Market Rally vs. Losing Streak, Walgreens Woes, Delta's Message to Investors 6/27/23

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Carl Quintanilla (0:30)

Market moving insight and analysis. Join Jim Cramer, David Faber and me, Carl Quintanilla, on the opening bell hour of CNBC Squawk on the Street.

Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Mike Santoli at the New York Stock Exchange. Cramer has the morning off. Pretty steady pre-market, mixed as the S&P still on pace for the best month since January. A lot of corporate news out of Delta, Snowflake, Walgreens, Microsoft and durable goods impressed with a big core orders in line. Our roadmap begins with the market rallies detour and whether or not it is a sign of things to come.

David Faber (1:02)

Also had a rough start for shares of Walgreens. The company slashes its outlook.

It's posting quarterly earnings that are below most analysts estimates. That's the first time in three years it's done that. Although the stock has been going down for a while. And a different story for Delta, the airline raising second quarter guidance. We're gonna have the latest from the company's investor day.

Carl Quintanilla (1:22)

Let's begin with the markets though this morning. Dow is coming off its sixth straight day of losses, the longest streak since September of last year. A lot of discussion this morning, Mike, about even though the indices were lower yesterday, Brett actually was a little positive.

Mike Santoli (1:36)

Yeah, actually quite positive. So it was another one of these days. And it's been the case, I would say, on balance for the last week plus.

And even really for the full month of June at this point, the average stock has actually gained ground on the big mega cap names. A lot of it I think falls in the category of the overall index is kind of pausing here. They're idling. We got overbought, got too hot. The big NASDAQ stocks did probably all they could do in the short term. And the big question was, is the market gonna broaden out? It has made gestures in that direction.

The equal weighted S&P is outperforming the NASDAQ 100, I think, in June at this point. So it actually has had a little bit of a comeback. Everything falls into the category to some degree of rebalancing. I don't mean just out of equities into bonds, but out of leaders into laggards and sort of looking for what hasn't participated. So kind of non-committal, feels very neutral in the sense that everyone felt under-invested. They chased, raised equity exposure in terms of hedge funds, taxable investors.

You're no longer seeing this massive net short in the S&P index futures, things like that. And now it's sort of a what's next moment because we've gotten pretty good gains year to date. We're between catalysts a little bit between the jobs report and Fed decisions. And so it feels like we have to sort of consolidate a little bit here and that's what we've been doing.

Carl Quintanilla (2:57)

Yeah, there was some, quite a bit of discussion yesterday though about say call activity tied to the S&P or semis that there is this underlying sort of bed of FOMO without a doubt. Even though the overall indices are a bit in irons, it hasn't gone away.

Mike Santoli (3:13)

In fact, it came back really strong and you can see it run through the morning. Yesterday's rally attempt in the morning in Tesla was really interesting because it was like, oh, there was a downgrade, let's buy into it. And then it didn't hold.

Nvidia and Tesla down kind of pretty significantly yesterday. So we'll see how it shakes out from there. So I'm not suggesting everyone's kind of wait and see and neutral and just letting the market do what it does. It's more about these offsetting currents of profit taking and the stuff that's run and really sorting out where we are in terms of this potential soft landing that's really gotten embraced as a scenario at this point.

And if it's a soft landing, you still got to kind of land. So things are going to slow around the edges. The question is, what have we priced in already?

Carl Quintanilla (3:59)

We'll see. I mean, credit sweeps out today looking at treasury futures suggesting that an un-inversion of the curve, David, may not come until 2026, which would basically put a recession three years from now.