Yields Spike After Hot Jobs Report | MRKT Call x On The Tape
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On the Tape.

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10 a.m. on the East Coast, that means it's 7 a.m. on the West Coast. By the way, thinking of all the folks out there, obviously, not only is this a market call, it's also the On The Tape podcast, a special Friday drop. So you will be seeing Dan Nathan, you will be seeing Elizabeth Young-Thomas, and Swizzle right in the middle. I'll start with you, Dan. How are you? I'm doing great. They call it a collab, Guy Dami, a collab.

And that's what we're doing here. My grandmother used to say, that's what they're all wearing, little guy, or that's what they're all. And I used to be like, Grandma, who are they? Because I'm not a big pronoun person. But OK, that's fine. Well, here's one thing, Guy. And you started out by saying we're thinking about everyone on the West Coast. I know that probably everybody watching or listening has somebody affected by this. So we are thinking about them. And it's kind of interesting, Liz. We started the week.

I think talking about the Rams, the Chargers, how they are in the playoffs. And the Rams game just got moved from SoFi Stadium, I think, to Arizona. That was meant to take place Monday night. It's really great to hear...

I don't know if you saw some of the Rams guys coming out and just saying, hey, we represent this town. We're thinking about everybody. I know a friend of mine is a coach over there, and they're going to great lengths to make sure the players and their families are doing okay and out of harm's way. That's a tough way to enter the playoffs. But again, these are the sorts of things, Liz, that are probably not top of mind for the folks out there in L.A.

Yeah, my heart goes out to everybody in those communities that's been affected. I mean, the last numbers that I saw, 100,000 people had been evacuated. We're still trying to figure out all of the homes that have been damaged and the businesses. And, you know, they're just things, right? They're things that are tangible, but they're memories and they're people's lives that are wrapped up in that stuff. And it's heartbreaking to watch. So,

Again, my heart goes out to everybody out there and sending love and support to everybody that's been affected, including obviously the Rams and the Chargers. Good points. You know, and I'll sort of end it by saying this, you know, people, you know,

there will be people that say, well, these are multimillion dollar homes and stuff. You know, the reality of the situation is whether you lose a, you know, a $200,000 home in a tornado in the Midwest or $35 million home due to fires on the West coast. I mean, those feelings are exactly the same. I mean, you can't, you can't replace the exactly what Elizabeth's talked about. And, you know, it doesn't matter. I mean, those feelings are what they are. So it is absolutely heartbreaking, but it's,

Listen, I think we all understand that. I think everybody's extraordinarily sympathetic, but let's talk about now what we're sort of tasked to do, and that's the markets. And it's one of those things you got to start the way we've been starting all week, Dan. It's the moving yields. And today people say yields are going higher for the right reasons, and Elizabeth can opine on that and those right reasons why.

With the job numbers that came out, unemployment rate ticked back down to 4.1%. And there's some things within that report that look good. So I think the optimists will say, well, you know what? That's okay that rates are going higher. Obviously, Dan, though, the market has a different view, at least for the first half.

half hour or so. Yeah, and just to do a little recap, and Liz, you can run through, I guess, the internals. That's what you do usually on these sorts of days when you're on CNBC's halftime report or the closing bell. Obviously, it just came in really hot, much hotter than people expected. The revisions were not as dramatic as some might have expected. And the debate is like,

You know, what did the Fed get wrong in September, right, when they had that 50 basis point cut and they said they're there to support the employment outlook, right? And I don't think that cut did that. I don't think that's why we're looking back here now and saying, okay, well, that was supportive of it. So the Fed might have gotten some things wrong.

You know, I go back and, you know, for 2024, I made the case a few times. It's like, why are we so locked in on that 2% target as it relates to inflation to the downside? When you think about how different the economy is from the time in which, you know, the Fed got stuck to that sort of rate, it was tied a little bit, I think, to average GDP. But if you look at all the interdynamics at play, you know, in a geopolitical, in a very globalized, you know, a

economy and you think of the strength of our economy relative to every other's, you think of the reserve currency. I mean, the list goes on and on and on. I just wonder why we're so stuck on that. So, Liz, give us the 411 on what you take away from this number. We're going to look at the CME Fed Funds futures and what they're pricing. I think all of us were in the camp that we thought there was going to be much fewer rate cuts than the markets were predicting for most of 2024 as we got into 25. But give us a skinny here.

Yeah, and sorry, I'm looking a little off screen here. I'm just trying to make sure I have all the data in front of me. So what happened today, obviously a much hotter than expected jobs report. So the change in payrolls came in at 256,000, expected to be 165,000. Now remember, for most of 2024,

we had started to focus back on jobs and away from inflation. And people were concerned, all of us included, I think, were concerned as the unemployment rate started to tick up, it crossed over 4%, the SOM rule triggered. There were all these warning signs that it happened. And we got back to a more balanced level of jobs open to people unemployed, which is where the Fed wanted things to be. So the first thing I'm going to talk about is

I don't think they were wrong to cut by 50 bps in September. I think if there was a mistake that was made, they should have started in July. So that September cut at 50 basis points was a catch up because they didn't start in July.

