Of taking harsh new policy action against beijing and lets get to Kayla Tausche in washington kayla . Melissa, todays policy announcement by President Trump was essentially a doubling down on pretelegraphed policies that the administration had already announced. Today from the rose garden, President Trump said that the u. S. Would be terminating its relationship with the world health organization, that it would be suspending entry into the u. S. For certain students and researchers that it finds to be affiliated with Chinese Military arms, that it would be starting a study of the Chinese Companies Accounting Practices and exactly what their role within the Financial Markets is with the potential delisting on the table there and studying the economic status of hong kong any possibly eliminating special treatment for that territory in the wake of beijings new National Security law and most of that was already laid out by white house or Administration Officials in the weeks leading up to today, but what moved the market in a positive fashion after this announcement is what President Trump was presented with, but decided not to enact those actions ranged from possible sanctions on top members of the Chinese Communist party. Penalties on assets and Financial Institutions affiliated with the Chinese Government and any sort of suspension of a phase one trade deal my sources say that President Trump and treasury secretary Steven Mnuchin want china to be backing out of that deal if anything is going to change. Currently ongoing right this moment, the white house is holding a panel with ceos and the president on economic recovery and the reopening going on across the United States. Well monitor that, melissa and get you any news that we have from those ceos as it pertains to todays announcement on china and broader economic metrics in the u. S. When we get it. Back to you. Kayla, thank you. Kayla tausche in washington. Lets take a look at the Market Reaction tech and semiconductors seeing strength as the china trade deal remains intact and the possibility that things could change is weighing on one top strategist j. P. Morgans michael kolonivch, says a breakdown of supply chain and International Trade between the u. S. And china would justify Equities Trading drastically lower. More broadly than trade this sort of ramping tensions between the u. S. And china which could result in domestic chinese consumers not buying american product, tim i think, first of all, you have to give marco, a lot of credit j. P. Morgans team has had a sensible call where theyve looked at market factors and theyve looked at ownership and momentum and theyve started to look at fundamentals and marco and team saying hey, not as boyant of a return to work as the economy. The word of the day yesterday was bluster and look, on china trade policy, bluster is certainly the need on both sides. Remember, theres a lot of posturing and jawboning on both sides, but ultimately, who is really in a position to dig their heels in right now, and again, well weigh the short term and the medium term and who could be a longer term player here when it comes to stocks and look at how we reacted in the last hour and ten minutes of trading and look at the chinese adr names and alibaba from 254 to the close was just over 4 and somewhere around 198 to 207 on the close. We saw that with tencent and we saw that with emerging markets and semis. I think if you look at semiconductorses theyre the best road map to follow for what we had last year and remember what kept going higher, semis were going higher even in the face of this i think right now we can continue to see that type of movement the other type of marcos call in terms of dialing down the optimism is that he believes theres been politization of the covid19 issue, and that perhaps that could impact consumer behaviors and it could reopen the economy and if only half the economy reopens, thats not to get to the alltime highs of 2021 steve grasso, im curious what you think of todays action and it does seem as the markets traded as if there was pretty much an all clear when its comes to the worstcase scenario regarding china. Think that the markets are trading. Two things, today was the msci rebalance day so that influenced a lot of the flows, but when you look at china, i think a lot of that is secondary lets just look at the markets pricing in a pandemic and theyre not worried about china just yet and it might affect the headlines from minutetominute and ultimately were worried about the pandemic and the one word that will save all this is the fed. If the fed is still there and the Central Banks are still there and we will look past china. For the meantime, we already looked at china trade. China trade was the major headwind for this market and for the economy. We heard all of that before. The market shrugged it off so what is the market going to do now with the same sort of ratcheting up. As long as you keep the trade deal intact, i think that the market will continue to grind higher and its myopic on the pandemic so once these economies start to reopen, if we dont get hiccups and thats a big if, and thats the first day im back in march and if we start to see reopenings of economies and we dont see major spikes higher in cases or in deaths, the market will grind higher because the fed is still there karen, market thoughts . Yeah. I agree with tim and steve i think trump was trying to thread a needle was to blame china very directly for covid coming into the United States so that theyre responsible, hes not responsible. Reelect him that was part of the message the other part is i will talk tough on china but im not going to do anything because im not going to rock the boat for the markets. That was what he was looking to do and he was somewhat successful in the second or third part of that, so i agree with steve its the fed and how are things going to open . We heard guy during the negotiation of the phase one trade deal of all sorts of other little ways that china retaliated short of official action, and ports for instance to sort of gum up the supply chain and things like that can still happen even without any official retaliatory action from beijing. No question about it, and a lot of this takes place with no return of sort from the chinese. Youre going to see a return of serve. Im hard pressed to believe this rhetorics not going to get ratcheted up, and i think President Trump successfully in the ice of the market thread a middle and the time of the day and all those things and that was a pretty hawkish statement if you really listened to it and im hard pressed to believe that theres not going to be some return of serve from the chinese next week. So although i do think the fed controls much of this, i think this heightened rhetoric between the chinese cant be