← CNBC's "Fast Money"
CNBC's "Fast Money"
Stocks Drop With Nvidia Results On Deck… And State Of The Housing Market 2/21/25
00:43:53
Stocks tumbling as weaker-than-expected consumer sentiment data, as well as a big drag from UnitedHealth, weigh on investors. And with all eyes on Nvidia’s earnings report next week, how should you position ahead of the week ahead? Plus A big week for housing data. Home sales dropping sharply as prices hit an all-time high for January. What one top economist sees in store for housing, and if the spring shopping season can turn things around. Fast Money Disclaimer
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- [00:01]
Courtney Reagan
Live from the NASDAQ markets site. On a day markets erased all of their post inauguration gains. This is fast money. Here's what's on tap tonight. A Friday fade. Stocks sinking and closing near their lows of the session. The Dow and the Nasdaq putting in their worst week of the year. Consumer stocks transports, big tech seeing the biggest losses. How do you make sense of the action and how do you set up going into next week? Well we're going to tell you but it wasn't all bad news. China stocks bucking today's downtrend. Alibaba closing in on the $150 mark for the first time in over three years. But is the recent run come too far? We'll debate it. Plus counting down to Nvidia earnings, housing headaches royal the homebuilders and a market bright spot in aisle to why Staples cut a bid during the session. I'm Courtney Reagan in this evening for Melissa Lee. Coming to you live from Studio B at the nasdaq. On the desk tonight we have Tim Seymour, Karen Feigerman, Courtney Garcia and Steve Grasso. But we're going to start with a sea of red on Wall Street. The market sell off intensifying throughout the session as weak data on consumer sentiment and a huge drop in UnitedHealth weighed on the markets. The Dow plummeting nearly 750 points seeing its worst day since December UNH responsible for 30% of that loss. We'll have more on that in just a few but take a look at some of the other big losers today. Discretionary stocks the biggest sector laggard led lower by casinos, cruise cruise lines and more industrials also taking it on the chin with ge, Vernova, Old Dominion and United seeing outsides drops. And take a look at Metta. A week ago it was riding historic 20 day win streak. We were talking about it here a lot and now it's down four days in a row and taking the rest of the Mag 7 down with it. All this action coming ahead of Nvidia's fourth quarter results on Wednesday. The last of the Mega cap names to report that stock now just barely positive on the year. Shares still more than 12% off their all time highs that was hit on January 7th. So where do we go from here and does this week's action make Nvidia more or less important? Timing. You get to kick us off.
- [01:56]
Tim Seymour
Well welcome Courtney.
- [01:57]
Courtney Reagan
Thanks.
- [01:58]
Tim Seymour
Right. You said like making sense of this. I think that a lot of today was two dynamics that I think aren't totally Obvious. I think the data that we got this morning was really a big part of this. Even though there was no headline data pieces yet an S and P essentially inflation gauge. You had a dynamic in terms of University of Michigan where you had some dynamics around 5 to 10 year expectations on the consumer side and they're the highest they've been since 1995. And then you look at some of the composite PMI and you look at where we are in real terms they came in significantly slower. So there was kind of slower growth. We had bad housing data and all of it feeds through on inflation. You add that to. I think there was a huge options expert today. I'm not going to tell you that that was the reason. I am going to tell you I think that had something to do with the day when the VIX was up almost 20% and you had extreme moves. In other words, if you look below the surface of the indices it was actually a lot uglier than today than it even looks on the indices which looked pretty ugly, which you pointed out at the top of the show. I think there's dynamics next week. This weekend we have elections in Germany which I think are very significant given how the tone has changed towards the U.S. s role towards protecting Europe in a post World War II environment. And a lot of things that we never questioned. I think at least add to the backdrop of yes, Nvidia does feel like they need to kill it and when you look at the Mag 7 it's been the Mech 7. I mean it really has been. And now the one stock that people hated the most is the most defensive fear. Not surprisingly that's Apple. An environment where people are actually punishing high growth.
- [03:31]
Courtney Reagan
I mean Karen, does this just feel like an environment where the markets are just afraid to go? Long into this weekend Tim brought up what's happening in Germany. We know we have Nvidia next week. Obviously the day started out pretty, pretty poor with that consumer sentiment number that really freaked me out about what consumers are fearing about how they feel and especially their inflation expectations. They believe 4.3% that's the highest since November of 2023 for their 1 inflation outlook.
- [03:53]
Karen Finerman
Although some of the data would be KE counter to that. Right, OK so but to get to your question of about is in video so is it crucial for the market? I actually think we've seen a broadening out. Right. We've seen financials do really well until very recently. Industrials do very well until very recently. So we've seen health care do very well. So I think it's not quite the. When it was all mag seven and that was it and there was nothing else to focus on and that was central to it. I think it was more important. I mean I'm long in video so I certainly care. But I think it's a little less important than it used to be. Especially with we've got all this other noise, macro noise, tariff noise, you know, some of the things Tim talked about China, which was nowhere. China's now an interesting piece. So I think it's a little less important right now.
- [04:39]
Courtney Reagan
All right, fair enough, Courtney. You know it was funny just two days ago I believe I was on one of the shows and we had a guest that was talking about how the markets are less likely to have this knee jerk reaction when we get potential headlines about possible tariffs, that the markets have gotten a little bit better about waiting until we see actual news. But then today you get this information from the University of Michigan, consumer sentiment about how consumers are worried about tariffs possibly to come and maybe that sparked the sell off. So I can't quite figure out are markets worried about potential tariffs or not worried? Because today's action very different from earlier in the week. Yeah.
