Engine trouble at ford, and a fast mover. A name we rarely mention on the show. The stories behind three stocks today. Were coming to you live from studio b at the nasdaq. On the desk tonight, we have tim seymour, dan nathan, guy adami and our special guest trader tonight, kristen bitterly. Welcome to everyone. Were going to start with the lateday selloff. The dow falling as much as 350 points at its lows. The nasdaq and the s p down as much as 1. 2 . The indices closing off their lows of the day, but all three still snapping a fourday win streak. The pullback colliding with that 30year treasury option that showed weaker demand. Jumping back to nearly 4. 9 . All of this as wall street was digesting the latest cpi data. Consumer prices rising 3. 7 in september from a year ago, slightly more than the street estimate. Energy, used car vehicles, prices falling, but it wasnt enough to offset the gains in things like food and shelter. So, how should the market be digesting all of these data points, guy . Looked like the market was going to be a little bit okay with a firmer cpi. First of all, great to have you. Thank you. Love being with you. Its serendipitous that youre with us, because i said the dollar had a fiveweek jump today . Think about the move in currency. Think about the move in the bond market. A 19basis point move today from low to high, which is remarkable in the context of everything thats taken place over the last week or so. Thats the trade. Tim talked about this a lot. I still think yields are going higher. I think yields would be dramatically higher, but for what weve seen ore the last week, so, yields are telling you the story. And the demand for our bonds, the market is demanding a higher yield to buy our debt. That is problematic. Is it problematic, tim . You are a little more, i dont know sang win . Yeah, i mean, maybe act kwee yes, sir sent to the market that i have. And the qs are close to that, actually, they finished with that. But i hear everybody here, and an 18point move on that auction was a sign that investors are demanding higher term premium so, you get a pickup of ten bips on the tenyear, 15 bips from 10s to 30s. The curve is steepening. Term premium, risk premium, and thats something to think about. The core cpi was hotter than expected. We had a week, you had all kinds of folks from the Federal Reserve talking about, eh, we probably dont need to go, maybe the long end is doing the work for us, but that core showed shelter and core elements of inflation that are going to be sticky, and its really that duration of higher for longer. Its not about rate cuts anymore. And i think ultimately i do think thats going to be bad for equities, but we had a 4 move in the s p. Lets take a deep breath and understand that markets are are dealing with a lot of factors, and i think thats what today felt like. We did see the probability for the next rate hike go up to 40 from 30 . Yeah. That was interpretation of the ininflation report. What do you think . Yeah, so, i think cpi, a little bit hotter than expected, but when you actually break down the numbers, if we look at core cpi x shelter, youre looking at 2 . So, with shelter and services, if we see a path to that actually coming down, you can see, maybe 2. 5 by the end of next year, not quite the 2 target that the feds looking for. But i think the price action today goes back to that 30year auction. It was all about the 30year auction. And this debate that weve had the whole month of september, who are the buyers of the tenyear and the 30year . And theres pressure that rates could go higher there. Weve had this debate all year, but it doesnt feel like weve had a lot of weak auctions, so, theres been a lot of discussion about who is a buyer, is there too much supply coming due, but most of the auctions, especially at the short end of the curve, have been gobbled up. What happened today . I dont know jack about auctions. But bringing it back to the stock market, if you think about the things that we value stocks on, right . And so, if weve been really focused on inflation and focused on rates, look what we had in the last week. Friday, we had an unemployment report at 3. 8 . A cpi reading very near 3. 8 , right . If you think about all the seasons that should probably put a build under oil and energy in general Going Forward and the lack of visibility in and around that situation, i think inflationary inputs are going to be higher. Going back to the stock market, a lot of corporates, this is what were going to hear in q3 earnings season about q4 guidance, its going to be a lack of visibility. And you can say they have a mulligan, if you will. Weve gotten our arms around the situation with ukraine as that settled in, but the uncertainty with the middle east is going to be here for awhile, and so, if you think about higher inflation, you think about rates higher for longer, i dont have to say what guy is saying. I dont have to say i think rates are going higher. All they have to do is hang out around here. You mentioned the dollar. If i think about u. S. Multinationals and the inputs and the stress that puts on their earnings at a time when consumer here in the u. S. Might be getting strapped, i say to myself, the leadership that tim speaks of, they have lots of exposure overseas. Because if enterprise demand for a lot of their services and products starts to wane as we get in the new year, stocks trading, the s p, i think, trading 18 times or so, which is in line, or a little bit above the tenyear average, with rates here and all this uncertainty, they dont make any sense. That to me in this valuation range. Thats my 2 cents there, sorry about your auction here, its not my jam. Just to be clear, the market went down 120 basis points you never want to see a whole market move on a weak auction. Totally the auction. Seismic move. So, the concern is now about deficits and debts and so now were demanding more yes. Per yield for the safety of u. S. Government debt . Yes. It comes upon a 75point basis move up until that. I realize the last few days have given background. I think yields are going to go higher term, and i do think, you know, term premium is a big deal, and i do think positively slope yield curves can you just explain why thats a big deal, what that means . It means that youre demanding more return from the u. S. Government for investing longer with them. Not riskfree. And it used to be. And when money is free, you know were talking about the u. S. Government, folks, its clearly the best credit in the world, and it will be, in my lifetime, and, you know, i still think that ultimately this is going to be an opportunity for investors to lock in really attractive yields. This is what kris does all year with her team. But the market took back half of that loss, and i think had a chance to think about it. I think just to put it very simply, if you can get yields on the front end of the curve close to 5. 