Market Resilience Despite Surge In Yields… And Options Action Ahead Of Micron Results 9/25/26

CNBC's "Fast Money"

The episode explores market resilience as stocks hold near record highs despite a historic surge in Treasury yields. Panelists analyze the s

Key takeaways

• The 10-year Treasury yield recently peaked at 5.23%, levels not seen since mid-2007.
• Semiconductor stocks like Astera Labs, Qualcomm, and Intel have surged as the AI trade maintains momentum.

Main topics

• Treasury Yield Surges
• Semiconductor Sector Strength

Notable quotes

The economy is actually accelerating.

Conclusion

While rising rates present significant risks to sectors like housing,

Transcript preview

Speaker 2 (0:00) From gas prices to housing prices, from government spending to consumer spending, from the AI boom to the data center backlash, how will this election hit your pocketbook and your portfolio? Continuing coverage, The Economy Election, CNBC. Speaker 3 (0:16) Live from the Nasdaq MarketSide in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. Heading higher, Treasury yields having a historic week, but one top market watcher says the move is far from over. Just how much higher rates can go and what it means for the rest of the market. And Micron on deck, the semi-giant out with earnings next Wednesday. We are turning back the clock for an old school options action to set up for the report. Plus, Microsoft ups its AI game. Moderna hits more than three-year highs. And time to check into Airbnb, what the chartmasters are seeing in the technicals, and where the stock could go from here. I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, Carter Wirth, Tim Seymour, Bono and Eisen, and Mike Coe. And we start off with what might be surprising strength in stocks despite a historic move in bond markets. The Nasdaq closing out the week up more than 2%, even setting an intraday record just on Tuesday. The S &P up for the week, too, and closing less than a percent from its own all-time high. The Dow also climbing into the green with a nearly 500-point gain today. All this even as Treasury yields track to multi-decade highs. The benchmark 10-year peaking at 5.23 % during the session before pulling back. It's still near its highest level since... June 2007, 30-year trading above 5.5%. Take a look at one group leading the charge. Semi surging 6 % since Monday as the AI trade catches a renewed bid. Astera Labs, Qualcomm and Intel seeing the biggest gains. So as we get ready to wrap up the month of the quarter, what does the stock action tell you, Tim? Speaker 1 (1:46) It tells me that. Equity growth is all about the dynamic that is semiconductors and what we've also seen in follow through from Meta and what we've seen from Microsoft. So I think if you look at semis, which, as you noted, have had a big week, they've outperformed the S &P by almost 10 % since you started to see this upward move in rates. And some of this is just. being ratified on demand by what's going on in meta, the demand for CPU for sure, the follow through there. So that's the story. Week over week, we're actually up 17, 18 bps on the long end. And yet the S &P was up about 75 to 80 S &P points and semis really outperformed. That's the story for equities right now. And if we were in a normalized move higher in bond yields, I think people would always be looking at equity growth and the fact that the equity world often isn't as reliant on financing. Now, we're in a kind of different world, as we talk about all the time. So I think the resilience of the stock market is extraordinary. I think the move in the bond market has been extraordinary. I think at some point, it's a little overdone here. I Speaker 3 (2:55) mean, Speaker 1 (2:55) I just think you have to take a breath. And we started to see that by the end Speaker 3 (2:57) of Speaker 1 (2:57) the week. Speaker 3 (2:58) Mike, you think it's overdone? Speaker 4 (3:00) I think, you know, taking a bit of a pause here would make a great deal of sense. You know, as rates have gone higher and at the speed that they've gone higher, I think it's really interesting how the VIX ended the week, frankly. You know, being sub-15 in the VIX, which is, you know, the 30-day forward-looking implied volatility or expectation for volatility in the S &P 500, I think it's... It's shockingly low in many respects. And I think it just makes a lot of sense for people to take a look at potentially introducing a couple of hedges here because they're quite inexpensive. And if this continues, at some point, one would expect something to break. But as far as what Tim was talking about with respect to semis, normally when you see rates go higher and we think about technology, we think about long duration equity. But a lot of these names. Maybe AMD accepted from that, which broke into the trillion-dollar club this week. A lot of those names are not trading at huge multiples, and I think that's one of the reasons that they've managed to hold in there a little better than you might otherwise have expected them to. Speaker 8 (4:03) Well, so much is new and yet so much is the same. I mean, in terms of the equity market, and there's no way around this, it's just the ongoing story of a few super cap important names driving not only at the earnings level, but at the performance level. I mean, year to date, if you just look at the S &P 500, only about 35, 36 percent of the constituents are outperforming the benchmark. We also know that only two sectors are outperforming the index, two of the parts that compose the whole. energy sector, but it's small, it's only 4%, and it's tech. So the same message is that it keeps, and yet the aggregate holds up, and there's been hyper-rotation, all because of this non-fear, right, of... Oil non fear of rates for now. They're contained now the question. We're all wondering that what is the tipping point? But it is not this moment here That's it and now it's a question of do you play for some mean reversion one of the most extreme readings right now? We have 2,000 base points of spread between two of the oldest indices in existence