- [05:12]
Courtney Garcia
And I don't think people are able to completely shake those headlines yet. Like maybe they are a little bit less of a shock to the system like the first time that you're hearing them. But clearly consumers are worried about inflation, whether that's coming from tariffs, whether that's coming from just inflationary forces like the fact that China might actually be coming back online that actually could start to export inflation kind of across the world. And you do want to keep an eye on that because we are very much a consumer driven economy. So we do have a few big points coming up next week. Nvidia is one of those which you've pointed out. I think this for them is going to be something where they need to shake off the deep seek news. Right. They dropped like 17% the day that that came out. And so I think they need to show that that's not going to be a problem for them. They've already came out to say that they actually expect that there's me more computing power power needed based off of what happened with Deep Seq. And you've seen the capex from all of these major firms have actually increased like I think $335 billion this year is earmarked to go towards AI spending. So I think they just need to prove that that demand is still there. They have a conference I think in March. And I think that's probably going to be more of a market moving event than what we see next week. But markets are absolutely going to be watching that.
- [06:16]
Courtney Reagan
Yeah, there's just so much going on there and it's so interesting that Nvidia is going to have to take a little bit of a defensive position potentially and spend some time on the call talking about that news. Steve, what do you make of today's action and all the piling into these safety trades? I mean, Hershey shares up 4%. You don't see that very often.
- [06:34]
Steve Grasso
Yeah. I mean, you know, for obvious reasons, Staples are considered the safety bed for everything that everyone has said. You have geopolitical uncertainty, you have tariff uncertainty. You don't know how China is going to pan out. Although Alibaba gives a pretty good indication of the, of the progress. If you look at the market court. Apple is the only one that's up since Deep Seek. Nvidia basically back to even Microsoft down down 6, 6 or 7%. Google down 9%. Amazon down 7%. Now Apple is being rewarded because think about how much they're investing in AI. 10 billion. What's everyone else investing? 100 billion 65 with Meta 85 with Google. Amazon 105. So deep seek has proven their base case. Their base case is that you can do it on the cheap. You can do AI investment on the cheap. Apple is seen as a staple and thus has performed just like that, a conservative bet in the on the economy and the market.
- [07:44]
Courtney Reagan
I want to get back to UnitedHealth because obviously that was a big talker of the day. Closing 7% lower though down more than 12% at its lows of the day. The Wall Street Journal reporting the Justice Department is looking into the company's Medicare billing practices. So that's putting scrutiny on diagnoses that trigger extra payments to Medicare Advantage plans. Unh. Refuting that report though defending its track record, saying in a statement, quote, we are aware that the Journal has engaged in a campaign to defend a system that rewards volume over keeping patients healthy and addressing their underlying conditions. Any suggestion that our practices are fraudulent is outrageous and false. Karen?
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Karen Finerman
Yes.
- [08:22]
Courtney Reagan
What do you make of this whole.
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Courtney Garcia
So.
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Karen Finerman
Right. It's ugly, but I think there's more to come here. And you know, when there's something that happens like this, I liken it to the Google situation when the antitrust came after them for. Right. The way they sell ads. Right. That's a huge thing, really important. And ultimately we got a bad verdict. And then at some point the market sort of forgets about it and shakes it off because we don't really have a resolution now. We don't know what the actual remedies will be and there'll be some counter negotiation back and forth. I could see a similar situation here. I think this is sort of the first inning. I would wait. I know it's not expensive, but I feel like there's more PR shoes to drop here. Right. They cherry pick. Either cherry pick or they find from extensive number of people who claim that they were pressured into giving additional diagnoses that they didn't even test for. I think we'll see a lot of that kind of stuff come out. It probably won't sit well with the market, but ultimately it's going to take a long time to resolve this and I think at some point the shareholders will just shake it off.
- [09:25]
Courtney Reagan
Okay, Tim. I mean this is not the first time obviously that UnitedHealthcare has come under scrutiny within the government, sort of getting involved, digging around. Does that make you nervous? Even if these things end up turning out to be either forgotten by the market or they determined, well, there was no wrongdoing.
- [09:39]
Tim Seymour
Well, I mean, I agree with Karen. I'm not sure you need to do anything with UnitedHealthcare, which, which I think our viewers know at different times. This is a stock that we brought up as being one of the most bulletproof stocks in the market and one of the greatest charts over the last few years. But if you look at this start Net, this, this chart now ultimately UnitedHealth is probably somewhere right around three year support. I, I want to think that actually this is a buying opportunity. I think there's been a lot of media attention around risk coding. I think it's, it's an easy political football. There's been. United Health Care has had quite an extraordinary last three months including some really sad news around their former CEO of one of their units. And we followed that news. So I mean we, we know where some of the public opinion has been around this. At the end of the day, the reason why this stock was one of the best stocks in the market for three years was because that the earnings power and the margin attached to what was better than not even close to peer growth is something that drove this stock higher. I think those are things that investors can still hold on to. But whether you need to jump in on Monday here, I don't know. But I do think at some point you're buying this weakness.
- [10:41]
Courtney Reagan
Cordy. It is trading at a 30 plus percent discount to the S and P. Does that make it attractive at all in a mice?
