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this is what Tom Lee just said about Nvidia and our markets this week so can the momentum continue let's ask Tom Lee he's fun strats managing partner and head of research and as you see he joins me now Tom's good to see you welcome back good to see you Scott that was the news of the day this morning we're buyers of stocks on Friday but even stronger if the jobs report is soft the implication being you were buying no matter what so it wasn't soft it was hotter than expected but nonetheless why did you come in into today thinking you were buying stocks regardless uh well there's a couple reasons Scott you know the first is that I think markets are much more focused on inflation reports and cpis next week and the the June fomc meeting on Wednesday and the second which of course we think is going to just show a continued Improvement inflation but the second is that stocks really historically have done well in the week following the release of the employment report Rising roughly 70% of the time in it implies roughly 50 to 80 sorry 70 to 80 points in the S&P of course it would be better if it was a soft drivs report and it wasn't well it's it's funny you say that it would be better if it was a soft jobs report because I think the market spent a good amount of today trying deciding you know what it was was it good news is good news good news is bad news I mean if the market doesn't necessarily need rate Cuts why why is a softer report better why can't we just be happy with good news labor Market's strong economy's hanging in don't need rate cuts and still may get them later this year uh I mean I generally agree with you Scott but as you know there's a faction of both Market participants and fomc that view some of this data as too hot for them to be comfortable with and I think you know the the more positive data points you get the more you might actually start to see markets pricing a hike and so I think you're right there's a there is a goldilux window and but it's safer to say bad news is good news because those actually clearly take away inflationary pressures I'm wondering if you think in any way that you know thinking that June is going to be the point of the year in which we start to get this money off the sidelines and into the market and how Goldman Sachs framed it the other day talking about a quote wall of money coming in but not really until July that you could have some selling between now and then but that the beginning of the third quarter and thus the second half of the year is the area to really plan for a wall of money coming into this market and then pushing stocks that next leg higher Scott that that Dynamic is certainly at play uh for a couple reasons one you know April was a down month and I think a lot of institutional investors actually sat out May thinking it was April was a start of a bigger correction so June is when money starts coming back in but I think more importantly since the end of 2022 I think a lot of Institutions and a lot of high net worth individuals sort of sat out this Market saying hey I'm happy earning 5% by the middle of this year if the S&P is up 15% on top of missing 30% last year I think a lot of folks are going to say listen I can't just sit on cash and earn 5% anymore when I'm missing out potentially on a 25% year for the S&P Tom would you make of the fact a couple times this week we had rates go down and stocks go down not exactly the dynamic that many had been expecting right because that's not the way that stocks and rates have been have been reacting right they've been pretty well correlated rates down stocks up well there were a couple of occasions this week where that didn't work why uh it's kind of hard to tell especially day-to-day but if I had to guess you know we don't want to be in a situation where the economy is slowing so much that we've actually hit stall speed so rates would go down that type of e economic Dynamic would scare stock so it's almost like bad news is too much bad news um in fact maybe that's why today's report kind of fits right in the middle because it's actually good enough to tell us the economy is still strong as you said but it's not enough to actually add to inflationary pressures Tom what what if you know this this Market is just screaming out it's it's nvidia's world and we're just living in it right I mean nvidia's up markets are good nvidia's not doing much S&P can't do that much nasdaq's negative today it's a on stock story uh I mean Nvidia is really a generational story for now because I mean how many3 trillion companies actually have doubled uh you know I mean so clearly Nvidia is important but it's it's important because it's really one of the most important ways to get exposure to Ai and I think the AI story is you know early Innings as many people talk about it's transformational in terms of productivity and there's a lot of use cases developing so as much as it might feel like One stock market as you know there's a lot of stocks up more than 20% year to date and I actually think breath is likely to increase so for investors there's a lot of opportunities in the second half non-farm payrolls came in at 272,000 job ads for the month of May the expected number was 185,000 job ads this was a number that nobody nobody saw coming at the same time the unemployment rate went from 3.9% to an over 2-year high of 4% but at the same time in the month of May full-time employment fell 625,000 jobs the largest drop since last