the Dow Jones utility average and the Dow Jones Industrial average on a six-month basis History shows that you play for mean reversion. So it's overdone as expressed in the equity market by utilities, or as Tim was playing, a little overdone in the rates as well. Speaker 3 (5:18) Maybe you can look at it another way, though, and that is maybe the markets are being very rational about where they penalize sectors and the markets. Maybe you shouldn't penalize technology because it is less reliant and less impacted by the narrative of higher inflation, higher energy prices, et cetera, and you should penalize the rest of the S &P 500. That is non-tech, which we are seeing play out with the RRSP. versus the S &P 500 or the utilities versus the S &P 500. Bonowin. Speaker 6 (5:46) Yes. So I'm with the with everyone else and saying that I think the concentration is a little bit concerning and will make you double take. With that said, to your point, I'm not quite sure that I would label it as illogical. You see IWM and small caps suffering because of the higher imported refinancing costs and carrying costs. And then, you know, if you think about the fact that we have higher rates and you're now essentially discounting at a higher rate. You would think that, yes, growth technology would get punished. But the flip side of that coin is that that is where the earnings growth has highly been concentrated. And so if you look at it from that lens, it's essentially a race against where are you getting higher ROI? In the earnings growth in this concentrated cohort, or should you be looking elsewhere? I do think that the... The pace of the move in fixed income, in bonds, Treasury specifically, I think is a bit concerning. And it is a bit of a canary in a coal mine. But I can see the logic as to why we have the dynamic that we currently have. Speaker 3 (6:54) Yeah. Mike Coe, do you like semis here? Speaker 4 (6:58) Yeah, I mean, look, we've got some big news coming up because we've got, as you alluded to, we've got Micron coming in next week. And I don't expect any news to be disappointing in the near term in that space. And like I was saying before, you know, the multiple is such that if you're looking at something like a Micron, which is trading at, call it seven times, actually less next year's earnings, you know, it's. Kind of hard if you think that they're going to maintain that for any length of time to understand why it would go materially lower from here. So I think you can still stick with this trade. Nvidia also. AMD, like I alluded to before, is probably the name that, to me at least, looks like the multiple is still anticipating a lot of good news rather than pricing in the good news that's already here. Speaker 3 (7:44) All right. Meantime, let's take a look at some of the stocks that currently have higher dividend yields. the 10-year U.S. Treasuries. So we thought this might be an interesting exercise here, from staples to transports to telecoms, all with yields of 6 % or more. And so we are wondering which is better for your portfolio or a would-you-rather, if you will. So, Mike, we'll start off with you. General Mills or Treasuries? And by the way, you can pick any, you know, you want to go two-year, five-year, 10-year, your pick, Treasuries. Speaker 4 (8:15) You know, actually, I'm going to take treasuries here because if we do have a pullback in rates, I think you have more upside than you do in in General Mills. So, yeah, I mean, I'm not a huge fan of that one as as we look at it. So that one was pretty easy. Speaker 3 (8:30) Yeah. Are you? Speaker 8 (8:31) Treasuries. Well, let's remember, there's a very handsome ETF. It's DVY, right, which features a lot of these things, like Bill Morris and AT &T. And it is making all-time relative lows to SPY right now. You know, these are non-growth, often very expensive stocks that are bond-like, but they are not bonds. Speaker 3 (8:51) That is true. Period. I guess I don't have to ask you what you think about all the others then. We've got a couple more here. We'd have to Speaker 8 (8:57) look at their chart patterns and see, but the concept is the concept. Speaker 3 (9:01) Fair enough. All right, Bono, we'll go to you on this next one, UPS or the 10-year. Speaker 6 (9:06) Also treasuries, although it's closer than General Mills. I mean, the issue with UPS is that, you know, if you're looking at dividend yield, you're looking at making sure that you have capital preservation and that the total return, this is a total return question. My concerns about UPS is, is there sufficient free cash flow to substantiate and maintain their current dividend yield level and for it to grow? And at roughly 102, 103 % of free cash flow. That is a concern for me. So adjusting for the risk, I think I'd prefer the sure thing with Treasury. Speaker 3 (9:41) Tim, I want to get your – you'll have yours, but your thoughts on UPS since you dabble in that. Speaker 1 (9:47) I'm long UPS. I have clients in UPS. And I think it's a story where I would never own UPS for the dividend. I think the dividend's safe. I think they've had some concerns on package volumes. The Amazon trend, which we knew was substantially getting cut, it was a lot worse than we saw. This is an ROI story. This is where they are in their ground. their ground business. I just think package volumes have not been great. And I would look at FedEx and UPS in tandem and say, I mean, UPS is down 20 percent in two months. And I just wonder if transports are telling us something. But I like UPS. I like the turnaround there. And it's not for the dividend yield. But that allows me some comfort to stay there. Speaker 8 (10:31) Not a great pattern. I Speaker 1 (10:32) mean, yeah. Speaker 3 (10:34) Tim, this is yours. Verizon or Treasuries? Speaker 1 (10:40) Well, my final trade last night was the two-year note. So I hate to fall in line with the rest of the guys because it's nice to be different. I think Verizon for me is – I've owned Verizon and AT &T over the years, and I just don't like the melting ice cube. I also think that while we're through a period where there was