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CNBC's "Fast Money"
The Fed’s Latest Rate Decision … And Uncertainty Around Oil Prices 6/18/25
00:42:42
The Fed keeps its interest rate steady, and one top bank analyst weighs in on the impact to financials. Plus, why Wall Street sees even more upside for Oracle, and the next move in energy as the Israel/Iran conflict throws oil prices into question. Fast Money Disclaimer
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- [00:02]
Courtney Reagan
Live from the NASDAQ marketsite in the heart of New York City's Times Square. This is fast money. Here's what on tap is what's on tap. Tonight, the Fed in focus. The central bank holding steady on rates but raising its forecast for inflation and cutting its outlook for growth. What it means for markets and for Chair Powell and Robo taxi route shares of Uber and Lyft taking a tumble on headlines out of Waymo. What the rollout of Robo taxis in New York City could mean for the future of transportation. Plus, banks get a boost on hopes for easing regulation one and analyst sees even more upside for Oracle and what's next for oil as Mideast tensions remain high. We'll talk to RBC's Le Macroft to get some answers. 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, Dan Nathan, Guy Dami and Michael Kantopoulos, who is deputy chief investment officer at Richard Bernstein Advisors. So we will start with all of the action after the Fed's latest meeting. Stocks losing steam in the final minutes of trading while the NASDAQ managed to hold on to a stock small gain. Both the S and P and the Dow dipped into negative territory. All had been up a half a percent or more earlier in the session. Yields, meanwhile, ended well off the lows of the day with the 10 year treasury trading at 4.4% at its peak. Now the moves coming after the Federal Reserve's latest meeting. While the central bank held firm on expectations for two rate cuts this year, new economic projections signaled higher inflation and lower growth. Guy, what do you think about what we heard today and what Chair Powell had to say?
- [01:30]
Guy Adami
Well, again, great to have you here in terms of what you just said. I think that's the story. And they're basically the Fed is saying these tariffs, you want to go down this road, that's fine. What are you going to see is higher inflation? I think they raised it to 3%. You're going to see lower growth down to 1.4%. And I think it's all on the back of the tariff concerns, which are probably somewhat warranted. And I think the market sort of reacted in kind. We'll see what happens on Friday when the market reopens. But I do think you're right to bring up the bond market. I still think that's the story and I still think rates are going higher.
- [01:58]
Courtney Reagan
That has been the signal really, Dan. Right. I mean the bond Market is, has been obviously touchier over the years, except.
- [02:04]
Dan Nathan
That didn't move today. I mean, when you think about it right now, I mean, over the last few days we've seen up or down 5 basis points in the 10 year. So it's not kind of signaling anything, you know, particularly worried one way or another. I think that a lot of folks might not have expected to see that kind of take down in growth. Right. And the expectations of prices kind of higher. I thought Fed chair Powell seemed like he had it all under control. I don't think by any means. The sort of, the questions out of the pool I thought were really aggressive. You know, it's like, you know, as much as investors want to see them get a bit more dovish, it seems like the press also wanted to see that happen. And he kind of just hung in there. I mean, I think it's hard to kind of look at what's going on other than oil, take the geopolitics out of the way and say that inflation has not gone in the direction that they want it to go and it's going to be there pretty soon. So to me, I think the expectations for only two 25 basis point cuts this year, I think that's the thing that's really frustrating people. I think that they'd like to see what we had last year in the last few months, a 100 basis points.
- [03:01]
Courtney Reagan
Michael, do the expectations feel appropriate to you? With everything that's going on in the world? It's kind of hard to take out geopolitics, is it not?
- [03:07]
Michael Kantor
I mean it's very hard to take out geopolitics and obviously the tariffs fit within that as well. You know, I think what, what we've seen is that the Fed is obviously very backward looking, despite the fact that Powell said that they're forward looking and need to look forward. But he also out of the same breath said we need to see how the data comes out over the next couple of months, which ergo means he is, he's incredibly backward looking. And so listen, I think we can agree that inflation is likely not fully here from the tariffs and that you're likely to see higher inflation pressures as you get towards August and September. Now what that ultimately materializes as no one knows, it could be 4%, it could be 4 1/2 percent. I think if I was in the audience that's what I would have asked. I would have said what happens if inflation goes north of 4 while unemployment is going up? Then what do you do? What do you do? In a stagflation area environment. And I think we could really be living in that come later this fall.
- [03:58]
Courtney Reagan
And what can they do?
- [03:59]
Tim Seymour
I don't know. That's actually because I mean that's kind of a bold claim right now even though it wasn't a bold claim six months ago. I think it's fair by the way, you know and welcome Courtney. But I tell you what I think today. Powell first of all played it safe. Sounds like the Fed's taking the summer off. The one thing that was a little surprising to me is their tolerance for inflation at a 3.1% PCE. I mean the sense I get is that they're strangely a little bit more comfortable with higher inflation or tolerant of it or accepting of the reality. And then there was a point towards the end of the day which I think also put some pressure at least in his presser I should say. I mean when he started hitting comments that were hitting the tape, one of them was labor market isn't crying out for a rate cut and going to learn more about tariffs over the summer. Those two things tell me we're not doing anything anytime soon. So we're still at two cuts expected for this year. It's likely it could be one. But this is a Fed that is going to do zero. So if the market was expecting that, I don't think so. I thought it was interesting that semis closed higher on the day, you know, semiconductors were up 40 basis point. The rest of the market closed down small. Not a big deal. But the Vix collapsed. I mean 6, 7% lower on the Vix in the middle of war and whatnot. I think the market wants to go higher.