- [10:46]
Courtney Garcia
I don't disagree with anything that Karen and Tim are saying here, but I do think if we do continue to see these headlines, if there is pressure and if the government really does try to actually put their foot down this time around, which I think what people are worried about, about 27% of their revenue growth in 2025 is tied to Medicare Advantage plans. So I think that's where you want to look at this and say, okay, if that is actually a risk, that could be a risk for the stock. So I don't know if it's a reason to stay out of it. But there will still be headlines that are going to affect in the short term.
- [11:12]
Courtney Reagan
Absolutely. Steve, what do you make of UnitedHealthcare right now, today's headlines or seen so far this year?
- [11:18]
Steve Grasso
Yeah, I would go down. I would go down the same path Courtney did. If, you know, 27 to 32% of the revenues are tied to Medicare Advantage. If you go to Humana, that's up close to 90% of their revenues. That's why you're got hit as well. Today, CVS is around 24%, but Cigna is probably the buy on this. It's only about 4%. So that's why you saw the rest of the space a lot weaker than CIGNA was. So I think the market does an excellent job out of sifting through it. The only problem that you have, or the huge problem that you have with UnitedHealthcare is that for the last five years, it's only up 55%. So it's had its fair share of headwinds and it's a bipartisan headwind that they're suffering from. So you have to be really choosy over which one you're picking, and you have to know really what is involved in the revenue mix.
- [12:07]
Courtney Reagan
All right, well, we're going to continue with this discussion. Let's bring in John Ransom. He's managing director and director of health care research at Raymond James. John, thank you for being here. I mean, it seems like you're not deterred at all from your bullish, bullish call on unh. Why do you think the markets are wrong in the reaction today?
- [12:24]
John Ransom
So, as one of the panelists mentioned, if you look at the last five years, every time the stock gets to a 30% or more discount to the S and P, it's bounced, number one. Number two, I think a lot of this concern is rearview mirror. So to take the coding, totally agree with the Coding scrutiny. But what, what people have to remember, this is way in the weeds. The government changed the coding in 2024. It's called B28. So they eliminated about 2300 codes when they moved from ICD9 to ICD10, which happened for the rest of the world in 2015. So they eliminated a bunch of codes that triggered these payments. And so looking in the past and say, well, in 2021, they had a code that doesn't that got dramatically curtailed with B28. UnitedHealth has said this is a $15 billion funding hit over three years. So they ground through the numbers last year by cutting about 4 billion SGA. But I think the focus on coding is fighting the last word.
- [13:18]
Courtney Reagan
You know, you've noted that the Biden administration was really hostile to UnitedHealthcare. Do you see a difference coming up here with this new Trump administration and how they may be treated?
- [13:29]
John Ransom
Well, what Biden, you know, agencies aren't supposed to reduce funding like CMS did. That's supposed to go through Congress. So I don't see another $15 billion cut coming out of Trump, but the next clue we're going to get. So look, it's uncertain. Okay, let's be clear, Oz and then it's been a little Delphic. But what's going to happen in April is the final rate notice will come for the Medicare Advantage plans. And that will be a big tell, because in the preliminary rate notice, Biden rushed this out. They didn't include any data from 2024. 2024 is probably a 10% cost year for the plans. And so the big tell is going to be, I think, in April when the Trump administration pushes out the final rule. And then we're going to have a sense of how they're thinking about the industry.
- [14:10]
Tim Seymour
Hey, John, getting back to really the fundamental thesis around the stock, and I know you're very bullish. I think you've got a 640 target on it. Talk about even just the guide that they've set out there for 25. I mean, I would argue this is very cheap. When you look at their MLR guide, I think, you know, relative to peers, again, I think this is one that if anyone can kill, excuse me, blow through the bar here, I think it's these guys.
- [14:31]
John Ransom
Yeah, they, they struggled last year. We called it winning ugly. And then this year, as you know, the earnings growth is about 4 points below their target, their 13 to 16% target. As we look at 2026. That's when I think you'll See some reacceleration. And then 2027, we fully lapped this V28. So look, I agree with what people said. I think this is going to take a while because we're going to chop around, you know, and 2025 is going to be okay, not great. But again, as the market looks six months forward, I think two things are going to happen. Number one, I think this rate notice could be a lot better than the preliminary. And then number two, and this is the key, medical costs are starting to flatten out for Medicare Advantage plans. The big problem with United is at the same time Biden's been cut here, Biden cut, we had a bad trend and we think three years on the comps get easier and easier. And we think the trend now again first quarter you could have some flu noise, but we think medical trend is going to flight flatten out. And the rate notice could be an upside surprise against the backdrop of the stock trading where it is.
- [15:31]
Karen Finerman
John, it's Karen, thanks for coming on. So let me ask you, do you think that this investigation is just specific to UnitedHealth or could widen out or do you see and do you see any shifting of where who's got a bigger Medicare Advantage business a couple of years down the line as a result of this?
- [15:49]
John Ransom
You know, I don't know the second question, the first question, but what I'd point out is that there was no news broken today. This investigation was started by the outgoing administration. And it was just we kind of thought people knew the way these things normally go, and I think you guys said it perfectly, is that we get a settlement in two years, people forget about it and it's going to be some immaterial sum of their $460 billion market cap. Normally these are fairly small. Again, just the thing about coding, this is so in the weeds. What happens is you get a judge and you get the government, you get the company and you have a squabble about it is exactly like taxes. As one of your guys said before, did you document this coding appropriately? And again, just to wrap a bow on this, I thought it was so crazy that the government allowed codes to drive payments and you didn't have to treat. And so eliminating that I think is a positive step. If you give truth serum to the industry, they would say, yeah, it got a little out of control with all the supplemental benefits and the fact that coding the government sort of set the game up where they created bad incentives. And so I think again, this is kind of rearview mirror stuff, but that's Kind of where we are. But yeah, I agree. Also, it's not going to be tomorrow thing. I think it's going to be a grind up over the next few months.
