tv Fast Money CNBC May 31, 2019 5:00pm-5:30pm EDT
the average year has two 5% plus pullbacks and they always feel nasty when they're happening and i think we're on the verge of deciding whether this is routine or if it will be a deeper correction >> it was -- december wasn't that long ago. >> thank you now it's not so much that does it for "closing bell" today. >> "fast money" begins right now. >> "fast money" starts right now live from the market overlooking times square i'm melissa lee. carter worth, tim seymour, jeff niles from pmc and dan nathan. crude getting crushed sinking another 5% now down 16% this month. is the commodity in for a crude summer we have the details. plus apple rotting >> oh! >> the stock having its worst month since november sinking deeper into a bear market and there seem to be signs of life the dow dropping 300 points having the worst month year as the president axe noubsannounce
tariffs on mexico. restaurants and railroads all taking hits today as wall street tries to digest just how big this impact could be now we're fighting a trade front, a trade war with china and mexico what does the market look like for these trade battles? >> hi, mel it tells you that tariffs are being used for any circumstances and this isn't about protecting the intellectual property and this isn't about control of technology and this isn't about politics and this is about elections and it's about what it's done on a two-day move. look at bond yields and you went from 228 to 211 on the teb-year and almost 1.5% and transports down 2%. pick your cyclical leading asset class and you had a two-day move that was extraordinary and you've seen emerging markets have a better day over the last couple of days. >> whether it's unreliable entities which is a new term
we're learning to define which is what china will be doing to protect industries it's not getting better, it's getting worse. you had them throughout asia which wasn't better. the only good thing right now is that sentiment is about as bearish as we've seen in a long time and i actually think things are very oversold in the short run. bond wields are way, way oversold and that's the best news. >> what is your message to corporations, if it's for any sort of battle and not just a trade battle we're notally not going to be in the lun of hire. we're looking for the credit markets and you've seen investment grade blowout about 125 basis points and the overall funding cost of investment grade has come down. a lot of that is because of treasury yields having fallen and there's potential risk in that which we can talk about
later and high yield may be a little more worry some, and not confirm the rally that we saw in the rest of the year high yield following that down lower and that in combination are things we're worried about and watching i think youcan play this through active management now. if you look at the russell 1,000, for example, about 30% of the names are 5% of the highs and 10% of the names are 15% off the highs and in thatness is the winners and losers are spreading out. if you have a good fund that you like i would think about that as far as execution goes. >> two then, obviously, sentiment can get extreme. i don't know if it's that extreme and you did use the word oversold and there was a case to be made for that, if you were to consider the following, over the past decade since the '09 low the s&p is down for the fourth week in a row and for the dow being down six, you go back to 1896 that's a fairly rare circumstance that's only happened 40 times on a six-week rolling basis and 75%
of the time in the seventh week it's up. so does that make you bullish? >> no. it means you get oversold because they were short start to cover and it does some buying and while you get a bounce it doesn't change the fact that we've had a great bull market and there are a lot of issues that are front and center. >> and you would just mention this and we talked about the s&p 500 and we are 7% off those highs. i think it's important to recognize the fact that the russell 2000 of small caps did not confirm that high a month ago and if you look at the msci world index. it never made a new high, right? >> the transports and all of it. >> i guess what i was saying is over the last month while there have been nasty headlines that we can extrapolate to at this stage of the game and where everything is that another round of tariffs on another front doesn't seem leak a great idea especially when you consider how
