The Fed, Oil, and a Trade War With Canada Investors Aren't Pricing In

Guy Adami (0:00)

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Dan Nathan (1:05)

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Welcome to the Risk Reversal Podcast. I'm Dan Nathan. That is Guy Christopher Adami. Hi, Guy.

Guy Adami (1:35)

Hi, I'm Guy Adami. How are you, Dan?

Dan Nathan (1:37)

I'm doing great. Nice long weekend. Well, actually, I haven't had it yet because you and I recording. This is Friday.

Guy Adami (1:43)

We don't want to try to fool the people. This is a Friday at a little after 10 AM on East Coast.

Dan Nathan (1:48)

Yeah, I'm just hoping that you had a nice long weekend. How's that? We celebrate our people who do the labor.

Guy Adami (1:55)

Aren't we all laborers in some way, shape or form?

Dan Nathan (1:57)

I am laboring through this week. I think this is like our fifth podcast. While we enjoy it very much, we're still just closing out the summer here, so maybe we thought we'd get a little R&R.

Guy Adami (2:07)

When you consider our voices like our working tool?

Dan Nathan (2:12)

I would say our brains. I would say this thing if you're watching on YouTube is obviously a pretty good tool there. They call that the money maker Guy Adami. All right, listen, we just got done looking at the all-important August jobs report. We're going to go through that a little bit, some of the market reactions. Yields are not doing a whole heck of a lot. You do see gold coming back in a little bit. The stock market really didn't know what to make of it. You saw some kind of movement one way or another. This week, we're going to have Oracle and Adobe earnings, which might be interesting more on the Oracle side guy, because that's probably the clearest connection between what SaaS and where it sits as far as AI build out and all that sort of stuff that we've been talking about.

Today, some interesting price action. I think it's worth noting. Yesterday, we were talking about the raging, raging Mag-7 and the weakness in the semis.

And now that's flip-flopped today for no apparent reason. I mean, the stocks is up as I'm looking right here, nearly 3% or a little more than 3%. Where do you want to start?

Guy Adami (3:12)

Well, let's start there because you said no apparent reason and I agree with you. A lot of times we try to find reasons why things are happening and we search for these things because you feel it necessary to have an explanation. But sometimes there may be no explanation. By the way, this has been going on for a while. I mean, it's been a few months now where we've seen days of down 3% in these different ETFs and indices and on the flip side up 2.5, 3% the next day, seemingly on nothing. What I think is going on, if I'm trying to sort of read the tea leaves, the jobs number was good, which makes a rate hike more feasible, I guess. Maybe there's some interpretation of the market that, if again, this puts the Fed further in play, we're going to get away from interest rate sensitive things and maybe get back to things that are not nearly as dependent upon interest rates. Maybe people think that some of that space, and that's just me trying to sort of read the tea leaves. Not suggesting I'm right, but I mean, that's as plausible an explanation as any that I've heard.

Dan Nathan (4:14)

Yeah, yeah, and I guess that makes sense to me, but I'm also looking at a VIX guy that's about to print 14, right? And so on the year, I think going back, a year Christmas Eve, that would be Dec 24, it printed 1338, so that is the 52-week low. And just the level of complacency, I think is very high, especially when you consider the fact that you're seeing this volatility within sectors in technology. Why are we so focused on technology? Well, obviously, it makes a huge part of the major indices. But there just doesn't seem to be any fear. And we got through earnings season, and I think the narrative coming out of it was that we had 20-plus percent earnings growth. We haven't seen that in a very long time. There's optimism that is going to continue. We had John Butters from Faxset and his Earnings Insight blog right on Friday that the last two quarters, through the first two months of the last two quarters, you've actually seen earnings estimates rise. You usually see it the exact opposite way. So you're seeing strategists, analysts, that sort of thing, basically not really worried about what might be headwinds. And we have lots of things going on. We have the macro moving around. We have geopolitics. We have a consumer that's under stress.