- [05:15]
Courtney Reagan
That's really interesting guy. I was just kind of thinking about energy and how it plays into all of this when we have so much up in the air with what's going on in the Middle east but is at least when consumers see that price of gas and if that fluctuates much higher that's going to scare them. That also then could play into growth. I mean how do you separate all this out or how do you put energy into the mix here with this?
- [05:32]
Guy Adami
You know we talked about it last night. It's a fair question. What we've learned and I've learned the hard way over the years is geopolitical rallies in oil are typically pretty short lived and I think you're probably seeing it now the other side of that equation, if something were to happen and we said it last night, for example, Straits, her muse closes or something to that effect that obviously has ramifications. And that's when you could see oil go from $70 now north of $90. And then that's a whole different, I think, equation. But short of that, I don't think oil is a story that people like us typically, or me, for example, want to make it out to be. I think the energy stocks are cheap, but I think the commodity is probably where it should be.
- [06:08]
Dan Nathan
Mike, you think it's safe to say that if PC went to 4%, that would be, I don't. Transitory? I don't know. I mean, just, you know, if you think about what are some of the near term pressures, that sort of thing, I mean, that's a word we haven't used in a long time.
- [06:20]
Michael Kantor
I don't think it would necessarily be transitory. Remember, everybody thought the oil embargoes of the 70s were going to be transitory. Then of course they became persistent. And so what tends to happen with inflation is as inflation goes up, everybody thinks it's transitory, but then it builds in higher inflation expectations in the future, which drives up prices for a much longer period of time. And, and so I'm not entirely convinced that tariffs or, you know, even a short term spike in oil, given what's going on in the Middle east is necessarily going to, to be transitory. The other thing I'll just throw out there very, very quickly is, remember, a tighter Fed, if you believe that the Fed is tight right now, should actually beget lower long term yields, not higher long term yields because the implication is that they're slowing long term growth and inflation by keeping the front end very elevated. So just something I want to throw out there is I think it oftentimes gets mistaken that oh, if the Fed cuts rates, rates are going to, you know, rates are going to fall across the curve. That's not the case. And they call them fall on the front end, but not necessarily necessarily in the back end.
- [07:16]
Courtney Reagan
Michael, if we're not feeling the effects yet of tariffs, when do you think they will be in play and how late will the Fed be potentially to the game if they're data dependent and backward looking?
- [07:25]
Michael Kantor
Yeah, I think that it's reasonable to expect right now. Right. We're in a sort of a first in, first out type of economy where you know, you front loaded inventory into the first quarter, you're selling that inventory now which hit before tariffs and you likely have to work that through over the course of the summer to ultimately be retailer or manufacturer, whatever it may be, to start to raise rates. And that probably happens sometimes in August, September, which means the Fed catches on to that data. September, October, which means, you know, it's later, much later this year before they really start addressing, you know, potentially higher inflation or not at all. Again, the question for me becomes almost does the Fed want some amount of demand destruction to help them with the inflation mandate? Are they, are they actually banking on that? I think they may, they may need to do that.
- [08:12]
Tim Seymour
Well, they want the labor market to fall. They don't want it to fall apart, but they want to see it falling apart. And I would just get back to that quote. I mean, right now he's saying, I'm looking at the job market, this is Powell, and I don't see any reason to cut. And this seems to be back to be the more important side of their mandate. Again, my, my assessment of today was I'm comfortable with slightly hot inflation because I know tariffs are there, but I think they're going to damp that. I think Middle east war damps that. I think there are dynamics that are also mildly inflationary from higher oil prices from that war. Until I see the labor market falling apart, however, I don't feel the need to lean on that side of my mandate. And you know, so that's equity negative. I mean, it's net equity negative. If you believe that you need the Fed to kind of goose markets here. But, but what we've all said, and we would all say, and I know Michael would say this is the kind of stuff they talk about every day, I think, but the growth scares the bigger issue here. So if we do have stag inflation, absolutely, the market is not priced for that right now. The market's resilience is something that I'm willing to say is, is, is somewhat tied to economic, that also looks through tariff headlines and says we're not going to get half of those, those tariff realities.
- [09:15]
Courtney Reagan
As a person with baseline anxiety, it's pretty phenomenal to me that the market is hung in here. But for more on what we learned today from Fed Chair Jerome Powell to a man that was in the room, let's get to Steve Liesman. He's still in Washington. He's got the details. Hey, Steve, what else did Mr. Powell say that really piqued your interest today?
- [09:31]
Steve Liesman
Well, I think to me, the warning to the markets in his press conference essentially that he were not out of the woods when it comes to tariff inflation, that he does see a meaningful amount of inflation coming in the months ahead. Let's listen to what he Said.
- [09:49]
Dan Nathan
Every outside forecaster. And the Fed is saying is that we expect a meaningful amount of inflation to arrive in coming months and we have to take that into account.
