 Welcome to Nasdaq Trade Talks. I'm Jill Malandrino, global market reporter at Nasdaq. Joining us at the market site studio, we have Falstow Puglisi, president of Cyber Trading University, as well as Max Cabasso and Chris Dearborn, managing directors on Nasdaq's market intelligence desk. And we have Michael Normile, he's U.S. Economist at Nasdaq. We're all here to talk about the beginning of earnings season, any trends that we can discern there. We'll get into some economic data and, of course, how the markets interpreting the Fed's rush to not cut rates. It's great to see you as always gentlemen. Welcome back to Trade Talks. We'll go around the horn here. Chris, it's almost like what's good for the economy. Is it necessarily good for the market? How it's interpreting retail sales data? It's quite good. You know, you have robust economic activity. Mike can talk a lot about that. When you look at the retail sales, if you look at what companies were pre-announced in coming out of December and ahead of the ICR conference, a lot of companies were telling you whether they were doing well or doing poorly. And a lot of the larger companies, especially when you make up the S&P 500 retail index, were very, very positive. Not only on sales, but foot traffic and online. So you get that nice mix of cyber and in-store, and that brick-and-mortar really did well. And if you followed along with those larger companies, the retail sales really aren't that big of a surprise. General merchandise is up, non-store retail is up, motor vehicle sales were good, auto parts are good. And the sectors that were expected to be down, if you followed electronics were off again, they were down really early in the year. And you see some of those items. And it's not really that much of a surprise when you look at it, if you look at the actual companies that are making up the underlying. So when you see that is good, bad, and bad good, it really is because it's only one thing that matters right now. And that's the Fed and what are we going to cut. And based on that data, and a couple of the other items right now, you're looking at a 50% chance of a rate height cut in March. That was over 125% back in December. So you're still looking at now maybe 125 to 150 basis points of cuts throughout the rest of the year. That was a firm 150 the last time we spoke here. Now they're downsizing it to 125, we'll see, but you're still looking at definitely a cut at the May 1st meeting. You know, like 150, even for the year, that seemed a bit aggressive. Anyway, I certainly don't see them doing anything more than 25 bits per meeting, but even 150 seems a little bit aggressive. I mean, that's what, six times in 2024? Yeah, and the Fed themselves, they're looking for 75 based on the last SEP in December. So, you know, it's pretty aggressive to double up on what the Fed's looking for. And they were very deliberate in hiking rates, and they're going to try to be very deliberate in cutting rates, it seems. So I wouldn't be surprised if we end up maybe somewhere in between what markets are pricing, what the Fed is pricing. I'm a bit of an inflation optimist myself, so maybe that will give them a little bit more reason to cut, maybe later in the year, back-to-back meetings, and maybe earlier in the year, they're taking one meeting on, one meeting off, something like that. But yeah, 150 seems a bit on the aggressive side. I mean, Max, it feels like 150 was priced in pretty aggressively, and then when you have Governor Waller come out yesterday saying we're not no rush to cut rates? They're going to be slower. The Fed always seems to be reactive, not proactive. So I would tend to think that they're going to be, like I said, slower to go. The market, again, doubling up. I don't think it's taking any cuts really off the table, but I think they're just trying to talk down the market, because I don't think we're going to get that six. So again, march down 50%, 50-50, I wouldn't be surprised unless economic data really changes in terms. If we see unemployment really start to pick up, that might speed them up. But until they really see, I think if inflation kind of stays where it is and doesn't really move either way, and the jobs number stays the same, they're not going to be in a rush to cut and kind of spur on the economy again. So again, I think they're going to be more reactive. I would not be surprised if we see a pause again in March. And then again, May back on the table potentially for the first cut, 50-50. I think what Waller said yesterday has kind of done its job and kind of taken down some of the expectations. Like you said, it was a 75%. Everybody's basically pricing it and now we're getting a cut in March and saying, hold on a second, hold on. Let's wait and see. So again, I think we still have a lot of data to come out between now and March. Obviously, I think we have three more jobs numbers coming out and inflation prints. So I think they're going to be a lot more reactive than proactive. So I don't think they're going to be jumping the gun to start cutting in March and getting ahead of themselves. And then if something turned later in the year, say, oh, wait, inflation comes back up, they're not going to hike again. So I think they're probably going to wait and be slower. And again, that's kind of what they said. They're going to be reactive and slower to cut and not jump the gun and 150 basis points in the year. That would be really surprising. And also we'll take a look at some of the Nasdaq stocks from a trading perspective in a moment, but you're seeing the reaction that they have had to perhaps rates not coming in as quickly or as much as investors thought they might have. Well, you know, as much as the rates, they probably, I think they're probably going to, the big news I'm seeing now is what's going on