DC’s Race to Avoid Default, Surprise Auto Partnership, Mixed Retail Bag 5/26/23

SPEAKER_1 (0:00)

Okay, text from the wedding planner.

SPEAKER_2 (0:02)

She's talking about a cake pop mural.

Sara Eisen (0:05)

Ah, exciting.

SPEAKER_2 (0:07)

Ooh, it's $8,000. Oh, I don't know, we're trying to save for a house.

SPEAKER_4 (0:12)

Well, you only get married once or twice. The three time stops.

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Jim Cramer (0:31)

It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

Carl Quintanilla (0:38)

Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Sara Eisen, Mike Santoli.

At post night of the New York Stock Exchange, David and Jim have the morning off. Holiday weekend, but not before we chop. A little more wood. Debt ceiling deal reportedly gets a bit closer.

Citi upping US equities and April eco data runs hot, including core PCE.

Two year, four, six is the highest since March. A roadmap begins with the macro outlook. Several retailers with results will get the latest reads on the consumer and inflationary headwinds.

Sara Eisen (1:07)

Plus DC's race to avoid defaults. Negotiators reportedly closing in on a deal.

Mike Santoli (1:12)

And Ford's surprise EV partnership striking a deal, a charging deal with Tesla.

Carl Quintanilla (1:17)

Let's begin with the markets. The futures holding in there as the Dow has now suffered a five day losing streak, closing below its 200 day moving average for the first time since late March. Mike, conversation this morning, definitely about core PCE spending.

And this idea that the recession calls may continue now to get pushed out.

Mike Santoli (1:36)

Yes, pretty familiar theme for the last few months, which is the economy seems to be holding up better than at least a lot of the forecast anticipated and inflation is a little bit stickier. So the processes we thought that were going to be underway with the Fed tightening this much and having the lagged effects of that come through have not really had as much of a bite as we might've thought. Now, where does that leave us?

I mean, the market in general, the typical stocks been struggling, pricing in some degree of slowdown, earnings are flattening out, but maybe are done being revised lower for the moment. So you have this kind of caught in between type of action outside of course of the big marquee, beloved mega cap growth stocks we keep talking about.

Sara Eisen (2:19)

I mean, everybody's pushing back against the notion that the market has been so resilient. You get so many emails about this. Tony Dwyer of Canacor, the top eight performing S&P 500 stocks account for 118% of year to date gains in the S&P 500 This has not been a broad rally.

Carl Quintanilla (2:34)

Well, this chart right here, I think Deutsche just weighed in a couple of moments ago, and Mike, you've been all over this for so long, but they're calling it the narrowest rally in a century by some metrics.

Mike Santoli (2:44)

Yeah, it depends how you slice it, which of the stocks you wanna count in the anointed bucket, but this is the equated S&P lagging, and almost all of this underperformance having happened since SVB failed. That's the early March divergence there. So you're talking about 10 percentage points. You know, it's interesting, by other measures, this divergence is as wide as it's been since 1999 or early 2000, but also 1998, okay? 1998 was not a mega top. It was a volatile year. You had some concerns about what the Fed was doing. You had a financial accident in Russia defaulting and everything else, and then it was a rush into the quote safe mega caps that could weather things, plus a little bit of a tech bubble getting rolling as well as the Fed got easier than expected.

Sara Eisen (3:31)

It's interesting though that the tech trade has held up so well given the fact that yields have risen and now Fed expectations are changing. Is June live? Is July live? We've had some hawkish Fed speak. We've had some hotter data, including the core PCE, which we know they monitor very closely.

And yet, technology has held up well.

Mike Santoli (3:51)

Well, you know my take on that, Sara, which is that yields have not ever been the only reason that they outperform or underperform. But I do think, there's no doubt June's a live meeting, I think at this point. I mean, not to say that it's a done deal they're gonna hike again, but knowing what we know right now, assuming there's a debt ceiling deal, I do think there's gonna be a little bit, it's a judgment call at this point. It's kind of like exactly what you think the risk reward of a pause, but you know it's gonna be characterized as a pause and not the end.