underestimated in terms of what it means to the market label me somewhat skeptical still. Sunday night should be a very interesting night, tim. Yeah. I think well get more politics and more grandstanding, but i also would just fall back on yeah the return of serve is fine. I think both sides need to dig in their heels on the baseline and well see a long rally this isnt going to end overnight. So i think both politicians will do what they need to do. Meanwhile, stimulus on both sides of the world is going to continue, so the markets are more focused on that think of where we were with the trade war even at the low points and when the feds stepped in the trade war meant nothing, and i, you know, for better or worse. Were not happy about the fed. Were not happy about nationalizing the assets and the credit markets i dont think we are im not, but i think this is the Market Dynamic that we have. Heres the question here ate other question, aside from formal actions from beijing, formal retaliation and we have u. S. Companies going into deepening the presence in china and relying on china for growth did you see the mauve in beyond meat today it was up 5 percent joining with yum in china, thank you control room for firing up this graphic. We did the story about popeyes going into shanghai and the huge lines. U. S. Companies are depending on china for growth so can that continue in parallel with ramped up u. S. China relations, karen i think on the one hand it can i think that chinese consumers are going to want the popeyes of the world and on the other hand the trade war was a message for companies that they need to have alternatives in their supply chain to china, and so that wasnt fully implemented, and i think there are still companies that, you know, need to have alternative supply chains so theyre doing that i dont know which of those two factors is bigger though coming up, shares of lulu lemon stretching higher. One wall street firm says this rally has legs and it may be downward facing dog. The chart master is here and he sees warning signsreng i bwin the beaten down space. We are back right after this break. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. But when allergies and congestion strike, take allegrad. A nondrowsy antihistamine plus a powerful decongestant. So you can always say yes to putting your true colors on display. Say yes to allegrd. Sawithout evenon yoleaving your house. To putting your true colors on display. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, youll only have to pay for the data you need starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. Its the most reliable wireless network. And it could save you hundreds. Xfinity mobile. Welcome back to fast money. Check out shares of lululemon Raymond James upping the company. Thats a 34 increase. Karen, youre in the name. What do you make of the call yes i actually agree with everything that he said, right . They are well positioned for many reasons including they already have a wellestablished online presence. The focus wellness and the focus on being comfortable and at home and their somewhat green inventory which allows them to not need to take markdowns because things are out of season and that helps them maintain their gross margin i also believe that their revenues will surprise to the upside and i think there will be a rush hes the high on the street now so i think there will be a rush to chase for me this is a portfolio positioning and the stock is up 35 percent and Everything Else i had was not up 35 so it was a bigger dollar position and a bigger position in the overall portfolio lastly, i have to sell some to ensure that it goes up and its sort of a sacrificial lamb kind of thing and now im feeling chill and good with what i have. So is she bullish it makes total sense, karen Capri Leggings and a muscle tank its not like a Spring Season sort of thing. Its an allyear round kind of thing, right, guy . Yoga has no bounds when it comes to seasonality i mean, for me its, you know, its a fullyear situation without question this is one of the retailers that weve been pretty fed fast on across the board for quite some time. Were not speaking about this in a vacuum i absolutely think it can get there. The knock is valuation and the other side of that is the growth is pretty ridiculous and as we mentioned a number of times, theyve gone from selling one pair of mens underwear and 50 is mens and thats a huge Growth Opportunity and so theyre probably late to the dance, but you know what theyre in the dance now and i think it can absolutely get there. We have a big read on the health of the u. S. Consumer today. Personal income jumping 10. 5 thanks in part to government stimulus checks while spending plunged a record 13. 6 , but are these numbers telling the real story about what is going on with the consumer . Lets bring in mark zanny, chief economist at analytics thank you, melissa. Wages down 8 im wondering, mark, if weve seen the full extent of the pandemic in wages and this number. We have one more really bad month, this month, the month of may. So we will probably lose another 4 or 5 million jobs so well get big negative numbers for may, and a lot of that will be offset by the continued Unemployment Insurance benefits and other stimulus checks. So in may, netnet it will be more of a wash in april, as you saw, the stimulus checks and the ui was each more than the loss of wages and that helped to support spending as well as it was supported. In terms of the sort of waves of layoffs happening, mark, when we saw that first in the lower income segment and services industries, for instance, and then it rolls over to white collar and more immune im wondering if that will up pact the numbers greatly and in turn are breaking down the news even that is rored that there are pay cuts and if companies decided that they would give their employees pay cuts to share in the pain and the pay cuts may not take effect until june. One of the most from an academic perspective, the stunning thing is about the broadbased nature of the job loss and the bureau of labor statistics publishes across industries and last month all, but a handful saw a job loss and the handful were nonstore retail, courier, Postal Service and general merchandise because the targets and walmarts of the world are capturing market share and are doing pretty well, but that gives you a sense of the magnitude of the job loss and thats all kinds of jobs and while many of them will come back, as businesses reopen many will not this will put a lot of pressure on incomes for a long time to come and obviously remain a significant weight on consumers going forward. Tims got a question. Hi, mark. Great to hear from you as usual. How about inflation . I think people are all over the map. We spent a year getting through a credit crisis which