New Record Highs for Stocks, GM and Ford Downgraded, Playing This Year's Top S&P 500 Gainer 9/25/24

David Faber (0:00)

Market Insight and Analysis. You're listening to the opening bell of CNBC's Squawk on the Street. Good Wednesday morning, and welcome to Squawk on the Street. I'm David Faber with Sara Eisen and Mike Santoli. We're live from Postline at the New York Stock Exchange. Carl's on assignment, Jim has the morning off. Let's give you a look at futures. We get started with trading on what we like to call Hump Day. You can see we're slightly lower open, perhaps, when we get started, but we'll see what happens in the next half hour. Speaking of which, let's get to our roadmap. It does begin with records. Both the S&P and the Dow are coming off closing highs, but of course, does the rally have room to run?

Sara Eisen (0:38)

Plus, Apple shares under pressure ahead of the open amidst potential new signs of weak iPhone 16 demand. And we're also watching auto stocks moving lower. One widely watched analyst downgrading GM and Ford due to China capacity concerns.

David Faber (0:53)

Let's start with the markets after another record-setting day. Sara just mentioned China capacity. Mike, I guess I'll come to you because China has had an impact yesterday overall to a certain extent it would seem. We did get a 30 basis point cut as well from the Chinese, although that market not necessarily responding as positively as it did. I don't know where you want to go this morning as you sort of paint a roadmap for the market.

Mike Santoli (1:16)

It was kind of interesting, a little bit of a jolt to the global growth story. They kind of executed the typical playbook, right? Copper goes up, base metals go up.

But I also do think that it is a little bit of a boost to this story in the US of trying to figure out in the week since the Fed decision what exactly we're to make of the macro set up right here. Because I do think there was some sensitivity to that consumer confidence number yesterday. You see the labor market indicators within it eroding a little bit more. You had the implied chances of another 50 basis point Fed rate cut in November rise on that news. And at the same time, everyone's saying, well, maybe it's early cycle in China, even if it's late cycle here. So net-net, we're kind of holding on to the post-Fed gains where the S&P 500 traded yesterday at the close, at the high from Thursday of last week, right after that post-Fed reaction rally. And now it's, I think, a little bit a matter of constantly testing for the fact that soft landing or not. I mean, honestly, it's almost the entire game in the near term. In terms of those indicators, we did get to a 20% year-to-date gain in the S&P 500 as of yesterday's close. It would be two years in a row of 20% plus.

Sara Eisen (2:27)

One thing I wonder is, you know, China's stimulating that stock market, extending its gains overnight and actually about to go even for the year. So wiping out some of the losses for the year. China's been a deflationary pull on US goods prices. So I do wonder, you know, if China's starting to really throw in the big guns when it comes to monetary policy, if that presents a risk for the Fed in terms of just how much cutting it can do, as we're all on alert for any potential flare up in inflation. But there was a move overnight, the dollar versus the Chinese Yuan past seven, that's a stronger Chinese currency on a better outlook for Chinese growth. Now, it's clearly missing the fiscal ingredient, which economists say is key. I mean, there's two big problems with the Chinese economy, housing inventory and household spending. And this doesn't necessarily get at either of them, but it does provide a boost to liquidity and potentially short-term growth. And I think that's what the market's reacting to.

Mike Santoli (3:26)

Yeah, I mean, it seems like we're a little bit past the point where, you know, China being relied upon as the growth engine, China kind of consuming way more than a chair in the way of goods. I do think it seems like more of an offset now to what we're dealing with in terms of deceleration, and maybe just a little bit of a sideshow, to be honest with you, in terms of the markets there, there have been so many fall start violent rallies as that market has lost value over time. I do see all the indicators that the outflows have been extreme from the Chinese market, and maybe what it could be is a little bit of an excuse for a value rotation that's been called upon in the US for a long period of time because the non-U.S. markets are trading like US value stocks and vice versa. So we'll see if that does matter. Although I have to say yesterday, you did get semis decide to support the market again. And so it's kind of like the market is deciding on a given day what it's going to rely upon to stay superior.