael Lindeberg, he's not usually hyperbolic. So when I read that note, I thought existential threat. I'm not going to say he's wrong because it depends on what happens with jet fuel prices over an extended period of time. But this is really what's got everybody's attention. Look at what's happened with jet fuel this year. It has doubled in price and the crack spread is enormous at this point for the airlines. And that's why when you take a look at the airline stocks and the potential impact on earnings per share, this is what Deutsche bank is talking about. If there's a 10% higher price for jet fuel than what the airlines had for 2026 for the entire year. This is the impact on earnings per share. Delta and Southwest, they could handle it. So could United American. A 56% hit to earnings per share doesn't mean they're going to go out of business. But you can see where those airlines do not have a strong balance sheet. They're going to be pressured, especially the longer this goes. You mentioned it earlier, Melissa. They're down 15% for this week in terms of the US airlines and in terms of demand. Scott Kirby was asked yesterday in Boston what are they noticing in terms of the impact. Certainly there is an impact on the cost side of the business that will impact Q1, may even impact Q2. To what extent remains to be seen. But he is not noticing a drop in demand. That's the key thing to keep in mind right now, Melissa. There is still strong demand, especially with corporate travel. That's the last we heard from the airlines. We'll get an update over the next couple of weeks when they give us greater granularity in terms of what they're seeing for Q1.
- [39:23]
A
Okay, Phil, thanks for that context. Phil LeBeau and I imagine what also helps the airlines is they've cut back on capacity in recent months and years.
- [39:33]
B
They look they, they've been running their businesses a lot more efficiently. That's great. And it's frustrating as an airline investor that generally is invested is that they don't get the credit when the jet fuel was lower but yet they hire. It's also I think the hedging that goes on Delta especially as shown on that sensitivity is very important and I think they've they smooth out a lot of this. I don't think they're caught totally blind on this.
- [39:58]
E
The to the point of hedging they used to hedge a lot more than they do now. So the European airlines actually hedge the most out of the Southwest used to be the, the, the king of hedging fuel costs and instead of doing that they dropped adopt a lot of that program and they negotiate directly with with who they buy fuel from. So hopefully they can continue to buy fuel at a discount. But if this continues to go, there's no hiding the exposure that these airlines are going to feel.
- [40:29]
A
We have a news alert we want to get to on prediction market platforms. Calcium polymarket the Wall Street Journal reporting that both companies are talking to investors about funding rounds that could value each at about two $20 billion. So Kalshi and Polymarket potentially in talks to raise some funds coming Up a massive week ahead for the resurgence software space with Oracle and Adobe on deck to report what option traders are betting on in this make or break week. That's next. Welcome back to Fast Money. Oracle shares dipping into the red after on a report that the software company and OpenAI have scrapped plans to expand their flagship data center project in Texas. Those sources telling RC Ma Modi that original plans for the project are still intact. So the contract is still good. The move doing little to Dan Software's recent momentum. The IGV closing out its fifth straight gain and its best week since April. Intuit CrowdStrike Palantir among the week's biggest winners. Oracle and Adobe both on deck to report earnings next week. So what are we watching in these? I mean, Oracle seems to be ground zero for a lot of the sentiment in the AI trade.
- [41:39]
C
Yeah. So I don't know if this is a good thing or a bad thing then. And it sort of begs the question, right, if they're halting the expansion like that, but not the original scope of it.
- [41:50]
A
Right.
- [41:50]
C
Will they start to scale back the original scope?
- [41:54]
B
I don't know.
- [41:54]
C
Oh, but also, I think this is why Meadow is down. Because if Meta is stepping into that, to take that capacity, you know, we know there's a lot of capex at Meta already that's not. That hasn't been received so well lately.
- [42:06]
A
Right. We did see that. We saw Oracle stock go lower on the news but then bounced back. So there was sort of a digestion of it and like, I guess people were over it. But you know, it does beg the question as to whether or not the upside to any of these contracts doesn't exist. And why doesn't it exist is a bigger question.
- [42:23]
B
Because they're not economic. And so.
- [42:26]
A
Right, so that's a problem.