The reason that I believe they cut in September was because the jobs market had become more in balance. And what I just mentioned about the number of jobs opened versus the number of people unemployed had gotten to a more manageable level. Wage growth wasn't as big of a concern anymore. We had all but written off this wage price spiral risk.

So they wanted to start bringing rates back down to a manageable level before they would put pressure on the economy. Now, the economy continued to be very strong. And now we're in a position where we've taken our focus maybe a little back off of jobs and onto inflation again, which perhaps is the correct way to be looking at this. The second thing I'll say about, you know, why are we so stuck on this 2% inflation target? I think, and Guy, I think you'll probably have views on this.

Back when the Fed started to message that they had targets and they started to be more transparent about what their intentions were, they had to have some sort of measurable goal. There had to be something measurable so that people could set expectations, which is much of where that 2% target came from. Now, we went back and forth on this show. We went back and forth just in the industry in general about whether or not they should move or adjust that 2% target.

It doesn't really matter if they should or shouldn't. The fact of the matter is that if they do move it, I think they basically admit defeat.

and say, we don't have the right tools. We haven't figured out how to manage this. We can't actually meet our goals. And that would send a worse message. So I think now that they're in it, they have to stay in it. They have to stay committed to this 2% thing. Now, that doesn't mean that they can't move rates before we get there. And they obviously have moved rates before we get there. But the risk now is that there's so much uncertainty about what they're going to do with rates and what they're going to base it on.

that the market is like tripping over itself to figure out what this outlook is like. And then the last thing, and I'll close here with these opening remarks. This is probably my longest opening monologue. I'll stop here. But the rate expectations have moved now only expecting about a two and a half percent chance of a cut in January. Look, a cut in January was off the board anyway. That was never expected. The bigger number is that

By the end of the year now, only about a 28% chance of two cuts. So one cut is baked in by the end of this year. Yesterday, that number, I believe, I believe yesterday that number was like above 60%. So that came down a lot due to this jobs report. You know, it's amazing. And by the way, Elizabeth talked about this over a year ago. She said,

you know, they will, what's going to wind up happening is they're going to sort of acquiesce and then the market's going to acknowledge that or take that as, you know, a failure for them to be able to get there. And there's going to be problems associated with it in terms of what you were talking about, Dan, you know, their steadfast need to sort of give levels and stuff. But that to me is them being slave to the market. I mean, again, I'm not a Fed official. I'll never will be a Fed official, but,

I wouldn't be as transparent as they are. Leave some ambiguity out there and let the market figure it out on their own because it's better that the market figures it out than to become a slave to the market and then seemingly do things that are knee-jerk reactions to what we're seeing, which, by the way, to a certain extent, I think we've seen that over the last couple of years. That's it. I mean, again, I am a hater without consequences.

question, but doesn't mean that I'm wrong. You know, it's funny. That said, Dan, I mean, look at where yields are now. Now, again, the optimist is going to say, well, I mean, I saw Ron and Sana earlier today talking about how strong the economy is and stuff. And

I don't know, maybe that's part of it. I don't really think that's it. Obviously, today's number suggests that. It's also the last number in this administration's tenure, so there might be something around that we'll see. But, you know, there are far more nefarious reasons going on, on top of...

what appears to be a pretty good job report. Yeah. I mean, listen, the one thing I'll just say, you just use the term nefarious and I don't think you mean about the data in and of itself. You know, Rick Santelli. No, no, no. No, no, no. But Rick Santelli this morning on CNBC, he's like, I don't trust these numbers. You know what I mean? Like, and that would,

implies something nefarious about the data, right? And I think you could say that no matter who the administration is, the Fed is supposed to be independent, right, of political sort of leanings and the like here. I do believe, you know, that Fed Chair Powell and the governors and all the folks who make those decisions, they are trying to stick to their dual mandate, stable prices and full employment and the messaging that we get. And that's some of the messaging that we heard in September that was different than, you

You know, earlier in the year when they were really focused, Liz just said this, they were really focused on bringing down inflation towards their target. Then they got focused on full employment. Well, we had disinflation and we've had a steady jobs market. And when we get to Q4 earnings throughout the rest of this week, I know right now Delta is trading up. I don't know how much, you know, a beat.

and a raise. What was trading up here? Where is it on my screen here? You know, there's going to be signs that, you know, maybe the economy is more resilient than we thought. Look at that, new 52-week highs. And so, again, you know...

We're just going to have to kind of make these assessments, you know, backward looking. But let's just talk about this for a second. OK, so hot data economies. OK, consumers hang in there. U.S. economy on a relative basis, despite the dollar and despite the.

raise in yield is doing okay. Earlier this week, we discussed what's going on in small caps and regional banks that might be telling a different story. Guy, I think that's where you're probably, you know, kind of leading to under the hood, right? But I say to myself, okay, let's get back to EPS. Let's get back to S&P earnings expectations of 13, 14% per fact set.