fragile global growth is right now and how weir actually kind of the best -- what do they call it the best house in a bad neighborhood sort of situation we can easily go down another 3%, 4,%, 5% in the next few weeks and i know the inicators that you're looking at are oversold and i don't think investors have panicked yet. >> it's very muted >> yeah, but i still think you have a case. the semis are more oversold than november 21st and this is a move in the bond market standard deviations and the probability of this happening is miniscule so you have a place where people have the sense that the u.s. and china are so dug in that there's no end in sight lobbing mexican tariffs for the issue of 2020 is as soon as the administration feels as if
they've satisfied the con stitch witness o constituency the market can turn on a dime. the problem with that is that we've seen for the last 15 months is that the fear of trade and the uncertainty for ceos is they truly do reel it in and they truly do go back on capex and not invest in their business and enterprise spend and then you layer in very real dysfunction in the tech world which i'm not sure how we'll solve unreliable entities as it relates to other champion companies. by the way, it's not just u.s. and china. they're bankly going to be protecting companies in india. do you think they're going to do it for the companies they have >> and the tariffs and whether or not the companies have to absorb that cost to not pass on to the consumer and you mentioned something earlier and you don't fell like you have to step in the way of the companies with less exposure there are a lot of companies in the s&p 500 have direct exposure. >> i think the one silver lining
when you're talking about a two-front trade war is the mexico front mexico may not be in a position to extend this type of framework. >> 61% of the local bond market is held by foreign investors if you start to see foreign investors and drag those bonds for a long time, that pressures the peso and they have dollar-denominated debt and oh, by the way, the cherry on top is that this's record long positioning in the futures market in the peso you start to get pressure on the pso and i don't think that's something mexico wants that. >> that all sounds smart and good except that what happened here we got blindsided by a tweet by a president that doesn't understand trade mechanics and he basically put some artificial deadline, june 10th, 5% tariff. mexico is the largest trading partner. we spend a lot of time talking about china but we actually have, there's the surplus situation which the chinese
don't have the mexicans can retaliate and we've already negotiated the nafta 2.0 and the tariffs are illegal under nafta 2.0 and that'swhy we have nafta in the first place. to me, there's no measurement. he's basically threatening the tariffs because of what's going on at the border how do we measure that things have gotten better and how does anyone factor in -- >> some are saying that gives the president cover to not ratchet up tariffs in the first place because there aren't specific benchmarks. >> he can say at any point in time i'm not going to do it. >> doesn't he start losing credibility is the point i would make as we try to negotiate this on multiple fronts >> even after the mexican tariff announcement is mexico was basically on the verge of a recession. they pointed minus .2 and the leading indicators indicated
they were going there anyway, and the reality is about shipping companies and the companies that are located in mexico and there's an enormous loss to u.s. companies and somebody then tweeted back, by the way, you considered northern mexico the bottom line is this is a case where mexico is almost $700 million of foreign trade a year and on some level if there was rationality to this it would be -- it would be concerning. >> just quickly. you're gm. what do you do with that >> no, it gets back to -- no, i don't think you to add anything and i do think there's uncertainty. in difficult times it's important to know what you own i'll say it a lot of times, they cut their flowers and keep their weeds and they sell companies that haven't gone down that much because they think oh, wow, i can make a couple of bucks in this one and they actually don't take profits or -- excuse me, cut losses on companies that
have done poor -- poorly gm to me have reaffirmed numbers and they'll basically make about 630 per share and this is something i can earn to a difficult feary. >> the fed funds probabilities an over 70% chance of a rate caught in september. >> they are now expecting two rate cuts and 75 title and the rate cut might not be the savior that stocks are looking for. this is the chart of the day why don't you explain it >> every piece of research i saw in my inbox said it has gone up. it believes that the fed can step in even if things get worse and they will cut rates and things will get better and on the surface that will make sense. you saw interest rates go from 275 on the ten-year to 213 or 214 and stocks are up about 20% since christmas eve and maybe a little bit less now, but on the surface that seems good.