- [17:08]
Courtney Reagan
What do you think the code is for truth serum? I'm just kidding. John Ransom, Raymond James, thank you very much.
- [17:14]
John Ransom
I think it's called Fino Noir.
- [17:15]
Karen Finerman
Right.
- [17:17]
Courtney Reagan
There you go. I like that. That was good. Courtney, I'm going to give you the final word on this one. Yeah.
- [17:21]
Courtney Garcia
I think this is something we're going to have to continue to watch these headlines because I think a lot of good points are brought up that no real new news was out today. This is something that has been out there. But I think the question that people have is is this new administration actually going to take some action on it? Because what you're seeing is they are trying to cut costs and do a lot of things that previous administrations have it. So the thing is, should they take this administration more seriously? I don't know the answer to that, but that's what the markets are trying to figure out right now.
- [17:46]
Courtney Reagan
Fascinating stuff. Well, coming up, consumer staples, the only market sector higher today. The name's doing the heavy lifting in the grocery aisle. That's up next. And the homebuilders on shaky foundations. What a week of bad data and disappointing earnings means for the housing trade. That's up next.
- [18:01]
John Ransom
You're watching Fast MONEY here on cnbc.
- [18:07]
Courtney Reagan
We'll be right back. Welcome back to Best money. One spot of green and an otherwise dismal day for markets. Consumer staples hanging on to gains despite another down day for Wal Mart. Ken View, Hershey conagra leading the sector higher. Steve, what do you make of this? I mean, some pretty decent moves higher in some of these names that you don't often get a bid on. Not, not at least like this.
- [18:36]
Steve Grasso
Yeah, I mean if you, if you look at them, their performance of their guidance has been good, their earnings have been good, their, their balance sheets are good. When you look at the performance, though, as an ETF on the whole, you know, go back five years, their performance in five years is up 27%. The XLK, which is the technology sector, is up 136% or thereabouts. So you have to be willing to, you know, short term if you want a place to hide and you don't want to go into Treasuries and you want to wait till the smoke clears. Fabulous. If you want to, if you, if you want to go longer term, markets on average go up 10% a year. They have dips, yada, yada, yada. But the place where you're going to get the outsized growth is going to be technology, not Staples. But I can't argue with hiding them for the next couple of weeks slash months.
- [19:24]
Courtney Reagan
Tim, do you find safety here?
- [19:26]
Tim Seymour
I think, I think not only do I find safety, I think there's a breakout coming. I think these are stocks that at least if we remain in a higher volatility environment, and certainly we sketched out a lot of uncertainty. I'm not saying that we're going there and ultimately my broad view on the market is markets are going higher. Having said that, these are companies that have proven that they've got the balance sheet to continue to buy back stock. In fact, Monday we're having Julian Emanuel from Evercore on, who's written a really interesting piece on companies that are low volatility stocks that actually are buying back stock. That's a great formula here. And some of these names also have idiosyncratic stories to themselves. I mean, we know kind of the failings or the story around Budweiser, for example, and why that was such a troubled stock because of their marketing campaigns and things that at least were perceived as missteps. This is a company that's been on a tear. You look at Coca Cola, they just gave you numbers, they're showing you they're actually outgrowing their peers. Even in a segment that doesn't do so well in the US but more broadly foreign. If you look at the story around Mondelez Campbell's, you know, these are stories that I don't think are perfect stories. And Staples came under a lot of pressure on rising input costs and valuations that didn't make sense. But in this environment, I like that trend. And The XLP above 84 is breaking out to all time highs.
- [20:32]
Courtney Reagan
Karen, before we go, I got to turn you on Wal Mart. I mean, to me the action feels overdone, especially yesterday and then again today, selling off. So now down about 9% for the week. What do you make?
- [20:41]
Karen Finerman
Yeah, as I said, yes, I thought the quarter was really good.
- [20:44]
Courtney Reagan
It was.
- [20:44]
Karen Finerman
And I thought the guidance was fine. I don't know why they needed to sort of, you know, go out on a limb when there is a lot of uncertainty. They also did say January was really good.
- [20:54]
Courtney Reagan
Right.
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Karen Finerman
So I think the only thing wrong with Walmart that it was too high going in. And I'm long. I was long two days ago and yesterday and today remain long and I'll be long next week. I liked it all Right.
- [21:04]
Courtney Reagan
Well, there's a lot more fast to come. Here's what's coming up next.
- [21:09]
John Ransom
Digging in on the housing data. A huge week of numbers and a big dent in the home builder trade taking center stage. We'll dive into whether these names can build the foundation for a rebound. Plus, can a slew of earnings next week set the stage for a retail rebound? The options set up ahead of make or break reports from Home Depot, TJX and more next. You're watching FAST MONEY live from the NASDAQ market site in Times Square.
- [21:36]
Tim Seymour
We're back right after this.