December and part-time employment was up 286,000 jobs so really how strong is this report well I think we could all argue for it was good it was not so good I don't think it makes a lot of sense and I think Wall Street is quite confused following this data today 10-year treasury yields are dropping almost 15 10e treasury yields are up almost 15 basis points today so Wall Street is saying this is too hot of a report JP Morgan has officially changed their first Fed rate cut view to November from July so they just skipped over September and went straight to November when for the last month or two now they have been expecting the first cut in July but this does not necessarily mean that stocks have to fall okay but stocks are at all-time highs and it's problematic because I mean on one hand you have fears of the economy slowing down certain sectors of the economy seem to already be in a recession on the other hand it looks like the jobs numbers are coming in too high for the FED to be able to cut rates but the unemployment rate is rising inflation is falling there's so many weird aspects of this economy and our markets right now that it's hard to say what's going to happen next I can tell you definitively Nvidia will split coming today in after hours and what will happen is NVIDIA will start trading as the split company coming on Monday and that's when Maybe you could get a larger selloff and that could lead to some downward pressure in our markets Nvidia has accounted for over half of the S&P 500's gain in 2024 so it's very important you can also see at the time of recording this video Nvidia is starting to give up even more down about 1% other AI adjacent companies like Dell also selling off quite a bit down about 4% and that's also not doing the markets any favors heading into next week we will have the FED meeting and I think that will be one of the next big Catalyst for our markets the same day as the FED meeting you also get the CPI report expectations are CPI is going to fall so that could be good news and could offset some of this hot jobs report but I think all of that is up in the air and nobody really knows anything following today and you did have this news that came out about 10 hours ago Nvidia CEO Jensen Hong to sell up to 735 millionar in stock and again I think that could lead to a a pretty rough start of next week for NVIDIA shares and it does say here fed swaps no longer fully price in a rate cut before December but here you can see throughout the trading day we are no longer expecting the first cut September 18th 49.5% chance of a continued pause through September 18th and a 46.6% chance of a cut coming September 18th November 7th is when the First Rate cut is officially priced into markets in a greater than 50% um you know capacity and well unfortunately that's probably not going to happen November 7th right after the election I would be surprised because that would be seen is pretty political December 18th you do have a 12.3% chance of a nothing from the FED throughout the rest of this year 39.6% chance of the first cut December 18th and a 36.5% chance of a continued pause through December 18th so either November or December is what the markets are saying for the first cut now I want to remind everyone out there I know you can get lost in the sauce and this data and that data and this data and that data on a week-by-week basis remember this the only thing that truly matters is inflation we can add 270,000 jobs to the economy for years it doesn't matter as long as inflation comes down if inflation comes down then the FED can cut rates and you have your perfect soft Landing because you know the economy looks like like it's adding a lot of jobs so I think coming next week when you get the CPI report and the FED meeting that's actually going to be the big Catalyst for our markets what happens between now and then let's be honest it's probably going to be correlated to what happens with Nvidia and after a split you do tend to get a selloff and that's kind of how I would think about the next couple of trading days CNN's fear and greed indicator is neutral at 45 one week ago it was neutral at 48 and 1 month ago it was fearful at 37 so you're definitely starting to fall again almost back into a a a fear territory for CNN's fear and greed index the percent of stocks above their 50-day moving average today is 44% so about 3% of all stocks today are falling under their 50-day moving average that's a pretty rough day comparing this to even miday when you had over 63% of stocks above their 50-day moving average you've Fallen quite a bit if you're just an average stock your latest AI investor sentiment survey is at 39% bull 29% neutral and 32% be that means you are at the highest level of bears this was as of June 5th as you have been in a couple coup of months now and this is more bearish than historical averages of about 31% now again like I said 10e treasury yields are up almost 15 basis points that's roughly the equivalent of half of a rate hike from the Fed so it's really not a big surprise that stocks are selling off today and you know especially heading into next week even if you look at the RSI on the NASDAQ the triple Q's the NASDAQ 100 it's at 67 you're pretty close to being overbought and heading into your major Catalyst with CPI and the FED it wouldn't surprise me if you do get a little bit of a pullback here especially considering this rise today in 10-year treasury yield so with that said
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