- [10:00]
Steve Liesman
I thought that the projections were also interesting. They downgraded GDP again, down 3, 10 to 1.4. Unemployment ticked up again. That's the third forecast in a row. Core PCE ticked up again, third forecast in a row. And the Fed funds rate unchanged at 3.9%. But God, I think that's a lot like a placeholder. You fill it in because you have to fill it in for the test. But I don't know if you mean it. This is the second forecast in a row the Fed has predicted a more stagflationary outcome of weaker growth and higher inflation. And at the same time, power was clear. The forecast suffered from a huge amount of uncertainty.
- [10:35]
Dan Nathan
We haven't been through a situation like this and I think we have to be humble about our ability to forecast it. So that's why we need to see some actual data to make better decisions. We'd like to get some more data and again, in the meantime we can do that because the economy remains in solid condition.
- [10:52]
Steve Liesman
I'll associate myself with the remarks of Mr. Seymour where he said, yes, all this raises questions about whether the Fed can, can it feel confident enough in the inflation outlook to meet these market expectations of a first rate cut in September. Courtney, I'm just not sure that the Fed chair took his arms around the market today and said, guys, I got you in September. I think he put his arms around the market, says, I don't know.
- [11:17]
Courtney Reagan
What do you make of Dan Nathan's comments that he sort of thought the press was pretty hard on the chair today. Really pushing for a little bit more.
- [11:23]
Steve Liesman
I mean, look, what we're trying to do is figure out what he knows and what, what he's thinking right now, even while things are moving. So I think we did our job, I think he did his job and I think it's all fine. I don't know. I'm amused that Dan has sympathy for the Fed chair, but he's a grown up, he's been at this job for quite a while. And I mean, at least we didn't call him dumb.
- [11:46]
Courtney Reagan
Of course not. Of course not. Steve, thank you so much for joining us. Appreciate it. I know you hustled over to be with us tonight, guy.
- [11:54]
Guy Adami
You know, I think the question comes down to what potentially has the worst outcome? Being too early and accommodative or being too late and missing it. And I Don't know the answer to that, by the way, but it seems as though they're going to sort of hedge on being too late because of all the things they see.
- [12:10]
Tim Seymour
So I think because they like to be too late, but it could be a problem. Too much to do. Yeah, right.
- [12:17]
Dan Nathan
I just thought the press was kind of beating the same drum, like they were kind of hitting the same question. That was my only point. I didn't think they were particularly hard whatsoever. I do find it really interesting because, you know, a year, I guess it was September, right. When they did that 50 basis point cut, the first I think since the start of COVID they were really worried about the labor market. That was the. They went to patient. Yeah. So they went too hard. A lot of folks thought that they did. Right. So we had 100 basis points towards the end of the year and now I think, to Michael's point, and I think a lot of us like what would be the conditions in which they do it? Because they can or because they have to. Right. And in those scenarios, if they have to, because you see the labor market weakening, you see growth weakening, you see persistent sort of inflation. Well, that's a situation that I think is really hard because if they go cut another hundred basis points and we're at three and a half percent on Fed funds at the top, I don't know what that does. I mean, if anything it could stoke inflation.
- [13:09]
Tim Seymour
Did anybody want to hear, you know, we're near to a cut today though. I mean, it gets back to ultimately what, you know, I don't know that the market wants to hear that. I know the market loves the Fed and is used to, is been reared on more Fed than less Fed, but if we took out tariffs and if we took out war and we were left with the labor market we have. I know those are big ifs, but I mean, on some level it is and it's not. We didn't have war a week ago. We didn't necessarily. We still don't really know what's going to happen on July 9th. We still don't really know where a lot of these tariffs are. So would we be pulling for a rate cut here and outside of that's what markets want? I don't think so. And I think the Fed did what they had to do.
- [13:46]
Courtney Reagan
We're going to move on here to a sector that is obviously largely affected by rates. Bank stocks, meanwhile, did hold on to their gains after this Fed decision. And there was also news that the central bank is considering easing capital requirements for big banks next week. So for more on that, let's bring in Christmas Marinac. He's of Janney, Montgomery Scott. Chris, what do you make, I guess, of what the Fed chair had to say as it pertains to your coverage to the banks? What does it mean now that we know a little bit more maybe about what the Fed is thinking today than say we did yesterday?
- [14:16]
Chris Marinac
So, Courtney, I think that the higher for longer rate environment benefits the banks. They can have a higher spread. I think that the deposit costs have already come down. If anything, I think the lack of certainty that the Fed has is telling the banks to continue doing what they're doing, which is a very careful lending setup. It's a very slow loan growth. That's the only bad news that we see. Credit costs continue to behave well. I think there's no change. So to some extent no news is good news for these companies.
- [14:44]
Courtney Reagan
What about on this SLR change or potential change? I mean, what does that mean to your coverage universe? Does it free up more capital and who benefits the most?
- [14:53]
Chris Marinac
Potentially, it really helps the large 8G SIFI banks that are trading Treasuries. Yes, they could hold more Treasuries down the road, but ultimately I think it facilitates trading and activity to create more liquidity, which is sorely needed. You know, for the last several years we haven't had the proper trading liquidity in Treasuries. It's created these dislocations day to day and week to week when you have volatility. And so the SLR is going to help facilitate that. I think Jamie Dimon covered it well on his April earnings call that it really helps to trade and helps clients accommodate. It doesn't necessarily mean the bank's going to hold more Treasuries over Chris. Banks hold more.
