Navigating a Tough August, Commerce Secretary in China, White House Selects Drugs for Medicare Price Negotiations 8/29/23

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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 Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Mike Santoli at Post 9 of the New York Stock Exchange. Cramer has the morning off. Coming off our first back-to-back S&P gains of the month.

Futures look to give a little bit back at the open as we await some of this week's high-profile inflation data, beginning with Jolts in about an hour.

10-year 422 A roadmap begins with, as we said, first back-to-back gains since July. Still on pace, though, for the worst month of the year.

David Faber (1:04)

Plus drug price talks. The White House names Merck, Amgen, Abbevie products amongst the first 10 drugs with the first ever direct negotiations between Medicare and those manufacturers.

And Commerce Secretary Raimondo making her way to Shanghai this hour. This, as she continues that four-day trip overseas, we will take you live to China.

Carl Quintanilla (1:27)

Let's begin with the markets as we start talking about the month of September. Yesterday, Mike, it was Sam Stovall who said, look out, it's the month where you're more often down than up. Although Bespoke now says when you're up double digits going into September for the year to date, that nearly has been.

Mike Santoli (1:43)

Usually strength on some level begets further strength. I feel like we've been hyper-focused on the seasonal stuff this year. It's worked, that's part of the reason. But we also peaked in the S&P 500 literally on July 31st. So it went right to script. There have been a bundle of years where you did have a week August followed by a week September. So it's not as if you get one or the other. That said, I think it's gonna have to be about more than just the calendar and working off the rally that we had going through July. I was just looking at the valuation levels as well as the absolute market levels at the end of July.

So the S&P 500 got up to the kind of peak for this rally of like 19.7 times forward earnings. Since then, markets down a few percent.

Let's call it, you know, three and a half percent since the closing high.

You've had the forward earnings forecast for the S&P 500 go up two and a half percent. So it's moderated the valuation to like 18 and a half. Not cheap, but it's definitely if you needed to come off the boil there, it has done so. Ten year treasuries over that span have gone from 395 to 422 So everything seems very rational. I think this two day rally we've gotten the S&P, if nothing else has prevented the market from looking like it's breaking down hard. There was some levels that maybe you didn't want to test below and you know, so here we are. We're still stuck in the middle, still between catalysts and still not cheap and didn't get super oversold. And you know, the market, we got no panic, but who knows if you always need that, you know, 5% pullbacks happen sometimes.

David Faber (3:18)

Mike, Carl and I discussed this a bit yesterday. You know, last week we were so focused on Nvidia earnings.

They arguably were as good as they possibly could have been, including the guidance and somebody saying it's got ramifications far beyond just Nvidia. Stock has gone nothing but down since, more or less. Anything to learn from that?

Mike Santoli (3:38)

Yeah, I mean, I think that the rule of thumb is worth heeding that if you fail to go up on really good news, it shows you that the market had priced some good stuff in.

You didn't have that extra lift. People were positioned for it. Maybe there's some people willing to kind of sell into it. And certainly it looks like that outside of Nvidia. If you look at where Microsoft and Apple are, they're in these little 10%-ish corrections off their highs.

Nothing crazy, but I think even if the stocks don't immediately go up on good news, the news was still good. And that's why I think that the fundamental basis of what's going on, if you really believe the longer-term story and you believe the fact that everyone's ramping their earnings estimates for Nvidia, it doesn't necessarily mean game over. It just means like, look, we pulled forward a lot of the excitement into those valuations and now it maybe has to get worked out.