low rates and that's good for stocks, but if you look at this chart and look at the individual trading days, really what you see is on the up days for rates is when the s&p has made most of its gains and on the down days for rates it's down 10%. it is not going to be the savior that everybody thinks. it calls that thesis into question maybe bad news is bad news now we've been conditioned that bad news is good news for rates. >> the fed was stepping in '08 and i mean stepping in and that will scare the market. >> at this point, noi there's more confirming data around the world that maybe they economy isn't that soft. >> if you think about the last fed hike and the first fed caught. >> whether the fed will deny this or not, if the, and even
though some people thought they were onerously, and this is a sign that the economy is weakening much more aggressively than three months ago. >> i'll make one last point and i think all of us other than our friend jeff here remember what it was like in '01 when the fed cut rates and in '08 you might remember that and it was the sort of thing that causes a near-term short skwez, but at that point these were desperate actions in crises and the fact of the matter is we don't have a crisisis what's the crisis? >> larry kudlow goes on tv last month saying cheat is killing it where's the crisis if they start cutting rates at fed funds at 2.7%. >> they're in preventive mode. with inflation at 2% we're at zero and we'll start getting creative we just had 3% gdp growth in q1
we will start panicking on quantitative easing when there's no financial crisis? >> last, quickly >> it's important for people on a friday when it was another awful week i don't think there should be a panic out there because the economy is not going straight over the cliff equities are priced near perfection still and that's really where the equity market is making some kind of an adjustment. >> talk about low energy, oil closing an ugly month and the market could be in for a crude summer apple falling deeper into a bear market having its worst month since november and there is one sign the stock has bottomed out. >> it gets put to the test as the fda holds the first meeting on the cannabis craze and we'll tell you what that means for the pot stocks much more "fast money" right after thisundrels. draw the line with roundup. the sure shot wand extends with a protective shield to target weeds precisely and kill them right down to the root. roundup brand. trusted for over 40 years.
[ whimpering ] and from this point on. nothing is going to be the same. [ "all these things that i've done" by the killers ] no, no, no. this way buddy. no! liam's heads for comforts is in the 80th percetile. oh that's cool. it's a lot of head. it's like you're the dad and i'm the mom and we're in a relationship and this is our baby. [ laughing ] well... it's exactly like that! exactly! welcome back to "fast money," it is starting to look like a cruel, cruel summer the crude crush also taking energy stocks with it, this after posting its eighth straight week of losses, making this the worst weekly losing streak ever as 90% of the names of the group are in a correction or worse how low can crude go
i'll go to carter on this. what does the chart tell you >> i mean, look, volatility like this and you had a reverse with gold doing one thing today and crude another. the bigger issue really is about the energy stocks and the sense that it's becoming such a small percentage of growth manager's benchmarks that it's -- you're getting to the point that it's self-fulfilling and they're stopping to take meetings with energy analyst and they stop research on the subject because it's not a important enough part of their portfolio to either bother spending time on and that is either the sign of a great low which many of you would argue or a sign of a structural change that is permanent >> your call is? >> i think there's no reason to be buying the stocks >> banana rama, we led in, great song and i believe that clip was from the karate kid. ♪ >> he swept the knee, and if you are a portfolio manager you can make the argument that someone's sweeping the leg on you when it
comes to investing in energy stocks i think energy companies are being run for equity investors and they're doing things differently and the balance sheets are better. having said that, if you are in an environment when oil went to fresh lows so i would be cautious on energy stocks. >> there is small exposure as well to some companies who actually buy crude from mexico and it increases the price of the may an crude and a couple of names like royal dutch/shell and chevron has some exposure there. >> there are certainly some individual problems and back to the volatility of the commodity just because it's been so volatile over the last couple of years and we made the mistake last year and we chased energy stocks because we saw this decoupling between the price of the commodity and investors are so programmed now to have the oil fall back down that even if we were to see a rebound in crude here and i would not
expect some sort of catch help up trade. >> for more on energy, i'm melissa lee on cnbc, the leader worldwide. here's what's coming up on fast. >> apple is having its worst month since november if you lost money we'll tell you how to get some of it back no matter where this stock goes next plus -- ♪ i feel pretty, oh, so pretty >> the cbd boom has taken the beauty industry by boom, but is all of the hemp hype just in the eye of the consumer? we've got those details. there's much more "fast money" right after this break
plants capture co2. what if other kinds of plants captured it too? if these industrial plants had technology that captured carbon like trees we could help lower emissions. carbon capture is important technology - and experts agree. that's why we're working on ways to improve it. so plants... can be a little more... like plants. ♪ welcome back to "fast