is deflationary and we just heard new jersey raise toll prices 34 and any business raising prices and whats your call on inflation and is that going to be something this we wait three months and then we see it . Yeah. Tim, its also a disinflationary shock. There will be spot price increases for products and services that are in shortage. Yeah youll see that, but broadly speaking because unemployment is very high and well be north of 20 in may even after the businesses reopen were going to be close to double digit and thats going weigh very heavily on consumer demand and businesses just wont have the pricing power. Ill give you one data point and more anecdotal we run a survey off of our website and weve been doing it weekly since 2003 and last week not a single business said there were raising prices and its 350 businesses across the globe. There are businesses raising prices and that gives you a sense of magnitude maybe on the other side of that pandemic when demand improves and it bumps up supply and theyll rationalize and down sie and thats on the other side of the pandemic. Thank you for your time moodys analytics we may not have seen the impact in terms of wages and their spending totally reasonable for mark to feel that way, and i think that this time period either makes marks job the easeiest its ever been or the toughest its ever been i think were so close right now to the fire that a lot of those numbering all have to run their course this is going to be a marathon, not a sprint so i think until we can get past this and the economy started again, i think you cant pay 100 attention to any one number, and you have to wait and its duration, not one number at a time theres a psychological component to living in the pandemic and in the numbers we got today, personal savings jumped up 33 and that rate is a record high and we might be entering a period where the consumer has this Great Depression mentality and they were scarred by seeing the extent of losses around them and even if he or she maintained a job they might be socking away more money thinking you never know, karen. Yeah. I think that is a concern for those that rely on consumer spending, but i think well end up seeing that there are companies that will still do well, like a lululemon who have exactly what the customer wants and then a lot who are not, particularly if it they have debt like a macys i think were learning what are the things we can do without and to me macys doesnt fulfill what the customer really wants in a way that lululemon does, and i do think Something Like starbucks for a relatively small amount of money can have the consumer feel like i have a little bit of a sense of a back to normal and this was one of the daily things i loved. Coming up, blunt trauma to shares of canopy growth. Theyre here to break down what happened much more fast money in two. Welcome back to fast money. Talk about a buzz kill shares of canopy going up in smoke. Medical cannabis use was in high demand and recreational revenue took a major hit tim, whats your take here well, look, these are terrible headlines and the question is what was the markets expectation . I think the falling sales and the deceleration on adult both b to c and b to b was disappointing. I think to the extent that theyre losing market share in canada, low 20s into high teens is disappointing and gross margin improvements is what they wanted to do and what they promised the market and these restructuring charges are necessary. Theyre painful, but where assets were bought and where they were marked was unrealistic and weve talked about valuations of cannabis for a long time. So what i like about this is this Management Team is experienced in Consumer Products and david klein gave a very stern and serious, you know, assessment of what they need to do to turn this business around, but theyre restructuring and theyre rationalizing in a way that makes sense for this industry theyve cut 40 of their capacity in canada and theyve got 2 billion of cash in the balance sheet. At a time when these companies are scrambling, this company has enormous opportunities to be opportunistic and its led by the right team and its got the most amount of cash and at this point they were marked down at this point these are not great numbers and it ran 80 , nine or ten days into the print, this was a terrible new reality for canopy growth. The news had an impact on the rest of the sector steve grasso, where are you now in cannabis . So im associated with private companies now, but if i had to pick one of the public ones it would either be canopy or chronos you have to get a company that has a long run in front of them and partners with deep pockets both have partners with deep pockets. It did strike me as odd that to tims point that the Recreational Use was not off the charts when you shelter in place there are a couple of things to do at home and i assume that recreation would have been a strong point, but i would say in the space. I think the major headwinds. Now we know what grasso does at home. Lets go around the horn for final trade. Can mention starbucks this is one of those luxuries that americans want a big piece of as they get into it and the company is reopening and starbucks will see some very interesting numbers in the next month. Karen yeah. If we see some increased rhetoric from china over the weekend and baba opens down i would be a buyer steve i was never a pothead, focker igv, and the expanded software guy adami dont puff the magic dragon, mel, and i have to tell you, cybersecurities are big. Jussat y no thanks for watching. Options a options action is up next. vo our communities need help like never before and wells fargo employees are assisting millions of customers across america through fee waivers and payment deferrals, helping people stay in their homes through mortgage Payment Relief efforts and donating 175 Million Dollars to help hundreds of local organizations provide food and other critical needs. When you need us, wells fargo is here to help. I am totally blind. And non24 can make me show up too early. Or too late. Or make me feel like im not really there. Talk to your doctor, and call 8442342424. Options action new opportunities to profit from the markets happy friday, everybody. Its time for options action. Carter worth explains why small caps could be in for a big surprise and how it all comes down to financials plus, jeopardy style, the answer, what is the work video call youre on and zooms video call the question what are two things nowhere near ending speaking of call, the professor, mike khouw has another teaching moment on why now could be the best time to go back to the most basic tool in your kit it is time to risk less to make more and lets get right to it for this frida
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