- [21:46]
Courtney Reagan
Welcome back to FAST money. Stocks tumbling to end the week as investors grapple with uncertainty surrounding the Trump administration's economic policies and some weak economic data. The Dow losing more than 800 points at its lows. The S and P having its worst day since December. In the NASDAQ falling more than 2%. Small caps closing below their 200 day moving average for the first time since November 2023. The Russell 2000 losing nearly 3% today. Block now trading undertaker XYZ dropping after missing earning expectations. Bank of America, though says it may be time to buy. The dip down 18%. And Hims and her shares plunging after the FDA took semi glue tied off its shortage list. That means the company will no longer be able to manufacture compounded versions of the highly popular weight loss drugs like.
- [22:31]
Tim Seymour
Will Go V. Can we just say, I mean, Square, Block, xyz. Absurd. Okay.
- [22:37]
Courtney Reagan
I mean, you have to deal with this. What are the first one I saw xyz, I was actually, I don't know what the name is yet.
- [22:42]
Tim Seymour
Oh, no, that's, that's what xyz pdq Bide.
- [22:45]
Karen Finerman
That's the name or the ticker that we are. And I always still call it square.
- [22:49]
Tim Seymour
I didn't mean to block.
- [22:49]
Courtney Reagan
I know. Square block. No, I know.
- [22:51]
Tim Seymour
I'm sick of this.
- [22:52]
Courtney Reagan
It's a good, it's a good side.
- [22:53]
Tim Seymour
All right.
- [22:54]
Courtney Reagan
All right. It's been a big week for housing data. Existing home sales fell nearly 5% from December to January, a steeper drop than the street expected. Earlier this week we got data on housing starts and homebuilder sentiment, which dropped to five month lows. All the news has kept homebuilder stocks deep in the red. For more on the state of the housing market, let's bring in Orfi Divangi. Thank you so much for joining us, senior economist at Zillow. We've certainly had a lot of news to go through, but let's talk, I guess about the Existing home sales first. And the disappointment there.
- [23:23]
Orfi Divangi
Look, despite the higher for longer rate environment, I think home buying demand has proven resilient. Existing home sales are still about 2% higher than a year ago. And even the new home sales, you know, you look at the, the way they ended last year.
- [23:39]
John Ransom
Right.
- [23:39]
Orfi Divangi
Also ended on a strong note. Builders continue to make the math work for homebuyers. They're building more efficiently. They're providing incentives for three out of five homes. And if you look at the share of builders cutting their prices, it's lower than a year ago. All of that to say, look, higher. Mortgage rates are higher than they were last year, and yet you're still seeing that kind of activity. I think that's, you know, I think we're making too much of the, the headline number. Remember, these homes that sold in January that are in the report went on the contract in December at a time where mortgage rates were actually rising. Since, I think mid January, mortgage rates have eased. The combination of more sellers this spring, new listings on Zillow are up 12% from a year ago. That, with easing rates later this year should actually make for a more interesting home shopping season than we had last year.
- [24:36]
Courtney Reagan
But the new construction starts also weaker in January than a year ago. That's right.
- [24:41]
Orfi Divangi
So if you look at the data, the January data, it's all about the weather. The weather problems that we had in the south, the unusual winter freeze. You look at the starts. Where did starts? Fall starts fell 19% in the South, 15% in the Northeast, and I think 9% in the Midwest, but they were up 25% on the West Coast. And so, you know, again, it's mostly weather, weather disruptions. Rates have actually eased slightly since mid January. So I think, although rates remain a key factor, home buyers haven't given up on homeownership. And we're seeing, you know, we're expecting activity to actually continue to pick up. Let me, let me add one more thing. Roughly 50 to 70% of sellers end up buying again. Historically, that increase in the number of homes for sale. Right. Has been positively linked with an increase in the measure of homebuyers in the housing market, an increase in search activity. And so that's why we're somewhat optimistic that home sales could actually rebound slowly in 2025.
- [25:52]
Karen Finerman
Perfect. Karen, thanks for being on a Zillow holder, by the way. I love the platform, great business, but you need more sales to go. And I'm wondering what do you think is sort of the magic rate for mortgages or the amount of time that needs to go by to release a significant portion of those stranded houses that people who have low mortgages just can't, can't seem to want to get rid of yet.
- [26:15]
Orfi Divangi
Look, those people are coming back. We have existing homes are up 12% coming on the market, up 12% from a year ago. So those people are coming back. I think what we need is more certainty, more, more consumer confidence, business confidence. You know, a lot of workers are kind of stuck in place right now, not sure what to do with, you know, with hiring, hiring rates lower. You know, we need less economic policy uncertainty. I always say that when people are uncertain about the future, they tend to sit on their wallets. And so we need to, we need to kind of like that, to die down on the policy.
- [26:49]
John Ransom
Right.
- [26:49]
Orfi Divangi
To dial it down a little bit on the policy changes and allow people to kind of move on and live their lives. People are going to move. And I think the home shopping season is gearing up to be a little bit stronger than it was last year. Zillow forecast that home sales should end the year. We should see about 4.11 million home sales this year, a slight rebound from, from the 30 year low that we saw last year.
- [27:14]
Courtney Reagan
Orfi Divangi from Zillow, senior economist, thank you so much for joining us. Steve, I want to get your thoughts here. What do you think buying opportunities ahead of the spring selling season?
- [27:26]
Steve Grasso
Yeah, it's tough to, tough to say. When you, when you look at the mortgage rates as a whole, 63% of US households have a mortgage rate below 4%, 73% have a mortgage rate below 5% and 83%. Obviously it increases have a mortgage rate below 6%. So people live in a mortgage, they don't live in a house. So it's kind of tough to have them move out of a house. So existing home sales are going to be tough. I captured on geographically, I saw that the Midwest was the actual, actually the only area that grew in existing home sales. Lennar has a big presence there. So if you look at demand and where it's strengthening up, I would take a second look at Lennar. And obviously Dr. Horton is the largest home builder. So you're going to get a natural variation across geographic locations. But once again, Court, it all depends on that mortgage rate coming down. And we're a long way from Kansas right now.