5 , two years north of 5 , going back to this concept, who is the buyer . Where is the bid for the tenyear . We saw a bid for the tenyear based on the attacks over the weekend, so, it did function as that flight to quality in an extreme situation, but then quickly the market corrected and said, okay if we get these high yields, anywhere from very short builds out to five years, im more comfortable hanging out there instead of this uncertainty around higher for longer and what that means for growth. And that is your point, as long as yields continue to uhhuh. A lot of people say, the economy is solid. So, thats one of the reasons did you see jobless claims today . 209, theres very little signs the job market is on fire. Thats a counterpoint. If you have a goldilocks situation, where inflation comes down and the economy hangs in there. Is inflation coming down . Yeah, it is. The rate of growth is slowing. People will say, what are you talking about, guy, inflation is back in spades, were paying more for things. And yes, in terms of rate of change, its slowing. Prices are still going higher, though. They are just going higher slower. Im not trying to be nuanced, thats the math. In terms of the market, look, right now, the market seems fine with all of this. At a certain point, the same way were seeing Home Builders roll over on the back of higher yields, one has to wonder if the same thing could happen in the broader market. What do you think when it comes to the good, soft landing story, still boosting earnings and the market . Because thats what the bulls argue. I think earnings, especially when we look into the pexations for next year are way too rosy. What is it, 12 Earnings Growth that we see for 2024 . If were in higher for longer that has that impact of earnings. We still see Earnings Growth going into next year, but maybe more to the tune of 4 , 5 , not 12 . And we have to be realistic. Is it a fullblown recession or just simply a slowing Economic Growth backdrop . I think that slowing backdrop in terms of pressure on the consumer, given some of the inflationary concerns, we start to see breaks in employment, they just need to be modest. I think thats going to very quickly change the consumer behavior, flow through to earnings and the slowing economy narrative. Do you think the relationship between yields and tech is still well, thats a great question. That was kind of not happening this morning. A little broken. Think about this. In late 2021, when the fed said, to battle inflation they are going to raise Interest Rates. The first things were hit, companies that did not have earnings, even some of the megacaps, when they joined the party in early 2022, thats when the s p turned lower, because we know the concentration of the top ten names. Theyve been the beneficiary, right . Like, thats the odd thing, i think, that youre talking about. Yeah. But you know, listen, apple, microsoft, they make up 20 of the ndx, the nasdaq 100 or so. They are down more than the ndx is from its highs. I mentioned this the other night on the show. If theres any reason to sell those stocks, if correlations go back towards one, like we saw in different periods in 2022, theyre going to be the leadership on the downside, too. If you look under the hood, weve been talking about retail, weve been talking about industrials, now Home Builders down 15 . The list goes on and on about the sub sectors within the s p that are in correction territory. They are saying something other than lets say 10 or 15 megacap tech stocks. Dont you think theres an element of the Free Cash Flow generation of these companies, as well . I think the narrative, not all tech is performing the same right now. So, when you look at the magnificent seven, i was one of th those. Theres a flight to qualify from a cash flow perspective. Thats what were seeing on even this week and days like that. Googles outperformed them all. And some of this, i think, google, from a free capital perspective, is right there, but apple generates more, at least aggregate Free Cash Flow than any of them. I think apple has kind of stalled in the mud, but i think we should keep in sight that many stocks areone 5 to 10 of 50week lows. Staples have been acting terribly. The dollar gens, the dollar trees, target, so its not as if there isnt a lot of carnage out there. But theres no question, what everybody is saying here, equities arent worth as much in a world when the rates are higher. So, what are they encouraging . Im sorry . What are the encouraging signs to you . Semis . Semis are being priced as growth. And they are being priced that theres actually a megacap, capx cycle that is coming through, and that were going to continue to see that. And that leadership, because of the technicals of the market and passive investing and all the things weve been following for the last ten years. It doesnt go on forever. Thats what i wash every day. If it breaks down, we should be worried until it doesnt. It doesnt and it goes higher. For more on what the numbers could mean, lets bring in bank of america u. S. Senior eco economist, its great to have you here at the nasdaq. Do you think this changes anything for the fed, the cpi report. Yeah, thanks for having me on. Our take away from the cpi report was, one, its a reminder that the flpath back to 2 is going to be difficult, and two, sticky Services Inflation means sticky policy rates. So, we keep our forecast for one more hike. Dont have particularly strong