And, you know, I heard some strategists on the network earlier this morning saying that they have a $6,400 price target in the S&P. We see it trading now, you know, at $5,800. It was just at $6,000, right, like a week ago or something like that.

And basically, they're saying that that's based on their 7% expectation for EPS growth in 2025. So Liz, when you start seeing some strategists with just a few percent to the upside on their target, and you see them discounting consensus S&P earnings, I say to myself, with yields where they are, with a dollar where they are, how much S&P earnings are really tilted towards those big

big mega caps that have a ton of exposure overseas. I say to myself, at some point in the not so distant future, those S&P year over year earnings estimates are coming down no matter what's going on with a stable economy and a stable jobs market.

Well, I think we'll get the verdict on that pretty soon. I mean, when you hear CEOs and CFOs talking in their fourth quarter earnings results, they're going to do a good look ahead on 2025. And I would imagine we're going to hear a lot of hedging. We're going to hear hedging because of the rate story. We're going to hear hedging because of policy uncertainty.

But that's not a new story. I think CEOs and CFOs have been hedging for a while and they tried to set expectations at a reasonable level last year. And then we knocked them out of the park. Really, this year, expectations are pretty high. So if they're hedging, it's possible that expectations do have to come down. One thing I want to I want to say about just market action today. So, you know, obviously, we know the 10 year yield is up.

Small caps, Dan, you mentioned are down 1.7%, which is exactly the same as what the S&P is down right now. The index that's really taking it is the NASDAQ, which is down two and a quarter percent.

So what message does that send? First of all, I know they're all down. So this is not a good day. But the magnitude and just the spread between them, the message that this sends, in my opinion, is that this is about rates. If growth stocks are falling faster and harder than other stocks, than small caps and then the average stock or then other sectors that are more cyclical, then this is about rates. This isn't about concern over economic growth.

So I think we're still at this point in an okay place. And you mentioned what happened on CNBC earlier this morning from Rick. Steve Leisman was trying to argue, you know what, don't basically vilify this report. This is a hot jobs report. Let's be happy about it. We added jobs. The unemployment rate came down. Yes, yields are up. But I suppose that makes sense given our expectations about the Fed. And now we've got hawkishness coming from the Fed.

But don't vilify it and say, you know, this is all bad news because perhaps it's not. Yeah. And it's interesting. So Timmy or Amanda, pull up the question from Eric Lancelotti because he asked about the IWM. By the way, I think the IWM said about two and a half percent or so today, but they're all different indicators. But I look at this and say, you know what? We for the first time in a while, we've breached.

the 150-day moving average to the downside. And if you go a little longer term, you'll see, despite the fact that we sort of got through those prior highs, you draw a horizontal line across those tops, Dan, and you'll see, hmm, that looks a little bit dicey. So the Russell, again, I mean, Elizabeth's right to point this out. Eric asked the question, so people are obviously focused on this. If the economy is doing better, fantastic.

theoretically, small caps, the most economically sensitive names should seemingly hang in there. We'll see. This is going to be a battleground now for the next couple of weeks in terms of what does all this stuff really mean? Anyway, let's go to the S&P futures because that's obviously a story today as well on back of everything else. And over the last couple of weeks, although you've seen some rallies along the way,

I mean, the S&P futures have been sort of doing this little grind to the downside. And, you know, we're fast approaching. And when I say fast approaching, fast approaching what would be the same type of low we made back in August in the form of that 150-day moving average, Dan. Yeah. You know, Guy, when I look at this chart, you know, I think you're just speaking to this, a series of lower highs. And, you know, we have that trend line. Maybe Amanda can draw it from those August 5th lows. And, you

You know, it's not a great looking chart, right? And so if I were looking to sell this thing, let's call it at 58.65 or so, breaking below, I would even move that up a little bit here. I'd try to attach some of those. Yeah, I would try to do that here. Let me tell you a guy, and I'd love to get your levels here.

So if you look at that uptrend, right, that last little push we had just a few trading days ago, it got rejected. So past support becomes resistance here. And if I was looking to play for a move back towards that, you know, 150, so that's what, 5740 or something like that. And then your next level really is 5500 guy, which was that September low. If I'm selling the S&P futures here, you know, 50,

what are we calling it? Um, 58, 60, 65 or something like that. Let's call it 60 right here. I'm keeping a pretty tight stop on that, right to the upside. And maybe that looks like yesterday's high or so. So maybe, um, something like 50 handles. And my first target is that 5740. So 58, 65 to 5740, that looks like a pretty decent trade. And I think you take it in the near term, but, um,

Again, I think you can play this thing. You can sell rallies. I think you could look to play towards support. And I think there's a couple levels to the downside that make some sense. And look at this chart, okay? We know that that high from July to the low in early August was nearly 10% in the S&P futures. Then the September was probably...