- [28:26]
Courtney Reagan
I wouldn't be surprised. Midwest is best, I always say. Why don't you guys believe me sometime?
- [28:32]
Tim Seymour
Certainly especially for music, right?
- [28:33]
Courtney Reagan
Absolutely.
- [28:34]
Tim Seymour
We know that.
- [28:35]
Courtney Reagan
Well, coming up, all the Details on retail ahead of a huge week of earnings. How the options market is shopping the biggest reports right after this.
- [28:45]
John Ransom
Missed a moment of fast. Catch us anytime on the go follow the Fast Money podcast. We're back right after this.
- [29:01]
Courtney Reagan
Welcome back to Fast Money. Retail earnings front and center next week. Home Depot, Lowe's and TJX all set to report. Mike Co has the implied moves on those stocks and a trade on one company that actually could disappoint. Mike, what you got?
- [29:14]
Mike Co
Yeah, so a Home Depot. That one's implying a move of about 4%. That's bigger than the two and a half percent that the company has averaged. Lowe's also implying a move of about 4%, although that's closer to their average, which is about 3.8%. TJX is implying a move of about 3, 3% or so. And now both Home Depot and Lowe's traded well above average daily options volume. Home Depot, unsurprisingly the busier of the two. And the busiest contract in Home Depot with the weekly 385 strike puts that expire next Friday over 1300 of those traded and that included an institutional purchase of 500 and the buyer paid about 670 for those. Now of course the stock did trade lower throughout the day, so those went up in price already. And for those who are inclined to follow and make a bearish bet, I actually think buying 385, 365 put spread probably makes more sense because if we take a look at the historical move for Home Depot, moves to the downside of greater than 5%, which is about where that 365 put resides, are really quite rare. So I think that's a less expensive way to make a bearish bet in Home Depot at this point if you're inclined to lean that way.
- [30:20]
Courtney Reagan
I was just, I was just thinking that Home Depot rarely has these big swings after its earnings. Mike, Wal Mart still getting beaten down after earnings yesterday. We talked to Karen about it a little bit before. What's your take on that one?
- [30:31]
Mike Co
Yeah, you know, this is an interesting one. I was a bit perplexed by Wal Mart, I have to say going into the number to begin with because I mean it was trading probably 38, 40 times forward at that point. And that is back when, you know, most of the street was looking for 5% top line growth. Now they're forecasting 3 to 4%, which net of inflation is really no growth at all. And it's trading even now at probably 34, 35 times forward, which is Very peculiar when you consider you can get better top line growth, better bottom line growth at a much lower multiple and better diversification if you simply bought the S and P. And that's over and above the fact that in the 70% consumer driven economy, consumers are clearly based on the most recent debt and delinquency figures under significant pressure and you know, I mean great for them that they've got groceries and things like that, but you could always buy Kroger 10 times if you wanted that.
- [31:18]
Courtney Reagan
Fair enough. Mike, thank you very much. Karen, are you still in Home Depot?
- [31:22]
Karen Finerman
I am in Home Depot.
- [31:23]
Courtney Reagan
What do you make of Mike's trade here?
- [31:25]
Karen Finerman
It's interesting. I mean it seems like some interesting protection. One thing that stood out to me though in the Walmart call they was patios which I was a little bit surprised. I think that probably would be a nice little thing for Home Depot. I'm not that optimistic given what's happened in the home builders, but this is one I own for the long term care.
- [31:41]
Tim Seymour
Do you ever find yourself in Home Depot?
- [31:43]
Karen Finerman
Yes.
- [31:43]
Tim Seymour
I mean what do you go to Home Depot for? I said, I mean it may not be a fair question here.
- [31:48]
Karen Finerman
Yeah, no, it's nothing. No, there's nothing like embarrassing or anything. No, no, I don't really talk or that sort of thing.
- [31:54]
Courtney Reagan
I don't know.
- [31:55]
Tim Seymour
It's a good point though actually is what cleaning supplies.
- [31:59]
Courtney Reagan
I do like.
- [32:00]
Karen Finerman
I do like tools. I have a toolbox and that's why.
- [32:03]
Tim Seymour
She'S a cool chick.
- [32:05]
Karen Finerman
I would have expected. Allen wrench set.
- [32:07]
Courtney Reagan
Yeah, got a couple of those. They've got cleaning supplies, picture hangers.
- [32:11]
Tim Seymour
By the way, if you don't caulk every six months you could have problems.
- [32:13]
Courtney Reagan
A lot of mold. You're going to have molds. You need those cleaning supplies to clean that up.
- [32:18]
Tim Seymour
A little crack in the caulk. Get in there.
- [32:21]
Courtney Reagan
Courtney, what do you make of. Do you shop? No, I'm just kidding. What do you make of Mike's call here on Home Depot? It doesn't normally have really big earning swings. It's sort of. So if the options are applying that it does, then maybe you're in for some money.