- [15:31]
Tim Seymour
Yeah. Chris, I share your view. I think this is your view that big banks look pretty good here. I think they do. And I think actually there's a number of forces but help to oversimplify this because it's not this simple. Of the three, whether it's investment banking and sales and trading activity or net interest margins or a regulatory tailwind, which of these are the most important for you in terms of your outlook and your ratings and what we should all be looking at here.
- [15:56]
Chris Marinac
Sure. Well, spread is the biggest dollars, Tim. So I think spread is the first. I think investment banking would be would be next. And I think the trading is right there with investment banking very much a close third. You know, the reality is the banks still make a lot of money on their regular way deposit and loan taking. And I think that even though we have competition from the outside world in private equity, I think that there still is a fair amount the banks are doing with their balance sheet. And frankly the low cost of funds has always been the competitive advantage that these banks have.
- [16:26]
Guy Adami
Chris, understanding that the carry is probably not the best constructed etf, but what do you make of the underperformance of these small and regional banks compared to the larger banks that you and Tim were talking about?
- [16:36]
Chris Marinac
Sure Guy. I think it has a lot to do with those medium sized banks. While they're taking share and making a lot of money, they're just not sexy. They're not growing revenues as fast as other parts of the financial ecosystem. I think it has more to do with the simplicity that investors would rather chase crypto and other areas that are non regulated. And at some point we're going to come back to the regulatory side because I think the easier regulatory environment is going to help these banks merge. It's going to help them do better and have less onerous rules and regs that have been constraining them the past five years. But it's just going to take time for investors to warm up. I think a lot of it goes back to loan growth and the fact that it's not that attractive to see. These are just slower growth late stage companies. They're not as growth oriented as many other parts of the marketplace.
- [17:22]
Courtney Reagan
Chris, before we let you go I was going to ask where you're thinking on bank M and A. You sort of mentioned it there. With the possibility of lower regulations now that some of these seats have been filled. Who benefits in your space?
- [17:35]
Chris Marinac
Sure, I think you're medium sized banks who can consolidate and create more 40 and 50 and 60 billion dollars banks is really where the action is going to be over the next two years. We probably see a few of the large regional banks marry. It'll be interesting to see what Wells Fargo does now that they can take on more ass. Will probably be simply putting liquidity to the work for a while. But I think the M and A is going to be much more of a mid cap and smaller cap arena as you really consolidate that end of the industry that is going to continue to slowly take hold. We had a deal this week, we have a few that have lined up in the recent months but it is still not anything seismic like we have seen among big bank to bank. I think a couple of those may take place but it is probably next year's business.
- [18:19]
Courtney Reagan
Got It. Chris, thank you very much for joining us here this evening. Michael, what do you make about sort of the general financials space and the beneficiaries potentially in the space based on Fed policy?
- [18:29]
Michael Kantor
Yeah, we actually like the banks at the moment. You know, out of all the cyclical risk out there, the banks are what we would call chicken cyclical or low beta cyclical.
- [18:38]
Tim Seymour
Chicken cyclical.
- [18:39]
Michael Kantor
Chicken cyclical banks and industrials, you know, versus a high octane cyclical like energy for example. Right, so we like the banks. Listen, we think earnings growth is likely going to slow pretty meaningfully throughout 2025 from 13, 14% in Q1 all the way down to sort of 2 to 3% by Q4. That's not terrible, that's not an earnings recession. The banks should do okay in that sort of environment, especially if we're a little bit off and earnings growth ends up a little bit higher than we expect. You have deregulation, you've had a much deeper yield curve of helping spreads to Chris's point. And so, you know, in terms of what we like within the cyclical world, I'd much rather own financials than say, you know, techcom Services and discretionary.
- [19:23]
Courtney Reagan
It's interesting though, coming into the year it seems like everyone thought the banks were just going to be huge beneficiaries of sort of changes in policy out of Washington. We haven't really seen it yet though.
- [19:30]
Dan Nathan
By the way, if we have 13% earnings expected growth down to 2 to 3%, this economy is going to have a real problem. I mean like just think about that. It might not be an earnings recession, but it's going to be a recessionary economic environment. Like make no mistake. And again, maybe you're just kind of, you know, throwing those names out in a chicken sort of fashion. I mean we can all agree on that. I mean like that would be an absolute disaster.
- [19:53]
Michael Kantor
But I don't know if it would be a disaster. I don't think it would be a disaster.
- [19:57]
Dan Nathan
We came in with 13% expected EPS growth year over year for the S&P 500, Michael, saying by the end of the year it could be down to 3%.
- [20:03]
Michael Kantor
But take, but take 2022, right? 2022 you had three and a half percent unemployment. Right. Which is very, very low. We were full employment. It wasn't an economic disaster at all. And earnings growth declined. We did have a bear market, negative 10%. You did for sure. And so you can have a bear market without being an economic disaster though. So from the economic, remember you got to Separate economics. Right.
- [20:23]
Dan Nathan
The market profit. Yeah, but the market's going to stiff that out ahead of time. What I'm saying is, is like, if that's the anticipation, then you're going to see a much weaker S&P 500 to see margins that are at peak right now collapse.