Half that, and maybe 5.5% or so. And the sell-offs kept getting shorter and shorter. It held that uptrend. Now we've broken that uptrend. And just to finish off here, that past support is now resistance. I think you continue to sell rallies in the S&P 500. I think you want to be careful if we get above that resistance. But for now, I think rallies are to be sold.

Agreed. That's the right way to play it. And so much of this, by the way, whether it's a NASDAQ or the S&P, is predicated on what obviously the name we talk about seemingly every day. So throwing video up quickly, because I want to just take a look at what this has done since that engulfing pattern that we talked about, that 153 and change, new all-time high, closed on the lows, did it on two times. Well, let's call it 1.8 times normal volume. I want to be accurate here.

And then you've seen the subsequent move, the same move that we saw in March. And we've outlined this same move we saw back in June. So if this were to play out in a similar fashion, you know, you're talking about a stock that could go down some, you know, anywhere between 35 and 40 percent.

And then I bring it up because one has to ask, what will the broader market be doing along the way? So that setup to me has sort of set the table, Dan, for this potential cascade in the NASDAQ and in the S&P 500. All right, Liz, let's talk about this. I know we're, you know, everyone, any pundit or, you know, it's not just pundits, actually. It's like everybody that I talk to in the market, market participants who don't have a camera or a mic in

in front of their face like we do every day, they're all talking about it, okay? The concentration. And it goes back to whether you're focused on the concentration of these top 10 names as it relates to S&P earnings, whether it relates to the performance within the index. We know that one stock that Guy just talked about was more than 20% of the performance of the S&P 500 last year, right? I want to pull up Apple for a second here. Obviously, this is a huge contributor to the S&P 500.

you know, on any different level you want to think about. Look at that precipitous drop. We were talking about it from a fundamental standpoint when that stock broke out of that long consolidation period. There was nothing fundamental supporting that. Let's just be clear. And we're going to get their earnings in a couple of weeks. And I think iPhones are going to disappoint. I think China is going to disappoint. I think services are going to disappoint because

Apple intelligence is a dead bang loser, but that was pure multiple expansion. That was folks chasing something that they thought on a relative basis was underperforming a lot of these other tech names that were, you know, we're getting the boost from generative AI. So Liz, when you look at a name like this, that is likely to go back towards that two 23 level or excuse me,

228 level, okay, which is that 150-day moving average, guy just mentioned NVIDIA. Microsoft on a relative basis has acted very poorly. You know, if you see Google, Amazon, Meta, Tesla, I think the fever broke there a little bit. What would that mean to you if we see weakness in the small caps, right? We already talked about that. And then the S&P and the NASDAQ driven down by this concentration.

Okay, so small caps in my mind are the confirmation. They either confirm a rally or confirm that we're going down further. Mostly what we've wanted small caps to do is to confirm rallies. And it has happened occasionally for brief periods, but they've given it up pretty quickly. So I would argue we're still not there in the camp that small caps have confirmed the broadening out trade or confirmed the durability of a rally. When you talk about concentration, so first of all, for earnings growth,

The tech sector is still expected to be the best contributor to earnings growth in 2025. Now, it's narrow, only about 22 per 21 or 22 percent growth in 2025 only. And then the next strongest sector is expected to be health care at about 20 percent. But still, most of our eggs are in the tech basket from an earnings growth perspective. So if those companies don't deliver, it will hit sentiment and it will hit growth.

those indexes in a big way, the delivery of it, this is where it gets dicey.

I think expectations are so high that these companies are under a ton of pressure to meet them. So it's not that these companies have to go meet earnings expectations, they have to beat earnings expectations and they have to guide higher in order to be rewarded seemingly by the market. So for them to come into another earnings season with those expectations, now look, it could work out fine. It worked out pretty well in 2024, it worked out pretty well in 2023. We had the same concerns then.

If these companies do come out and beat and then raise guidance, everything is probably okay. But it does pose the fragility risk because we are so dependent on it. And then when you just look at market action and we know how much these companies drive the broad indices, how much they're driving ETFs, and really just how much they're driving investor psyche. I know that there are still like earnings watch parties for NVIDIA, right? We go to

a bar or something and have a party to watch earnings. I don't remember a time when that's ever been the case. So the obsession with this continues and the further the divergence grows between these large cap companies and the rest of the index, the more room there is for that gap to close. And usually when you see those gaps close, it's with the big ones coming down pretty quickly. Yeah. Look, all fair points. And you know,

Dan mentioned the market participants trying to play the catch up in terms of Apple. And we've talked about this. We've beaten this one to death as well. But a lot of that is also due to the fact that passive investing last year, a trillion dollars make their way into mutual funds and ETFs. Who wins to that? Well, Apple more than any other company in the world, probably, just in terms of the number of ETFs and mutual funds that it's in. So passive investing, they win.