- [32:34]
Courtney Garcia
Yeah. And I agree with Karen on the long term holds here. I think this is something. When you see an aging housing inventory, you see all this demand going towards housing, like longer term that is going to be an opportunity. I think the question is like when is that pent up demand actually going to come to fruition into Home Depot? I don't know if any of this has to do with like the wildfires that happen in LA and the, the idea that more people are going to have to rebuild there, which would be a benefit for Home Depot. So I don't know if that's what some of that call has to do with, but I think that probably will be some of the things that people are looking to see next week.
- [33:00]
Courtney Reagan
I am curious to see if they give us any details on their exposure to Mexico and Canada. I know they, they a lot in what they say North America, but they don't break it out by country. I'm hoping that they start to so we can figure that out a little bit more. Well, coming up, a Baba bounce in one of China's top tech stocks. How to tackle this red hot trade right after this. More fast into welcome back to FAST money. Alibaba delivering gains even in today's sea of red. Shares of the Chinese e commerce giant jumping almost 6% today. The stock up 15% for the week and nearly 77.0% already this year. Meanwhile, the crane shares China Internet ETF now up six weeks in a row. That's the Kwebs longest streak since before the pandemic. And our next guest suggests there's a lot more upside ahead. Let's bring in China expert David Riedel of Riedel Research. Thank you so much for being here with us. Really appreciate it. You know, in October you told Fast Money you were worried about the longevity of the China rally. So it sounds like you're changing your two month tune on this one.
- [34:10]
David Riedel
Just, just extending it a little bit. I'm still worried about the back half of this year and I'm a little bit worried about 2026 given trade war fears and tariffs and things like that. But I think there's a trade trading opportunity here. We were early on our call on being positive on Baba and I think we're going to stick with it here for at least the next few months.
- [34:28]
Courtney Reagan
So why are you so positive? Do you think it's because of Beijing? You think they're going to be more supportive of their markets?
- [34:34]
David Riedel
They really are. They definitely need to develop their domestic capital markets, their equity markets and they're really putting their money where their mouth is. They're making more money available for share buybacks. They're encouraging dividends. The idea that she met with Jack Ma the other day and publicly called him out in a positive way, it's a far cry from a few years ago when Jack Ma was essentially in hiding because he because Beijing was taking potshots at him.
- [35:00]
Courtney Reagan
Yeah, that was sort of exactly my next point. I mean, why is Beijing now seemingly more supportive of these tech companies than they were several years ago? And I think people were relieved to see Jack Ma where there were obviously a couple of years we were sort of wondering where he was.
- [35:14]
David Riedel
That's right. He did go undercover for a little while there. But I think the global enthusiasm following Deep Seat has reminded China that these tech wins can be positive public relations PR opportunities for Beijing. Also, as they see around the world that the external environment is getting a little more difficult, I think they realize they need to have some homegrown technology talent. So they may need to be a little bit more encouraging of their tech bros or their newfound tech billionaire folks that are running some of those companies. I think hence the rehabilitation of Jack Ma.
- [35:48]
Tim Seymour
Yeah. David's Tim, and we've talked about this for years, you and I. I think Jack Ma's research resurfacing from this weekend at Bernie's is extraordinarily important and more than just a coincidence. Talk about, though, the earnings power of Baba and talk about a company that everybody talks about E commerce. I mean, this is, and you know, this is the Amazon of, of China. Their Ali cloud business. The revenue growth there is extraordinary. I mean, to me, this is an earnings multiple story as much as I've said it's not reliant on change in stimulus in China. This is an earnings growth story that I think is underappreciated.
- [36:23]
David Riedel
This has exactly the same earnings dynamic as we've talked about as Amazon, you know, ability to make a tremendous amount of money on their cloud services, their web services. Alibaba is in exactly the same position. Sure, they benefit from a little consumer sentiment improvement. They benefit from a little Beijing activity to help boost the hometown heroes. But Baba is a great business with tremendous profit potential.
- [36:50]
Courtney Reagan
David Riedel, thank you so much for joining us. We'll follow this trade for sure. Steve, what do you make? Is this time to put, put some money to work in China?
- [36:58]
Steve Grasso
Well, as you stated on the intro on this, it's already up 70%. Alibaba. Alibaba is the obvious proxy when it comes to China, but when you look at, you know, a JD or a Baidu, I think it's more based on valuations as well. I think Tim touched on this a little bit. When you look at Baba, it's trading at 21 times. When you look at JD, it's around 13 times. You look at Baidu, it's around 10 times. So the restored relationships with the government, the valuations versus US Tech and obviously the earnings Runway, it's a big deal that they restored those relationships with the government. The government really was the, was the biggest headwind to Chinese related stocks. But if you're looking for the China rebound play, Alibaba's had an incredible run. And maybe you go a little bit further and a little bit deeper into some of those other names that I just mentioned.
- [37:55]
Courtney Reagan
Courtney, how do you consider though, the tensions between US and China when you're looking to invest in Chinese stocks? Is there any risk there of these tensions getting heightened?
- [38:03]
Courtney Garcia
I mean, there obviously is risk, but I think that's probably the thing that people aren't considering is, you know, Trump came in office and people said, oh yeah, China stocks are not where you want to be. And it almost becomes the obvious play. Right. Because people are so pessimistic about it. It's probably a better entry opportunity. This is something we all have to pick our acronyms early in the year. I think all of us have BABA in ours, do we not?
- [38:23]
Tim Seymour
Yeah. I mean BABA was in mine last year.
- [38:26]
Karen Finerman
Yeah. No, where's mine? And guys too.