- [42:27]
B
Look, I saw that headline that to me felt like a Netflix moment. Okay. You know, it seems to me at a much smaller scale and of course I'm referring to them backing out of the WBD deal. Oracle starts backing out of commitments in terms of data center and some of these, these, you know, pie to the pie in the sky, excuse me, deals. Isn't that what you want to hear as an Oracle investor at this point? I mean, I think it is.
- [42:49]
G
Yeah.
- [42:49]
B
I think it is.
- [42:50]
D
Yeah, yeah, yeah. I would be the third person.
- [42:52]
B
Timbo. Sorry.
- [42:53]
D
Got it.
- [42:54]
E
Yeah.
- [42:54]
A
Owen Timbo. Yes, yes, yes. Yeah.
- [42:57]
D
Noteworthy. Listen, again, it's hard to say that there's anything more important than Oracle next week on the earnings front. I do think a lot of this has been de risk. I mean, you look at the PE multiple contracting, whether or not it's going to return to its old highs, I think that's, that's a tough one. But I do think like on the cusp, this whole open air situation in terms of them being able to raise a question at the core of this whole trade was do they have the money? Will they have access to the funds to be able to actually fulfill any of their commitments? And I think that question, at least on the surface, gets answered to an extent. To Tim's point about perhaps some of the pie in the sky, to take his phrase, numbers in terms of data center buildout, I think it's a bit of a mixed bag there. But at the end of the day, the core funding source here, at least some of those questions have been assuaged and I think that's a, a marginal positive.
- [43:49]
C
Just on his point, funding is getting more expensive. That's moving.
- [43:53]
A
Yes. And higher. Yep, yep.
- [43:56]
E
I have to look at this on technicals because it's just too hard to, to navigate through the fundamentals of it right now and the spend. So if you look back to April, the low was around 120. High in September was around 344. We've bounced ahead of that low in April. So it's trying to find its footing. So if you want to dabble in it now, this is a good spot technically to take a flyer.
- [44:17]
A
All right, well, options traders expecting fireworks from next week's reports. Mike Coe is here with the action. Hey, Mike.
- [44:23]
E
Hi there. So Oracle's implying a move of about 10%. That's slightly less than the eight quarter average that it's done, about 13%. Adobe is implying a move of about 7.5%.
- [44:33]
D
That's also slightly under the eight quarter average of 9%.
- [44:36]
E
In Oracle's case though, it traded more than 60% above average call volume today. More than 250,000 call contracts overall and
- [44:43]
D
calls outpace puts by about 1.4 to 1.
- [44:46]
E
And the busiest call options were the March 100 and 60 calls. We saw over 10,000 of those trading for an average of about $9 a track. So those traders are apparently betting that Oracle can be above that 170 strike price, which happens to be the 50
- [44:59]
D
day moving average by March 20, or
- [45:02]
E
up about 11% or more over the next two weeks.
- [45:05]
A
Obviously part of the setup of Oracle is that big run that we mentioned at the top in IGV ahead of the earnings, which is not exactly what you want to see as a precursor
- [45:14]
B
to no, but I think Oracle is an exception and the move in Oracle has been so extraordinary and I think the, the, the software part of their business that was not really AI build out, I think is not the part that's really been punching. Anyway. I think Oracle priced in a lot of pain. Yeah, it's had, it's had an okay bounce, but the rest of the software space, I'd be more worried if I was another name.
- [45:36]
A
All right, Mike Koh, thank you. Have a good weekend. Up next, final trades, Final trade time.
- [45:46]
B
Timbo, I like that UBS call on Pharma. I like the xlv. I think US Pharma still is defensive. A number of names in there. I think you can play it so
- [45:56]
A
XLV and not BV for victory. Yes, Karen.
- [46:01]
C
Well, what a long week.
- [46:02]
A
I feel like.
- [46:03]
C
I mean it felt like forever and an expensive week that didn't work out that well. But I do think we'll see some more volatility. So I think the VIX VIX index
- [46:12]
A
goes higher before it goes lower.
- [46:15]
D
Yeah, I tend to agree.
- [46:17]
A
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer if you your parent or spouse served in the military, you could join our family. Our members saved an average of $70 a month on auto insurance when they switched. Tap the banner or visit usaa.com join today to check your eligibility restrictions. Apply.