Rates Rock Stocks, Apple Downgraded, Largest-Ever U.S. Healthcare Strike 10/4/23

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David Faber (0:31)

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

Carl Quintanilla (0:37)

Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer here at Post 9 of the New York Stock Exchange. David Faber is at CNBC HQ this morning. Pre-market is pitting its hopes to some relief in bond yields after ADP comes in light.

89K, that's the lowest in almost three years. Ten-year yield back below four and three-quarters.

Oil also near a three-week low. Our roadmap this morning, begins with treasury yields still hovering at multi-year highs though. Stocks look to regain some of yesterday's big losses.

David Faber (1:04)

Plus one time, one long time, Apple bull downgrading the stock, citing high valuation and concerns of soft US growth.

And it's the largest healthcare strike in US history. Some 75,000 union members at Kaiser Permanente walk out of hospitals and medical offices.

Carl Quintanilla (1:22)

Let's begin with the markets. Dow coming off the worst day since March, as you may know by now, losing its gains for the year to date. Jim, this morning, writing a lot about the tyranny of the 10-year, as you put it.

Jim Cramer (1:33)

Yeah, look, I mean, I think that there's a consensus building that you can't have the yield curve be the shape that it's in now. I know this probably bores a lot of people of the pros, but if you're just trying to figure out, like, what the heck is this all about, there's a sense that if you go out 10 years, you've got to go to the usual, which is that there's a steepening curve, and we're all going to have to pay a little more if we go out long, meaning that, like, say you need a mortgage, that's going to go higher. We got a number that was a little softer today from ADP and actually showed you that there was not as much wage growth, which is what people are worried about with the Fed, but I'm much more concerned about issuance. I'm concerned about how the Treasury pays.

I know that yesterday Ed Yardini had a fantastic hit where he talked about how it's possible that we don't have a lot of Federal Reserve bonds sold. But just be aware that, and David, you know this, that it's very hard for people to understand and interact with the bond market. But if you think that the 10-year, which is currently at 4.74, should be above what the Treasury rate is, what Fed funds rate, then you know there's more pain ahead. It just may not happen with the velocity that it's occurred, and it's the velocity that's really driving people crazy.

David Faber (2:44)

Yeah. Well, listen, everybody's trying to figure out when we're going to hit a top, or at least a near-term top in yields, Jim. And you point out the technicals. We've talked a lot about them lately. We have as well in the second era of Squawk on the Street. Sarah's been talking about it for weeks in terms of the supply-demand equation. Has something changed in a significant way, given all the supply that still needs to come to the market? And is that sort of the new normal?

But when it comes to equity investors right now, I guess you made this point last week when we kiddingly talked about just having the entire show be about the 10-year.

You have to look at it and you have to make a decision here, you know, ultimately, in terms of what you're going to do. But what do you see as the impact really, let's call it near term and long term, obviously does seem to increase the chances of a hard landing, doesn't it?

Jim Cramer (3:34)

Yes, it does. And I think that there's a sense that, well, what is the Fed really want here? And I say, forget that. It's not about the Fed right now.

It's about demand.

And when you see small and medium-sized businesses still charging ahead, still hiring, still growing, but the large ones are not, then you say to yourself, wait a second, if wages go up, even though mortgages are now higher, the spending is not going to bring the price of a house down. I think that, Carl, when I look at the fact that houses are still up, say, 40% from pre-pandemic, that's the last holdout, the last thing the Fed wants to come down. But if you're going to have to finance this deficit and you're going to have to be able to do the quantitative tightening, which is what the Fed is really more important right now than the Fed funds rate, then we're not done to sell it. And I'd like to think that because we're so oversold, we're done. But I also am not naive enough to think that if we get a number that's strong on Friday, we could have some real problems.