Tech Pullback, Nvidia Loses Market Cap Crown, Ferrari CEO Exclusive 6/21/24

Robert Frank (0:00)

Market insight and analysis.

Carl Quintanilla (0:01)

You're listening to the opening bell of CNBC's Squawk on the Street.

Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Melissa Lee, Mike Santoli, a post-night of the New York Stock Exchange. Cramer and Faber have the morning off. Futures relatively steady after Thursday's downside S&P reversal. Big options expirations today. Could bring some fireworks, Eurozone PMIs slow down. Our own 10-year yield is back to 422

Our roadmap begins with this tech stock stumble, the Nasdaq ending its string of recent records.

Melissa Lee (0:30)

Plus Nvidia pulling back, losing the most valuable crown. Shears of it and other chip makers down sharply from the highs of the week. We'll get into that action in just a moment. And corporate hack attacks, thousands of auto dealers going back to pen and paper deals after a cyber breakdown at a key software provider heads into its third day.

Carl Quintanilla (0:48)

Let's begin with this tech pullback we got yesterday, snapping the Nasdaq seven-day win streak. Mike, you were here to see it firsthand.

Mike Santoli (0:55)

Yep.

Carl Quintanilla (0:56)

Explanations?

Mike Santoli (0:57)

I would say you could make observations and descriptions more than explanations, but the setup was obviously there, not just seven days up in the Nasdaq 100, but statistically as stretched to the upside as you've only been a handful of times, let's say a half dozen times in the last decade. So the makings for a enough for now moment for the momentum sector of the market was absolutely there. Nvidia obviously embodies everything in an amplified way.

That was the case yesterday as well, opens up 3.5%, ends up down 3.5% on the day. Very similar action to a day in March, March 8th, opened up about 3% at a new high, downside, reversal, what happened after that? That was a short term peak for the momentum factor in the market. It flattened out relative to the rest of the market, didn't do much. Nvidia actually had like a 15% plus pullback ultimately over the next month or two, but you look at a chart, I guess, a longer term chart, you barely see it. It's like a little stutter step. But I think you can sort of be prepared for the at least possibility that this could result in rotation as it did yesterday, or it could create a little bit more of a more chop because you do have these expirations. It kind of clears the decks.

It's sort of like all the accumulated call option buying in the hottest stocks essentially comes due today. The dealers that had to buy the stock to hedge it, they can kind of ease back and then you have the market you're left with afterwards.

Melissa Lee (2:19)

I mean, look at that sideways action right after that. Outside reversal day that you referred to back in March where you talked about last night on fast money. That was perhaps one of the greatest buying opportunities that you could have ever been presented with on a split adjusted basis. The stock was down to 88 or something like that in today. Now look at where we are here. The key is-

Mike Santoli (2:35)

It did get down to 76 I think.

Melissa Lee (2:37)

That's true.

Mike Santoli (2:38)

Ultimately, yeah.

Melissa Lee (2:39)

The key is will the buyer step in at this point in the cycle? It was a very different picture back in March in terms of what has been priced in.

I think it's also notable though that it's not just Nvidia alone with an outside reversal. We saw Broadcom first with the outside reversal on Tuesday, so it was sort of a bit of foreshadowing in terms of people examining this AI semi-space, thinking about the stretch that the Nasdaq has had and reevaluating positioning, triple which doesn't help the situation. And so here we are.

Carl Quintanilla (3:08)

We were on pace for the Nasdaq's longest win streak of the year so far. Also had these stories on the wires looking at Fed Fund futures bets and this idea that one particular trade would get paid well if Powell turned the July meeting into a live one, which got some discussion.

Mike Santoli (3:27)

Yeah, I guess that's sort of been kicked around. Didn't Alan Blinder say last week on our air he thought July actually would be a smart time to think about going. Who knows what has to happen between now and then in the next few weeks, really. It's four to five weeks until that meeting for him to have what he needs to either make a cut or at least make that the time when you say next meeting we cut.