I would submit active investing, they're not going to win. And we're maybe on the precipice of that. Real quick, we got a question from JS, and this sort of dovetails nicely. If TNX, and that's, by the way, the CBOE, I think 10-year yield, which got up to 479 today, if that were to go to 5%,

Where's the US dollar? Elizabeth, I know, has thoughts on this. I'll take a shot at it. I mean, I think most people would say, well, if the yields are going higher, the dollar's going higher. And there's some, obviously, there's historical truth to that. There's a scenario, though, where yields start to go higher and then actually the dollar starts to go lower. And if you're looking for proof positive of that, today's a day where gold should be getting taken out to the woodshed very,

vis-a-vis what's going on with yields. And actually, gold is higher today. So there are a lot of strange things happening under the surface here, Dan. Yeah, no doubt. And the gold one is interesting. You guys have been steadfast on that. These consolidations that we've seen over the last year, and it probably goes back a little bit more.

They were things to kind of, you know, buy the dip on, right? Because we've seen the consolidations and the breakout. And you make the point about a strong dollar. I mean, you know, it's acted well in the face of that strength. So, again, I think it's something to keep an eye on. I want to make one point that Liz said about the NVIDIA watch parties. You know, this brings me back to this was early 2020. All right. Excuse me.

early 2000, I am sitting at a place called Bond Street Sushi. I know you guys have probably all been there. It's down on Bond Street in lower Manhattan. And this was a hotspot, '99, 2000. I remember being in there with somebody I did business with and we're just having a little spicy tuna roll and maybe some sake or something like that. And we hear these two women next to us talking about Qualcomm.

Yahoo, that sort of thing. And we were trying to see, are these women, are they traders on the street or something like that? And then I heard someone say, well, you know, the guy I work for this and whatever. So it was there were executive assistants of somebody on Wall Street and they were all in on Qualcomm and Yahoo. And I remember my friend and I, who's obviously in the business, we were like, holy shit.

and then flash forward like 2012 and maybe amanda can bring this chart up from 2011 in apple okay to 2000 mid 2013 and look at this move in apple and i gotta tell you i got taken to the woodshed in mid 2012 on this rally on the way up because i do what i always do i get sometimes really stuck

in the fundamentals make that a day chart if you can because i think it'll just kind of show the sort of magnitude of it and you know it was another time you remember my main man ennis tanner um guy who who used to be a great great um derivatives trader he joined us on options action and fast money a little bit and he was in turkey and he was working with me at the time he was working remote and he called me up one day and he's like you are not going to believe this this was in mid 2012. he's like and he speaks turkish he was on a bus

in Istanbul, and he heard these women

And I don't know why I'm saying women. But he didn't think... There were not market participants talking about their exposure to Apple computer. This is in Istanbul. And look at that right afterwards. And it wasn't to the day or anything like that. 45% sell-off from the highs to when it makes its lows. So when you start hearing some of that stuff, you better get your antennas up. Liz, really quickly, if they could pull up the RSP. This is the equal weight S&P. So we were talking about concentration. We were talking about passive investing. This thing...

Look at that. That's one of the one year. Let's go to the one year for a second. That looks like one of the worst charts in the stock market. Okay, so speak to that. And then I'd love to get your take on that. Because if you start to see that thing breaking down a little bit, what is that telling you right now, Liz? I'm just curious.

Yeah, I mean, this fell apart. I put this in my note for this week. It was outperforming for most of 2024. We talked about the broadening out trade. These other sectors were coming into the forefront. Mega caps had taken a little bit of a pause. And then at the end of the year, that all changed. And we went right back to the tale as old as time, which I've called it that a few times now.

Mega caps took over. The equal weight fell out of bed. And we're still seeing that there's outperformance in the equal weight on a six month basis, technically. So it's still ahead, I suppose, technically. But it's just it's not doing well. So this whole broadening out narrative did not hold up. And I mentioned this before. Small caps did not confirm it.

What we need to see, and this is what I would say to people that are bullish out there, that are really bullish. And frankly, if you read my 2025 outlook, I'm optimistic on the economy and outlining risks, but I still see that there are more pillars of strength, at least economically, than there are risks.

But one of the things that can happen is that if AI disappoints, first of all, if AI earnings disappoint, and if speculation overheats, and I think what we're seeing right now is that speculation overheated, and it overheated post-election based on the expectation of all these pro-growth policies. And then we realized, wait a minute, we don't even know what they are yet.

We don't even know what they're gonna do to the economy yet. And then, oh, by the way, yields are like rising dramatically. The dollar is rising dramatically. Is that really good for everybody? And now we're thinking maybe the answer is no. So there's been a real pullback in the cyclical posture

There's been a real pullback in the growth posture. And Dan, to your point of just hearing anecdotal conversations, when you hear things like that, a lot of those people that are owning stocks late in the game, right? They're into it late in the game. They have what I guess are called paper hands, right? So they're not holding onto these things very strongly. And a pullback like this, whether it's in the equal weight, whether it's in a broad index, whether it's in just the mag seven in general, right?

is going to scare them. And then you see these sort of precipitous declines, selling begets more selling until it's washed out. So there's a couple of things to look for. You want to, in these environments, see if there's a flush that occurs, right? Is there enough of a flush in the selling where then we can sort of calm down, we've come back down to earth? In the tech sector in general,

Back in early December, 81% of those names were trading above their 200-day moving average. Now we're at about 40% of those names trading above the 200-day moving average. That's a pretty good flush. May not be done yet, but it's a good flush. And as of a couple days ago, there were still a handful of names that were trading in overbought territory, according to RSI. I think you need to see a little more of a flush to see if that actually stops.