- [20:36]
Michael Kantor
100% agree with that.
- [20:37]
Tim Seymour
You guys, you ever been chicken Cyclical.
- [20:39]
Courtney Reagan
See that?
- [20:40]
Guy Adami
You know, I've been a number of different things. Chicken cyclical, probably.
- [20:43]
Courtney Reagan
Yeah.
- [20:44]
Tim Seymour
I'm just trying to figure out what it is.
- [20:45]
Courtney Reagan
Turkey cyclical.
- [20:47]
Tim Seymour
Everybody's got a time and taco.
- [20:48]
Dan Nathan
Chicken tacos.
- [20:49]
Courtney Reagan
Yeah. You know, you know who's never chicken? Eamon Jabbers.
- [20:52]
Guy Adami
No, no, stop this.
- [20:54]
Tim Seymour
Nice segue.
- [20:54]
Courtney Reagan
Meantime, NBC is reporting that President Trump is currently in the Situation Room meeting with the Security Council to discuss the Israel, Iran conflict. So CNBC's Eamon Javors has more. What have we learned? Amy, this is obviously a very serious and ever changing situation.
- [21:08]
Eamon Javers
Yeah, absolutely. Courtney. We don't know what options the President's considering in that Situation Room meeting, which, as you say, is ongoing at this hour. What we do know is that the president held a press availability shortly before the Situation Room meeting this afternoon. He was doing a photo op with the Italian soccer team Juventus in the Oval Office. He took some questions from reporters there, and he was asked if he has decided what to do in terms of US Involvement with Iran. Here's what he said.
- [21:37]
Tim Seymour
I have ideas as to what to do, but I haven't made a final.
- [21:40]
Michael Kantor
I like to make the final decision.
- [21:41]
Tim Seymour
One second before it's due, you know.
- [21:43]
Michael Kantor
Because things change, I mean, especially with war.
- [21:47]
Eamon Javers
So, Courtney, you heard him say, I like to make the final decision one second before it's due, as in, you know, due, like a homework assignment would be due. That to me, just sort of listening to the President's words implies he's considering some sort of action that requires a deadline, perhaps a military deadline, where he's up against a go or no go decision that's coming up relatively soon. He says he wants to wait. He seemed awfully ambivalent in that press availability, Courtney, in terms of the prospect of striking. He said, you don't necessarily want to fight, but sometimes you have to. And he underscored his bottom line here, which is that the Iranian regime cannot be allowed to get a nuclear weapon.
- [22:25]
Courtney Reagan
Courtney, didn't he also say something like, no one knows what I'm going to do. I don't even know what I'm going to do? Which again, sort of suggests that maybe he's trying to make a decision between two things and he has not figured out what it is until that deadline comes, like you said.
- [22:37]
Eamon Javers
Yeah, he's, that was earlier today at a separate press availability. He was raising some flag poles over at the White House. Talked to reporters then as well. And he said, you know, nobody knows what I'm going to do. Exactly what you just said, I don't even know what I'm going to do necessarily. So the idea here is that this is a tough decision for this president. This is a president who campaigned against getting in what he called forever wars in the Middle East. He has a substantial part of his MAGA contingent who values that promise. But the president today was asked about people in the MAGA political movement who oppose military action in Iran. And he said, well, my supporters are, for me, that is, he seems to suggest that they'll be with him even if he decides to take this kind of action. And we don't know ultimately where he's.
- [23:21]
Dan Nathan
Going to land on him.
- [23:22]
Courtney Reagan
Eamonn, thank you very much. Keep us updated, of course, as you hear more. I mean, Tim, you sort of, I always go to you as our international expert here. I mean, ahead of a market holiday tomorrow, tomorrow, and then coming back on a summer Friday, effectively knowing the president's in the Situation Room, if you're an investor, what should you be prepared for in an outcome that the president seems to suggest he doesn't even know?
- [23:44]
Tim Seymour
You're not going to be short oil. You're going to, you know, I mean, I know it's obvious, but I mean, if you think about where we were a week ago going into that weekend, I think some of the same playbook. That's why I was surprised that the VIX collapsed a bit today. Again, I think we have a holiday tomorrow. I think Friday could be a very quiet day. I think people are trying to take two days. And I think this is a case where there are risks out there that, that the market hasn't really anticipated. I think the risk really, though, would be to the commodity space. Right now, the US Equity market is not really processing what this war in the Middle east means because it does not know. Supply disruption is one thing. Near term inflation expectations are a big deal because even though you strip them out of your core cpi, they are a big deal. But right now, now we just don't have it till we have disruption. This is a headline.
- [24:32]
Courtney Reagan
Well, coming up, can Oracle keep climbing? Shares up 50% in the second quarter and analysts see even more upside for the stock. The details on that call. Next. But first, Waymo taking a crack at the concrete jungle. The details behind the Alphabet units rollout in the Big Apple and what it means for Uber and Lyft. More on that when Fast Money returns. We're back into. Welcome back to Fast Money. Uber and Lyft shares hitting the brakes after Alphabet announced its Waymo taxis are coming to New York City. Kind of shocks me, but with a twist. Starting in July, the cars will operate with a human driver while the city's Department of Transportation weighs Alphabet's autonomous ride hailing permit application. A fully autonomous fleet would require a change in state law. No easy feat. Waymo is currently in operation in select cities in California and Arizona and is partnered with Uber in Austin and Atlanta. This is fascinating, Dan. Nathan, what do you think about this? A real threat to an Uber and a Lyft?