money," pot stocks, and the case for cbd with the fda holding its first-ever hearing on the potential medicinal benefits of the hemp hype. there are a lot of questions out there still that they're asking. tim, in terms of the benefits and the science, et cetera >> they should be. there's a lot of false claims and snake oil and they need cbd oil and whatever form it takes just because it's been passed and legal through the hemp bill does not mean that the products and the products that go in food should be unregulated and everybody in the industry would argue the same thing and there were 150 people parading in front of the fda giving views, testimony and insight, claiming they want the same thing i think this issa i process that would take some time and i wouldn't hold your breath on a decisive outcome today or tomorrow. >> let's get to aditi roy who had been monitoring the meeting. what was the meeting like? >> it was a spirited meeting with fda officials grilling the proponents on what the ingredients the benefits that
advocates say it does and it included company executives, and research asked the fda to set up a regulatory framework for cbd to be used in food products and beverages. fda panelists helped develop dosage requirements and about the effects on users and pets. one executive at wildflower which sells cbd soaps was questioned about the medical benefits of his products >> we've had a lot of interactions with customers that it's simply more effective as a beauty product when we include that ingredient. >> when you say effective, what do you mean by that? >> it delivers a higher sense of personal attraction, increasing -- it's more desirable to the product, not through clinical definitions, but you know, through a consumer-based -- >> and on another note, the illinois house passed
recreational cannabis legalization today following senate approval of the bill earlier this week. the bill goes to the governor who is expected to sign that would make the illinois the 11th state to legalize recreational cannabis >> aditi roy joining us on the new york stock exchange. the last sound bite speaks volumes in terms of the claims -- or not even the claim, but how do you measure any sort of claim from the products. >> a lot of people are selling snake oil. a lot of this is oil. >> although you can use cbd soap >> or just soap. >> all right all right. it's being infused in a lot of products and the products were more attractive because people think there's some sort of medicinal sort of situation. i think the fda will find that they don't, there's no way to put your finger on it. listen, at the end of the day you've been saying this for years now. it's thc for medicinal purposes and recreational
isn't that the big thing cbd feels like vapor ware to me. >> there is some cbd application, like a topical which could have lidocaine in it that's approved by the fda, so if you're basically looking for some skin anesthetic plus, that's what people are doing, but yes, when you talk about medical and the pharma and the science, this is where companies are getting multiples. this is where you actually see people willing to pay for companies. do i think, however, because of the capital market structure and the legal status on the federal level you are seeing cbd company comes to market. there will be a handful that come through in the next few months on nasdaq, on the new york stock exchange that will be big deals and they'll be well supported. >> and there will be more consumer product companies going after these sorts of businesses in order to get into this latest buzz word. carter, you don't use cbd? >> do you use soap >> soap on a rope. the old-fashioned kind >> whatever.
>> all right on that note -- so, meanwhile, what do you think of the pot stocks in general? >> as we talk about markets. it's a great market discussion because of the risk factor in this sector is such and companies that need to raise capital in the next few months because it's that time again, i think it's a very -- it's a very dangerous time in the sector right now to be running after pot stocks because they're down. time for the final trade carter >> of course, it's finally come to life, a big week and we think it's just the beginning. >> tim seymour. >> i'll take the other side of this, not because carter's wrong and gold typically does rally and we've seen gold rally 1320 and 1330 multiple times and i think i'd be a searle of gold here >> who is allen hamilton the tech exposure that's not necessarily exposed to what's going on in china. most revenues come from the u.s. government and it's a play on the national defense strategy and more money going into
cybersecurity investment. >> and we still like it. >> dan >> tech around for options action and we'll tell you how to play for the long side and very exposed to china, but here's a way that you can get wiggle room. >> that does it for us on fast don't move "options action" is up next. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis. i'm off to college. i'm worried about my parents' retirement. don't worry. voya helps them to and through retirement... dealing with today's expenses ...while helping plan, invest and protect for the future. so they'll be okay? i think they'll be fine. voya. helping you to and through retirement.
hi there we are live at the nasdaq in times square the guys are getting ready for a big b very big show. here's what's coming up. >> apple shares are rotting this month, but if you lost money on this stock, don't worry because dan nathan has a way to trade it on the cheap and he'll tell you how to do it plus -- ♪ ♪ >> doesn't that look refreshing? ko and carter think so and they'll tell you why coca-cola could be the ultimate summer sizzler, and later -- >> my name is bond james bond