But that's what you want to watch for in these environments. Are we going to flush it out and stop at support? Or are we going to keep going below? And a lot of times, and you guys would know this better than I, when you keep going below support, there's usually another 5%-ish to go because momentum and selling picks up. Yeah, I mean, the RSP, which is a mannequin pole longer term chart. And this is where I think we're headed. But you

You go way back in time. I think it was sort of January of 2022. We made a new all-time high of about 162 or so and then spent the next sort of year-ish going lower. And so that prior resistance to one of your earlier points, Dan, is going to be support. I think it's going to find itself sort of in this 162 if you want to draw that horizontal line.

And, you know, what does that mean? You know, what does that mean? What's going on? Again, I think it speaks to the fact that it is a very top heavy market and we'll see. And the other thing quickly before we get to the chart of the day, you know, we've been pretty steadfast on this as well, that we thought the VIX could be a story into the fall of last year and the remainder sort of,

of the winter into the spring of this year. And you're seeing it again, the VIX is either side of 20, and I don't think people are paying enough attention to the potential for there to be these high vol days that, well, not historically, but over the last couple of years, we've only seen a handful of. - Yeah, no doubt. And I mean, Guy, you had been mentioning this into year end, especially after that big spike that we saw after the Fed meeting in December 18th. And I think that spike in vol just told you at the time

that people were not protected enough. We've been talking about the skew in the options market that we still saw calls more expensive than puts in some of the most favorite names in the stock market, you know, on an individual level. And that's why you had that kind of scramble for protection in mid-December or after the meeting. And here we are, we're just kind of

inching higher a little bit. What does that tell me that we're approaching that kind of 20 level? It tells me that people are kind of hedged up. They're continuing to kind of add hedges. So that's something to kind of keep an eye on the put call ratio and the skew levels in the VIX without getting too technical here.

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We're not all bearish or not all skeptical. You and I have detailed a couple bullish trades in the energy patch over the last month or so. One in XLE a few weeks ago, one in Exxon. Obviously, that's a big component of the XLE. You have been of the mindset, maybe it's because of some of your inflation fears or some of the geopolitical stuff, that oil is going to have a bid to it. All

of last year it found a lot of support i want to say in that kind of mid to high 60s range so here it is this is our chart of the day and guys this is just the headline of the day causing the four percent rally what are you thinking here let's back this chart out a little bit and give us some levels and and kind of what you're thinking about after a pretty nice run over the last month or so well i mean if you go this chart speaks volumes and it's obviously an important day but we're topping out right at this downtrend line it's been in place since

the spring of last year. So, you know, proper discipline suggests you sort of pull the ripcord here. The flip side of that coin is this chart here, which is a little longer term. And you can say, well, wait a second, you know, maybe we're breaking out to the upside. So,

we bring up both of these charts because they're telling two entirely different stories. I look at those levels of support that we traded down to bounce from and then traded down to again, and now we're bouncing and say, hmm, that's a pretty interesting tradable bottom. So if this thing were to start to build on itself for whatever reasons, right now, it's geopolitical in nature. I think this is one that could catch the market off guard. Now,

Full disclosure, I thought that most of last year as well, and that didn't come to fruition, but we're starting to see it now. There's a lot of hotspots out there, and there's a lot of rhetoric around crude oil and around the geopolitical stuff that is going to put a bid to this thing.

I think, for the foreseeable future. Now, what that means for the XLE and some of the individual names remains to be seen. But you can see it on a day like today, just a Valero, for example, if Amanda wants to pull it up. I mean, this has not been a stock that's been trading particularly well over the last four or five months. But today, you're getting a bounce. And I think you're going to continue to see things like

There you go. You're going to continue to see moves like this over the next couple weeks. Yeah, and to your point about pulling the ripcord on the oil, we had the XLE trading above 90 about an hour ago or so on the opening, and here it is. It's trading on the lows of the day up just 70 bps up today.

you know, at 80, 88, 62. So again, keep an eye on that. Look where it got rejected at that flattening 150 moving average. Liz, what's your take? I mean, obviously old school traders, I'm just going to call guy an old school trader. I'm not calling you old guy. I'm just saying that you were trading, uh,

oil, you know, three decades ago or so. The relationship between the dollar and oil, we have strong dollar we just talked about. Now we have strong oil over the last month. Is it more of this geopolitical headline that we see today and that we've seen over the last couple of years or so? Or what do you think is going on here? Because you've also been constructive on energy for both valuation, but also some other, you know, some other views on that.