- [25:36]
Dan Nathan
Not yet. I mean, look, you just mentioned the regulatory thing. That's gonna be difficult. You also think about just a density like this is going to be kind of difficult, you know, when you think about the activity today in the market. So you just mentioned Uber and lift down. I'm surprised, like Tesla wasn't down on this. You know, this just kind of shows once again that, you know, Waymo, excuse me, is pressing this advantage that they have right now.
- [25:57]
Tim Seymour
Okay, grab a sip there.
- [25:58]
Guy Adami
You know, Cheers. We do. What did we call those things? We put letters together, make words, acronyms. Acronyms.
- [26:04]
Tim Seymour
Yeah.
- [26:05]
Halima Croft
Uber is letters together.
- [26:09]
Guy Adami
You and my tube. And we've seen these Waymo headlines before with Uber. We've seen the salt before and it typically comes right back. Stifel just initiated Uber, I think on the 11th of June with $110 price target. I don't know if it gets there, but I think Uber goes higher from here.
- [26:24]
Courtney Reagan
Well, there's a lot more fast to come. Here's what's coming up next.
- [26:28]
Chris Marinac
A prophecy on Oracle shares, why analysts see even more gains ahead even as the tech giant trades at all time highs and how you should play the stock. Plus, all eyes on crude prices as the Middle east conflict weighs on the oil patch. What one top energy analyst sees in.
- [26:46]
Michael Kantor
Stock door for the sector ahead.
- [26:49]
Chris Marinac
You're watching Fast Money live from the NASDAQ market side in Times Square.
- [26:54]
Michael Kantor
We're back right after this.
- [27:05]
Courtney Reagan
Welcome back to Fast Money. Stocks ending the day near the flatline after the Fed left rates unchanged. With the central bank signaling it's no hurry to cut rates. Shares of recent IPO circle surging after the Senate passed the genius bill which would establish A federal framework for US Dollar pegged stablecoins Coinbase also higher on the news steel docs steel stocks also on the radar after Japan's Nippon Steel completed its acquisition of U.S. steel. President Trump approved that merger last week after the companies signed a national security agreement with the US government. And shares of Gilead jumping as much as 3 1/2% after the biotech company won approval for its twice yearly shot to prevent hiv. But shares closing the day unchanged. By the way, you won't want to miss the CEO of Gilead on Squawk Box Monday at 6am Eastern Time right here on CNBC. And shares of Oracle higher after Guggenheim upped its price target on the name to 250 bucks from 220, saying revenues could accelerate, quote in a big way in fiscal 26 and 27 and that operating income will likely follow suit. Tim, what do you make of this call?
- [28:10]
Tim Seymour
Well, I'll tell you what, again, and we've said this, if you counted Oracle out, you're in a lot of trouble if you certainly bet against them. And what was so extraordinary about their first quarter of double digit revenue gains is it was organic. So we know Oracle has grown through acquisition over the years, but this was organic. So double digit revenue gains for the first time in over a decade. So the sense here from the analyst community is I think that this is you're about to have some serious follow through and this is, you know, if you want to get really excited and a lot of the, a lot of the analysts have, this is kind of end to end a stack. I'm quoting Mizuho here. In other words, this is a case where they see it and they, they can start to interpret off of essentially what you had in that first quarter. So it's not cheap and you have to believe this narrative to jump into the stock here.
- [29:01]
Courtney Reagan
Guy, it's had a really nice run.
- [29:02]
Guy Adami
You think this can continue that a great run. We mentioned the acronym that was the oh and the hope trade a few years ago and you were early though, by the way. Tim, as you know, if you're long Oracle here, you can die a happy man. Courtney, as you know, yes, you can. I know your folks are watching right now, so they're on it as well. But look at valuation 26 times is not where Oracle typically lives. But if you believe everything that you're reading, maybe 26 times as reasonable, I think it's gotten a little ahead of itself.
- [29:30]
Courtney Reagan
All right, fair enough. Well, coming up, the next move in energy after a big jump for crude With Middle east conflict. Conflict could send oil next. Don't go anywhere. Fast money is back into. Welcome back to Fast WTI crude settling above $75 a barrel for the first time since mid January as uncertainty around the Iran Israel conflict rages on. President Trump earlier today saying he has not made a final decision on whether United States will directly strike the Islamic Republic, but that Iran does want to come to the negotiating table. So for more on the oil market volatility, RBC's global head of commodity strategy is Lima Croft. She joins us now. She's also a CNBC contributor. Halima, I understand you were just at a roundtable sort of discussing all of this in the Middle east tensions. Where, where are you thinking right now that policy is sitting between where the United States will get involved and not.