real estate too. I mean, they're expecting that it's supposed to have a crash going on to this year. And not more just more the retail, more of commercial. So if that happens, I mean, they're going to probably have no choice but to lower it because that's probably going to probably bring down the market a lot. And but some of those stocks are obviously not reacting too much. I mean, some of them just going on their own news, but I'll just be more concerned about what's going to happen with the real estate market and then also what's going to happen if they're going to, well, it's going to really cut it down that much. He said he's slowing it down. I mean, we could probably go back to where we were in October. I mean, that's what made that big market meet. We had a big rally. I mean, we basically ran what about, I don't know, we run about 4,000, I mean, we're at 7,000 points on the Dow. The S&P ran about what about 5,600 points? We made on that run. We made new 52 e-cars on that run. The S&P and the Aztec 100. Do you think the selling's attributed to anything else besides, I mean, who's going to sell at the end of the year for the most part, right? No one. This is kind of also typical behavior in the beginning of January anyway, you know, for tax purposes and so forth. So do you think the selling that we're seeing is anything else besides rates? No, but I also think that you have a couple of other items that usually give a boost to the market, right? There's no buybacks in the market right now for January. That's a big underlying tone right there. People will wait and see what the corporates are going to be doing. You know, the tone has been all over the place over the last four weeks, depending on which weight you look at. When you look at earnings, you know, the forecast for earnings have varied tremendously. And now you've got over 110 companies giving guidance. A lot of them are giving negative guidance for the quarter. So, you know, all you're hearing is more of a negative tone, really kind of like a risk-off mentality. So are you going to put money to work there or not? And that's the question, you know. And if people want to wait and see, then it's going to be stock specific. You know, you look at the mangrove at 7, there's been some major negative news on some of the company names there, but some of the other companies have been very positive. You know, so we're just talking before, you know, the first week of January markets were down significantly. Second week of January, we get a little bit more news on stock specific items, but markets are up every day. So it's five days down, five days up, and here we are starting week number three of January. You know, the question is what we'll be saying in that same pattern. You know, you only have a handful of companies that have reported so far, about 12% of the S&P. And then it came out. Yeah. Was there anything, Michael, there in terms that you could discern from earnings or, you know, it's really just one sector? Too early. Yeah. I think what we see with earnings in kind of the big picture that's different from what we saw in the last few quarters is it's much more mixed where the last few quarters it was really just energy was down, health care was down, and materials were down. And this quarter it's looking much more kind of 50-50, half the sectors are up, half the sectors are down, and it's, you know, the sectors that are up are still the consumer driven kind of information technology, communication services, consumer discretionary, but we're also seeing financials are down this quarter or estimated to be down, and industrials is kind of joining materials and that maybe manufacturing recession driven weakness that we've seen too. Yeah. I wonder if geopolitics is also an issue as well. I mean, we have trading routes that are being affected. Yeah. It's going to pass down somewhere. Geopolitical, our own elections now, things are starting to heat up again in the Middle East. There's something with Pakistan yesterday dealing with Iran, the Houthis, and again, haven't seen it much. It's starting to pick up more. You're starting to see headlines again and everybody kind of adjusting the routes. Is that going to cause, you know, potentially a supply side spike in inflation kind of like what we saw after COVID where we just couldn't get the supplies. So not so much demand side, you know, being driven by supply. If it just slows everything down, if there's some bottlenecks, that's our picking inflation up again or not helping to come down or seeing any deflation, which potentially then impacts the Fed. And now even for our own politics, what's the narrative going to be now that we're starting to get some of the caucuses start to see some players drop out, candidates drop out. It's looking like it'll be, you know, a Trump Biden potential, you know, square off for the presidential nomination, but we'll see how that goes. But you're starting to see some of the narrative. What would that mean, you know, who's going to benefit if it was Biden again, who would benefit if it was Trump or if it was somebody like Nikki Haley, you know, which sectors are going to start to benefit from that. So I think that's starting to come into a clear picture, starting to see some notes, you know, on that and kind of how that could start to shape where we're going in the market. So it's not so, you know, completely fed focus where we start to get some of those political events and narratives, kind of what it's going to be in Washington and which sectors are potentially going to benefit from that. So we definitely have some other potential headwinds or tailwinds depending on where you are coming up, you know, it's not just going to be fed focus. I think we still have a few more months till that really starts to pick up, but that's