Yeah, well, so energy for much of 2024 was a supply story. And I think it remains that way, which is mostly geopolitical. The dollar, on the other hand, right now, the reasons for the dollar's rise has been geopolitical, but more so tariff commentary and a rise in yields. And the rise in yields has largely been driven by concerns over inflation in the U.S. And we've talked about this before. Guy, I think, said it on Wednesday. People are going to continue to demand higher yields in order to

own U.S. debt because of what's going on with our own government. Now, that's not necessarily an international problem, right? That's an at-home problem. So I think there are different forces driving the dollar and energy right now. And I think energy will continue to be dominated by geopolitical supply shocks. So that continues to be the story in 2024.

what you want to watch in the dollar, and this isn't happening right now, but if the rise in the dollar starts to be because there is global fear,

that's when you start to get much more concerned. I don't think that's the case now. I think the fear right now is more reflected in the gold market and the fear is around currency volatility. But if the dollar starts being demanded because of global economic fear or global financial market fear, then we're in a different scenario. So again, right now, I think these are driven by...

Slightly different forces, but it could end up being something that is happening in tandem soon enough. No. And again, Elizabeth does a far better job explaining these things than I do, but she's spot on. And, you know, I think amongst the many interesting stories early this year, I think energy and what it means and, you know, what factors are at work.

is going to be one of them. Let's go real quick to the call of the day. There have been a couple, but the ones we want to look at are Lululemon, Dan, and Nike. It's interesting. Lululemon, which was a disaster for the majority of 2024, has gone from about $225 a share almost to $400 a share without anybody paying any attention to it whatsoever. By the way, what that means is it's probably recouped

half of the move that we saw from December of 2023, when the stock made an all-time high north of 500, to that recent low that I just addressed in August. So here we are at the 50% retracement. But it doesn't stop some of these analysts from making some calls. So

I don't know here. You know, I think this is sort of late to the dance. They're upgrading it to buy from hold, which I sort of get. Maybe they were forced into that. I think their price target is about 475, which still suggests significant upside. You know, I think I look at this one and say, you know what? All we've done is basically retrace 50 percent of the move we've seen over the last year.

Yeah, you know, and this is one guy, if you recall, you know, when it was down there below 300 bucks, we did tell a bullish options trade. We were targeting a move back towards that 300 level. It was an October 260, 310 call spread. So we got that one right. And at the time, we just thought on a relative basis to some of its peers, it got too cheap.

you know, a lot of those, you know, turns on its multiple as the stock was going lower, right? And estimates hadn't changed that much. You know, we thought that was probably something that was worth taking advantage of. And they had some execution issues. You see some of those gaps.

On the chart, those were reflective of poor earnings and poor guidance. And here you are, you know, you're consolidating now after that big gap. The problem that I have now, Guy, is that this is not particularly a cheap stock. You know, earnings and sales growth expected to be

high single digits, not 7%, 8%, and you're trading at like 25, 26 times. So they have to continue to execute in an environment where who knows what consumer discretionary sort of looks like. And that just leads us to Nike. There was an upgrade there. We don't have to spend too much time. Maybe a mannequin flash that. You and I talked about it earlier in the week. It is interesting that analysts are starting to kind of lean into some of these names that have been underperformers or at least have come a

very long way if Amanda wants to pull that out to a five year. You look at it on a one year basis, you could say, OK, well, maybe that's some good support. I think you and I were both highlighting earlier in the week or last week those sort of COVID lows that look like 60 bucks or so. And again, there's not a ton of valuation support in this one. New CEO have to execute. They have a lot of competition. We've talked about the on and a whole host of other guys who've kind of come into this.

Liz, how are you thinking about consumer discretionary? We know that high-end brands around the world have demonstrated a lot of weakness. A lot of that has come from China. We know that Russia is also sort of an issue here.

Is consumer discretionary or high-end a place that you want to be? I know you're constructive on retail that is playing towards some of this case-shaped recovery or case-shaped consumer that we have in the U.S., and that would be Walmart, Big Box, Costco, and the like. So how are you thinking about consumer discretionary and then broadening it out to retail in general?

Well, consumer discretionary is one of the sectors that would fall into that growth category. So the stocks in general are under pressure as long as yields are rising. So the charts are tough to look at, right? Like this is a tough chart to look at. And if you're looking for an entry point, perhaps you've got a better entry point than you did a year ago or so. But

If we're entering an environment, and I always have to think about the macro and not necessarily trade on the macro, but you have to think about it, if we're entering an environment where consumers are worried about inflation again, and where we know the economy is worried about inflation again, and we're in the first quarter where inflation usually surprises to the upside, I think consumer discretionary is probably a place you want to wait out for a while, because not only will consumers...

at least pause their spending, right? And maybe some of those higher end consumers aren't pausing entirely, but we know that they've shifted their behavior due to inflation. So consumers will pause their spending just to wait and see what happens. And I think you could see that through the first quarter. - We've got a couple, well, actually one question I wanna address. There are a few, but time is short, but CR Tower is asking a question about the airlines and Delta reported today