- [30:30]
Halima Croft
I can tell you there is a, almost a sense, it's like a, a 5050 call on whether President Trump will authorize U.S. airstrikes on this Fordo enrichment facility. That is the enrichment facility that the Iranians use for their highly enriched uranium, the close to weapons grade uranium. Their high speed centrifuges sit in that facility. Israel is not thought to have the capabilities to disable that facility. They will need the United States. And so there really is like really a lot of speculation that we are going to become involved in this conflict and that could in a very different place in terms of regional escalation.
- [31:07]
Courtney Reagan
What does it mean for the price of oil if we're sitting at 50, 50?
- [31:11]
Halima Croft
Well, here's the thing. If we do get US intervention into the conflict, that raises a prospect of, you know, does the regime in Iran decide they are facing an existential survival crisis? Do they deploy their short range missiles? They have significant stockpiles remaining of short range missiles that can be used to target regional energy facilities in the Gulf. Do we see attacks on ships and we did see this playbook in 2019. I think there's a lot of recency bias in this market. We Forget that in 2019 after we reimposed maximum pressure sanctions on Iran, Iran targeted tankers off the coast of UAE. They hit critical pipelines and then in September of 2019 targeted Saudi Arabia's ABCAKE facility, the largest oil processing facility in the world, taking off half of Saudi Arabia's production temporarily. What security experts are saying in this city is that Iran sent warning shots in 2019. If they had wanted to take that Saudi facility off for months, they could have done so. They could have sunk those tankers. So the question is, will Iran turn to that playbook if they feel that the regime's survival is at risk.
- [32:17]
Tim Seymour
Halim, it's Tim who suffers the most if we see a spike north of 80, 85. And again, if you think about Irani oil, oil and you think about Russian oil, like where's it really been going at least secretly and I think about China. I'm just kind of curious what the macro of oil is here.
- [32:34]
Halima Croft
I see where this question is going. I mean certainly the US consumer is going to suffer in a higher oil price environment. It works against President Trump's desire to bring inflation down. But there is this like narrative out there that Iran is going to be so concerned about, you know, displeasing China, its main customer for crude that it wouldn't dare, you know, curtail supplies of energy to China. Here's the thing though. If the regime is facing an existential threat and think about it, I mean they have been subjected to withering airstrikes. I mean Israel has complete air superiority over Iran at this point. The head of the IRGC has been killed, numbers of generals have been killed. If the regime believes that the US is coming into this conflict and that could put their survival at risk, I don't think they're going to care about China as their top priority. I think there is a real risk they'll seek to impose costs on us for doing so. So again, I don't think we should be sanguine about the risk to oil in the event that we see further escalation from here. They certainly the view in Washington is they retain capabilities to strike oil if that is their choice.
- [33:39]
Guy Adami
Alima, what's the scenario, if any, where you see an oil spike and it lasts, it lingers as opposed to the oil spikes that we see that just are a couple day events and they come right back down.
- [33:49]
Halima Croft
Well, again, again I think about what, what type of lens are you using for the Middle East? I mean certainly we haven't seen significant disruptions in the past couple years. But if you look at major conflicts in the Middle east, you know, the Gulf War, Arab Spring, we had multi, you know, month, sometimes year long disruptions of significant volumes of oil, million plus volumes of oil. And so the question is, do we see a significant attack on a facility that takes that facility offline? I mentioned Saudi Arabia, but also look to Iraq. I mean Iranian backed militias in Iraq operate in close proximity to the most important energy facilities in Iraq. Iraq is the second largest OPEC producer responsible for around 4 million barrels a day of production. Those facilities I think would be at risk in an escalation situation, everybody focuses on the Straits of Hormuz. Yes, the Fifth Fleet is in Bahrain, the US Fifth Fleet. They could probably reopen the straits, but that does not mean that Iran could not mine the straits, couldn't target tanker, individual tankers. They could cause problems in the straits. And one more thing I'm going to tell you is we're already getting reports that Iran is jamming ship transponders very, very aggressively. Qatar Energy, the Greek shipping authority, has already issued warnings to their vessels not to traverse the Straits of Hormuz at this point. So, again, these are not calm waters, even though we have not had missiles flying in the straits.
- [35:15]
Courtney Reagan
Well, there's a lot here to consider. Halima, thank you so much. Really appreciate all that you brought us. When it comes to your intelligence and the strategy in the region, Tim, what do you make of all that?
- [35:25]
Tim Seymour
Well, I think Halima is really about as good as anyone we could listen to. And I think we've become a little bit immune to the headlines in this country, and I think we have to be careful of that. I think what happened in October between Iran and Israel was seemingly, you know, just a little sideshow. And ultimately, I think it was intended to be a show. I think right now, the risks of the things she's talking about aren't, you know, whatever that probability is, the market is not prepared for it.
- [35:54]
Michael Kantor
Yeah, I mean, this goes, Tim, to what you mentioned earlier about the VIX today being down about six points. I mean, it really doesn't make a whole heck of a lot of sense if you have oil spike to 90. I mean, it sounded like if Iran strikes and takes out oil fields, you're talking north of 100. If that persists for a year, 18 months, whatever it is. I mean, that uncertainty is absolutely terrible for both the markets, the consumer, the economy. And remember, that's the thing. Right now, you have massive scarcity in certainty. And so I think this could be a real wild card that the market is not appreciating. And you couple that that with declining earnings growth, tariffs, the inflation picture certainly doesn't look good. The Fed won't be doing anything. It doesn't make sense to me at the vix.