- [38:31]
Courtney Garcia
This is something I think their AI story clearly is paying off. And you're seeing their revenue cloud growth was up like 13% in here. But also when you look at the E commerce business, the idea that that was coming in strong means that the Chinese consumer probably is coming in stronger than people are giving them credit for. Right. So I think that's what you want to look at when you look at a stock like this. I would try to put away some of the political headlines. Yes, there are risk, but I think you're ultimately going to be investing in this company.
- [38:53]
Karen Finerman
Yeah.
- [38:53]
Courtney Reagan
The Chinese consumer obviously is something everyone's watching closely. I don't think we know the full story there yet. Well, coming up, security blanket stocks. The names helping each of traders sleep at night in this topsy turvy market. That's up next. And here's a sneak peek at the Kramer cam. Jim's chatting exclusively with the CEO of Equity. Catch that full interview at the top of the hour on Mad Money. But more fast back into. Welcome back to Fast Money. Stocks sliding to end the week. The Dow and S and P seeing their worst day since December. With the turbulence we've seen, we wanted to ask the the one name that will help them sleep through the weekend. Karen, kick us off. What name will bring you comfort? What's your weighted blanket?
- [39:42]
Karen Finerman
Well, a sleeping pill. It's very clear. I had to look for One of, one of the, you know, the pharmaceutical companies say. Oh, and Pfizer Sonata. It's not really my drug of choice, but I would go with that something Sunday night, you know.
- [39:57]
Courtney Garcia
Okay.
- [39:58]
Karen Finerman
That I'll sleep better. All right. I took it very, it is very literally, very literally.
- [40:02]
Courtney Reagan
Steve, what's your melatonin? What's your sleeping.
- [40:07]
Steve Grasso
Yeah. So you always get an outsized return on tech as, as we've all seen on the show. I'm going with Apple as we started off the show up 11% since that deep sea headline. While the rest of the space is either flat or down substantially. You have a great brand, you have recurring revenue, you have a services business. Services revenue that's, that's increasingly a bigger percent of total revenue. They have a 2.35 billion installed base which can only help the services revenue that comes out of it. It's seen as a refuge for the entire market and it's a staple. So that's the way I sleep better at night.
- [40:50]
Courtney Reagan
Okay. Sleep better with Apple. Karen likes Pfizer.
- [40:52]
Courtney Garcia
Courtney, I chose commodities here. I think one thing that the markets have been continuing to weigh out is inflation and that inflation really, it's likely not under control at this point. I think that's what the bond markets have been telling you for months here. And that's where commodities can be a really good play as a hedge. And I think also as you are starting to see some optimism coming with China and if they are actually coming back online, that could continue to increase commodity prices and potentially inflation. So that's actually something I would have as a head share especially when markets are down like they were today.
- [41:18]
Courtney Reagan
Okay, Tim.
- [41:19]
Tim Seymour
J.J. and it's, it's been non correlated markets. It's had its own issues. It's been to me a company that was undervalued. But the talc resolution looks like there may be some resolution. You don't have to rely on that. There's also an announcement they made that an investor, an analyst essentially Investor day where they talked about developments in Medtech and a couple of products that actually had been on hold that are now back in the market. Stock looks like it's getting up near really a three year breakout level. And again I think it's, you know, if you're worried about markets here, JJ is not trading on market dynamics. That's something allows you to sleep.
- [41:50]
Karen Finerman
Do they have sleeping pill?
- [41:51]
Tim Seymour
I'm sure they have a few but.
- [41:53]
Karen Finerman
You know, for a friend.
- [41:56]
Courtney Reagan
Yeah. I can't recommend stocks but if you haven't tried a Weighted blanket. I mean, amazing. I cannot.
- [42:01]
Tim Seymour
A weighted blanket?
- [42:02]
Courtney Garcia
Yes.
- [42:02]
Tim Seymour
What does that mean?
- [42:03]
Courtney Reagan
What? It's like a heavy blank blanket. Like mine weighs 15 pounds.
- [42:06]
Courtney Garcia
So, like it feels like a hug.
- [42:07]
Tim Seymour
Be suffocated.
- [42:08]
Courtney Reagan
No, it's amazing. You got to try it. Don't like to try it. It's amazing.
- [42:11]
Tim Seymour
All right.
- [42:12]
Courtney Reagan
Anyway, your final trace. It's time for the final trade. Let's go around the horn.
- [42:29]
Steve Grasso
Steve, kick us off Teva Pharmaceutical with the UNH headlines. The negative headlines today. It made me think about Teva, which has had its own legal challenges. Maybe this gets pushed aside with the UNH challenges and people start to look favorably on the stock.
- [42:46]
Courtney Reagan
Taba, Tim J.
- [42:48]
Tim Seymour
And Jay. But I feel like I need to change my finances. I'll trade to a weighted blanket anyway.
- [42:53]
Courtney Reagan
Go get is going to change your life. Karen.
- [42:54]
Steve Grasso
Yes.
- [42:55]
Karen Finerman
Starting the big retail earnings next week. Tjx. I like it.
- [42:59]
Courtney Garcia
And Courtney Garcia, Alibaba, you were saying, should you still be invested here? I would say yes. A lot of people are still under invested in China. Take a look at this.
- [43:05]
Courtney Reagan
Thanks for watching Fast Money. Mad Money with Jim Cramer starts right now.
- [43:10]
Karen Finerman
Thanks.
- [43:13]
Courtney Garcia
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of cnbc, NBC Universal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Fast Money disclaimer, please Visit cnbc.com fastmoneydisclaimer.