I think the stock is making a new, forget about 52-week high. I think it's an all-time high. Don't at me if I'm wrong. But Delta's been one, if you watch Fast Money, we've talked about that for quite some time in terms of being best in class. The question then asked about pulling the ripcord on UAL, I don't know necessarily if that's something I would do. But something we talked about on Fast Money, I think last week was this bearish to bullish reversal in American Airlines. So-

Pull up AAL because that's been the real underperformer. And we talked about it in the wake of a Jefferies upgrade. I saw the analyst on with Kelly Evans, and she made a really cogent argument as to why American made sense. You know, they're getting into higher margin businesses. And since that call, you know, this is a stock that's done well. Now, if you do a longer term chart, Dan, you'll see that, you know, this was nowhere for a long time.

And now seemingly we're starting to make the turn. So, you know, Delta is always best in class. United, eh, whatever.

American Airlines is the one I think you're going to get sort of your beta on here, Dan. Well, not only valuation, but to your point about the technical breakout here and the relative underperformance, I mean, that is the sort of ingredient to have this thing moving towards those kind of low to mid-20s. And if they really are taking it seriously about getting back some of that market share as it relates to business travel, this is one that I would probably look to.

to kind of buy and maybe kind of, I don't know if it's a great pairs trade with like a United because if you're kind of iffy on United relative to Delta, long American, short United could be the trade. I just want to touch on one other thing. And Liz, maybe you have, you know, anecdotally, not the actual data with you. And again,

Again, Guy uses this term all the time. When you have these sorts of disasters, heartfelt sort of feelings about what's going on in LA. And again, we have these hurricanes. We have a lot of these situations. A lot of folks go to this kind of home improvement sort of situation, the Home Depot and the Lowe's and maybe Amanda can flash a chart there. And we were just talking about retail. That's the only reason why I'm broadening out here a little bit away from the big box. But

you know, let's do a one year of Home Depot and Lowe's, you know, sitting right there on some support of the 150 day, you know, the rebuild is going to be a multi-year sort of thing. And I just wonder if maybe these are the sorts of names that you want to be looking at in retail is. Well,

Well, for one thing, I mean, both of those charts look pretty similar to each other and you can see the decline as yields have risen. So we obviously know mortgage rates have gone back up again. So the housing market is in this continued frozen pattern as people don't want to take on a new mortgage, which is

logically sends you to some of those stores because, okay, then we got to, we got to love, love the one we're with. Right. Whoa, whoa, whoa, whoa, whoa, whoa. Steven stills. All right. So Liz is way too young to know that that's Steven stills. If you can't be with the one you love, then love the one you're with.

Yeah. Okay. And the one you came to the dance with. So what I mean by that is the house you're in, right? If we are all lucky enough to still have that house, obviously. So I think there could be an opportunity here. This is a better entry point, certainly, than what you saw during the rally in New York.

late summer, early fall of 2024. But to your point, Dan, the rebuild is going to be a years-long process. So if you're going to look at names like this right now, you probably want to be ready to hold them for a while because it's going to take some time for that to rebuild. And there's a lot that we still don't know about how much insurance was involved, how much of the rebuild is actually going to happen the same way, right? So there's still a lot of question marks there. And you got to think about insurance companies too. What will the effect be

on that sector. Well, we'll talk about that on Monday with you, no doubt, as we come back from the weekend with an On the Tape podcast Monday morning with the great Elizabeth Young-Thomas. Football games will have been played

By then, to keep it sort of ending on a light note, we'll see if your Packers of Green Bay will emerge victorious against the favorite Eagles of Philadelphia. That's going to be a good football game, by the way. They're all good football games. And tonight we have the Longhorns.

of Texas against the Buckeyes of Ohio State. I'll just say now, Dan, that I think Ohio State rolls there. But, you know, we shall see. And the Rangers got back on good footing last night, albeit still a team sub-500, as I mentioned to Bill Hockman earlier. So I want to thank everybody for joining us on this. What did you call it, Dan?

I don't know, Friday? Oh, it was a collab. It was the On the Tape and Market Call collab. There's certain things that I never... I don't say, you know, hot spots, collab, you know. Well, listen, Liz is a great partner of ours on Market Call and...

and on the tape. So when she's with us, it's always a bit of a collab guy. And you and I are just always here. And I'm sure people are sick of us, which is why they love having Liz Thomas on with us. Liz, thanks so much for being here. Hearts go out again to all the folks dealing with this. I know all of us. I have a great, great friend of mine.

who lost a house. He lost the assisted living where his dad was in and, and people are scrambling. So, you know, if you can reach out to any of these folks, I know a lot of people are doing that. Any, any help that you can give obviously is the thing. I don't mean to be preachy, but we all have somebody in our lives who are being affected by that. So again, we go out to them. Guy Dommy, great to have you here. Have a great weekend. Liz Young, Thomas, same to you, sister. We'll see you on Monday morning.