- [36:40]
Tim Seymour
What's the chicken thing, guys?
- [36:41]
Dan Nathan
The VIX is down because it's pricing in three days that the markets closed and then a summer Friday. So I just wouldn't say.
- [36:46]
Michael Kantor
I'm just saying that down today, though.
- [36:48]
Dan Nathan
I know, but that's how the VIX works. It's just pricing, you know, each day about. So I think that, you know, down 6% is not really down 6%.
- [36:54]
Michael Kantor
2020.
- [36:56]
Dan Nathan
Yeah. Let's see where it is on Monday day fair. Yeah.
- [36:59]
Courtney Reagan
We should note that the meeting in the Situation Room with President Trump and his security team is over right now. We will bring you any headlines if we do get those. Well, coming up, a home buying holdup. Why buyers aren't coming to the closing table even as mortgage rates fall. Details on the housing trade is next. We're back into. Welcome back to FAST money. More signs of stress in the housing market. Housing starts tumbling to a five year low in May, down almost 10%. CNBC's Diane Olich has more details. Diana, what's going on here?
- [37:35]
Diana Olick
Well, Courtney, that was the top line total number, but it's always important to break this one down. So multifamily starts dropped over 30% month to month. This is a volatile monthly number. But we have seen a record supply of apartment units delivered in the last few years with more this year. So the development pipeline has been slowing down. Interesting though, that permits which are of course an indicator of future construction are higher. That's because the market is now seeing stronger demand and people are staying in their rentals longer. Why? Well, because they're not buying homes. You see that in the single family starts flat for the month and down over 7% from a year ago. This should come as no surprise given the very low builder sentiment report we got yesterday and a weaker outlook from Lennar's quarterly earnings report on Monday. The consumer is just not willing or maybe not able to make such a large investment given high costs, high rates and overall economic uncertainty. You see that also in the mortgage demand numbers that we got this morning. Mortgage applications to buy a home dropped again last week. When you look at applications just for newly built homes, those mortgages, they were down over 4% year over year in May and rates did drop a little bit last week. But really mortgage rates have been hovering in this very narrow range just below 7%. Because it seems, Courtney, that 7% is the new norm.
- [38:56]
Courtney Reagan
Normal. Yeah, it very well may be. Diana, thank you so much for breaking this down. Obviously very important for many people's individual financial portfolios. Michael, what do you make about the housing trade writ large?
- [39:06]
Michael Kantor
I mean, you know, listen, you've got this is sort of shows the long and variable lags of policy. You know. And remember, housing is a high multiplier industry. So it doesn't bode well, I think, for growth. You know, home builders are, you know, at this particular juncture of where we are in the economic cycle. Probably not where you want to be, not where you want to be overweight. I think it sends a reasonably poor message about you know, sort of the broader economy going forward and you know we're a bit cautious on the back of it.
- [39:38]
Courtney Reagan
Well, coming up, Wal Mart finally gets a win. The retail giant snapping a ten day losing streak. How our traders are handling the name after its recent drop that trade Fast Money returns. Welcome back to Fast Money Wal Mart. Our chart of the day closing up almost a percent to snap a 10 day long losing streak. And that tied its longest ever down run going back to June of 2004. Today's gains come after the Senate passed the Genius act stablecoin bill last week. The Wall Street Journal did report that Wal Mart and Amazon are exploring issuing their own stablecoins. When I reached out to Wal they had no comment as you might expect on something like this. Dan, what do you make about Wal Mart?
- [40:25]
Dan Nathan
Yeah, I mean some of the estimates that you're that they would say by having a stablecoin is like millions, you know, whatever the number is and obviously it could be passing through some savings to their customers but I just don't think a lot of their customers are going to be stablecoin users. So it's one of those things that reminds me of like back in the dot com era where you know, compact computer put like a.com button on their thing and the stock would go up like a lot. I, I don't think that's going to happen with Wal Mart.
- [40:48]
Tim Seymour
I think, I think it's probably more for suppliers. I think the stablecoin dynamic in terms of actually settling invoices and whatnot, it makes a lot of sense and I'll just say if it was 10 straight, was it 10 or 11, what was it? I mean the fact of the matter is the stock behave fantastic for that. I mean it barely moved, I mean when it moved 20 bips a day. So I mean if that's weakness Wal Mart I'm buying that.
- [41:08]
Guy Adami
That's exactly the whole time high was 105. I think it closed today at 95 and change. So I mean that is not a huge move off of a 10 day losing streak not unlike what the Mets right now.
- [41:19]
Chris Marinac
So I like I tell you what.
- [41:20]
Tim Seymour
Guy, you're smooth as a Tennessee whiskey like that.
- [41:25]
Courtney Reagan
Well speaking of sports, we actually do have a news alert on the NBA. CNBC has confirmed that Boss family has entered a $10 billion agreement to sell majority ownership of the Los Angeles Lakers to TWG Global CEO Mark Walter. Walter is also part owner of the Los Angeles Dodgers, Chelsea fc, the Los Angeles, Los Angeles Sparks, as well as several auto racing teams. This is the largest sports ownership transaction ever. Quite a deal. Well, up next, it's already time for your final trades.
- [42:03]
Michael Kantor
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