Markets and the Joy of "Six," A Housing Miss With "2020" Vision, Harris vs. Trump on Inflation. 8/16/24

SPEAKER_1 (0:00)

Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:05)

Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Mike Santoli here at Post 9 of the New York Stock Exchange. Cramer in favor of the morning off. Pre-market just south of Flagg. Global equities wrapping up their best week of the year. S&P now up 8% from last Monday's low, just 2% from some all-time highs. Roadmap begins with that winning week for Wall Street. Does the rally have more legs? Plus, the weakest housing starts data since May of 2020 as Redfin says the share of million-dollar homes just hits an all-time high. And the vice president said to deliver a major economic policy speech today featuring new tax cuts, housing incentives, and price caps. Let's begin though with the broader market in the midst of a six-day wind streak. Mike, I think it's the best six days going back to 22

Mike Santoli (0:50)

Yes, it's been a good streak. Obviously makes sense to digest some of that. Really, if you go back to the intraday low of a week ago Monday, S&P up 8% in eight trading days. And it's gained back about more than two-thirds of what was lost, high to low. So what does that tell you? I think it tells you a couple of things. One, the extremity of the stress in the very short term, I think, cleared out so much in the way of accumulated exposure to stocks and positioning and risk assets and all the rest of it. You see it in all the hedge fund data. You see it in a lot of the sentiment stuff. And so that creates a little bit of a technical tailwind for that to normalize once something doesn't break as a result of that. And then the data have come in, as we've been talking about for a couple of days, that allows investors to kind of rebuild some confidence in the soft landing scenario. So relief across all those fronts. I think the strength of the come back says a lot about the buildup of anxiety ahead of it, through the numbers about July softness and consumer and all of that. So what does it take to get you back to the highs in a hurry? Probably quite a bit. I mean, it doesn't take a lot in distance, but I still think you have to have a lot of certainty. So arguably, we're going to have to be surfing from data point to data point, testing against the soft landing scenario. Very bullish if in fact the Fed can signal, it's going to start to ease and normalize policy and become less restrictive in a very deliberate slow orderly way. Because that's always to me been the bullcase, not that they start to cut and slash rates because that seems like a little more of a desperation move. So, all of that fits together pretty well. Earnings did their part, I would argue, 10% annualized. And you know, Citi saying that the non-MAG 7 stocks up 5% plus or 4% or something like that in the second quarter. Not wonderful, but it's doing some of the lifting.

Carl Quintanilla (2:40)

Well, first contribution from the 493 in six quarters. Now we're starting to get some curtain raisers on Jackson Hole. It was BNP Paribas last night saying that Powell's likely to indicate that cuts are imminent and set the tail for September. JPM desk today talks about whether or not cuts do anything to interrupt the growth bullish scenario. In other words, do they know something we don't know?

Mike Santoli (3:05)

Yeah, I don't think we're close to that. Look, if September happens with a cut, it will have been what, 14 months since they hiked last. That's an extremely long time to be on pause. They've set the stage for this. They've talked about how restrictive policy is at this level. Inflation by CPI and PCE going below 3%. I mean, there's a massive gap there. There's a massive gap between Fed funds and deteriorated yield. In other words, everything builds toward they should be cutting right now, not because the economy weakened appreciably beyond what they were expecting. So I think that message should be taken okay. Yeah, I guess the question is, does it have an actual effect, aside from a psychological effect? It's much more about the gesture of, we're no longer trying to hold the economy back. There's room to cut without it meaning there's something negative for the economy at least in the short term. That's the win if it goes that way. But there are numbers between now and then.