conviction on whether that hike comes in november or december, possibly even later, but even if that hike doesnt get delivered, higher for longer, so, its going to be difficult for the fed to cut rates, as long as services dont longer than the market expects at this point . Quite possibly, yes. The markets are pricing about. The argument to that is, we have seen the big selloff in longterm bond yields and that hurts asset prices. It hurts the economy, and that does the work, essentially, for the fed. Absolutely. This has been a very interesting past few days, because there was a leaning from several fed speakers that, look, maybe we can go we can pause, maybe we can go on hold from now on, because of financial tightening. And then you get this cpi number, and it makes you wonder, how the fed really done enough . Do they need to do more . Long and variable lag effects, which we should start to feel now. Im surprised it didnt happen sooner, but speak to that because historic amount of hikes in an historic amount of time. You see in the selloff in rates, a lot of those rates, it means financial tightening. And housing, which is tracking the First Quarterly increase since the First Quarter of 2021, that could go into a double dip. Business investment has outperformed this year, but theres a risk that might not last, as well, given where rates are right now and what the senior loan officer survey is telling us about credit. Im reading in your note, you think maybe the 80s is a better analogy based on the pace of inflation. What what does that mean for the Housing Market . If you think this is an 80s backdrop, look, i think real estate is going a lot lower. You cant have free money and expect people who overpaid for houses, i mean, the math is pretty simple. Right, so, its not the same scale, but if you think about what happened in the 80s, a lot of inflation and aggressive fed response, a large increase in Mortgage Rates as a result of that, but then, the other thing that was going on back then is that the largest cohort in the population, back then, the baby boomers, were coming offage. And they were starting families and that kept a floor under home prices. Year on year home prices actually never went negative. And this time around, its the millennials rather than the baby boomers. And so thats a similar story. How do you think about the supply demand balance . Theres just not enough supply. And when you look at the numbers, we are still short 4 to 5 million units, and so yes, we have higher rates, which should, you would think that housing prices would come down, but given the supply demand imbalance, its tough. Right. One of the ironies of whats happened is, one, we have higher rates, and two, a lot of households are locked into very low rate fixed mortgages. So, whats happened is, the lack of supply of existing homes has led to a little bit more construction on the new home side, and thats helped housing activity bounce. Great to have you here. Thank you very much. Were taking the questions on todays data. Dan . Listen, i go back to the stock market. Im not an economist you dont know jack about the economy or bonds . I know a little bit. Jack what . Sorry. The only thing ill say, think about the most economically sensitive groups in the stock market. I look at banks, how theyve traded all year, Home Builders have joined the party, right . The consumersensitive ones, we just talked about retail, consumer staples, they are kind of falling apart. The market reminds me a great deal of q42021, where every day on this show, and sarah, you used to pop on every once in awhile, you would say, you are so negative, why are i did say that. But i would say tow, you, l under the hood. There was a lot of stuff that was already selling off, already in bear markets, and coming into october, november, before the fed did their aboutface, so, to me, i think were in a similar period, where theres a lot of masking of bad activity which could suggest Something Different in 2024 than weve become used to in 2023, which was, again, back to that buy the dip mentality. Look under the hood. Wow. I know jack about metaphors. Looking under the hood . Any gearhead in you, growing up . A little bmx. Guy, clearly, the camara. Youre safing that because youre trying to put a wedge between me and sarah. I did not drive a camaro. I have no problem with that. All right, thats fine. I drove a camaro. When we come back, a surprise move from the uaw, speaking of cars. Why the ford plant they are targeting could mean a big hit to the company. Well have details straight ahead. Plus, two words eras movie. The pop stars eras top hitting the silver screens with huge expectations for opening weekend. How much she could pull in and how shell be celebrating in the end zone. Hint hint. Do go anywhere. Fast money back in two. Everywhere are asking is it possible . With comcast business. It is. Is it possible to help keep our Online Platform safe from cyberthreats . Absolutely. Can we provide health care virtually anywhere . We can help with that. Is it possible to use predictive monitoring to address operations issues . We can help with that, too. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. We, in the industry, do see it in certain parts of our industry, on the lower fare side of the business, but were a very different carrier than those. We got premium, which is continuing to drive the strength of the business. Weve got international, which was gang busters. That was deltas ceo on s squawk box this morning. Delta saying profits rose nearly 60 in the Third Quarter, but forecast fullyear results at the lower end of estimates due to rising fuel costs. Shares down over 2 today, have been steadily losing altitude since late june. So, how can delta get its wings back, tim . Well, boy, theres a few puns in there. A lot of great writers on this show. I think delta really just needs to hold the line on discipline in terms of capacity and keeping costs in line. Eds done a great job here. He also he listens to his employees. He listens to his customers. And i think deltas made some difficult adjustments at times when it seemed the right choice for the business and the Corporate Culture was some