definitely starting to, you know, percolate in the background. Alright, let's talk some trading here for a moment. Let's take a look at some book viewer charts here for a moment, starting with NVIDIA, of course, one of the MAG7s that we've been talking about. Explain to us what we're looking at here in terms of level two and then get into the price levels. Well, the big thing I want to talk about, like, you know, getting back to the book viewer, NVIDIA has been having such an unbelievable run. Obviously, AI has been really taking off and they even said they're projecting, it's supposed to take over like 40% of the jobs out there. So, NVIDIA basically really has been benefiting from almost from like 150 from where it started back in the beginning of the year. Now, I went to 500 and what I wanted to show right here is that a lot of people that day trade, which would I specifically do, but you could also swing trade with it, there's been a lot of big, what we call iceberg orders, big block orders, what NASDAQ basically started building their platforms on the book viewer and here you could see that there was about a big, big iceberg order out of $500 a share. Big, big order out there. Whole number, popular number, all-time high. It's not kind of a really major problem breaking through it and as you could see it over the past several months, it kept hitting it, it couldn't break it, hit it, couldn't break it because there's big, big order out there. So, as much as most people look at, you know, the P ratios, the book value, what the company's doing with it, it's all about supplying demand. Stock had a tough time breaking it all of a sudden. Somebody came out there, executed that big, big, big, big block order out there and now you can see NVIDIA literally broke that 500 and went all the way to all-time highs and just breaking all-time highs all the way up to, you know, roughly was at 560-ish and has not turned back ever since. So, as much as we've seen the market coming down, NVIDIA is running on its own market. Yeah, and to Chris's point earlier, you know, this goes back to some stocks are doing their thing and some stocks aren't. It's not as if they're running in tandem just because they're part of the MAG7. Let's look at this from a different perspective with AMD, of course, another non-cyclistic stock. Same thing. So, some people can't afford to buy NVIDIA and then they might just trade, you know, AMD and AMD is obviously bending from up. But once again, one of the things that traders look at is whole numbers and 150, everyone probably has that number and it's almost like to the penny. And sure enough, here's an example on the BookView where people could use as a swing trade. Program trading kicks in at certain times during the day. You know, orders come in at 9.30 and then all of a sudden they'll cancel them at 4 o'clock. So, you see a lot of these orders coming on the BookViewer and right here, big order shows up. You have all these orders stacked up there. You got 128 orders, 37 orders, 455 orders, 200,000 shares. I mean, that's a lot of money in shares and orders out there. Finally, you get to that price just when NVIDIA broke that 500, same way here. They executed that 200,000 share seller. Boom, stock breaks 150. Now we're already up. Stock runs $10 on that day, breaking, once again, not all-time, 50-week highs or daily highs, but all-time highs. Yeah. Well, which is interesting, Chris and Max, because you see a lot of the same information sitting on the market's intelligence desk. Are you seeing the same types of things when orders come in? Because sometimes you hear about these massive size orders and then sometimes trades go off or they don't go off. Are you looking for the same information? Yeah, similar. The only thing is a lot of, depends on where it's coming from, the fracturing of order flow and kind of where it comes from and how much is dark versus lit. Obviously, these are great examples. When it's lit and you can see it, it's great. It's obvious to be there. Chris and I were talking about on the desk earlier. In these super liquid names, it's not as impactful, lit versus dark, but some of the ones that don't have as much liquidity, a lot less of it is going to be lit. So you're really hunting in dark pools trying to find that liquidity. But again, here, in these bigger names, you don't have to be dark because there's ample liquidity. It's really the smaller names that you have to kind of hide or search around for to find liquidity where you see these orders like, hold on, something is off here, something doesn't look right and you actually really have to look for the liquidity again just because there's not as much out there. These high-flying names, they're in the press all the time. People see it. There's ample liquidity. So it's okay to be lit. Okay, you're going to get filled. You're not going to spook anybody there. Whereas in some of the smaller names, a large order like that will probably scare a lot of people away. Actually, wait a second. This is size. This is a few days of volume here. What's going on? But again, when you see some of these bigger names, it doesn't have to be hidden as well. So it gives a nice indicator. Okay, that gets cleared out. There was a real seller there. It clears out. Boom, it's off to the races. And you typically sell the more liquid names? I use you sell more liquidity. But when it comes to some of the small cap stocks, I mean, it's just that the same exact thing I'm trying to point out happens on brand names and also happens on small cap stocks. It's just that some people think like, oh, this doesn't happen on them. Listen, like Tesla's the most searched stock or traded stock in the exchange. You search on Google, whatever it is. Everybody trades it. It's got great options, everything else. It's got huge, great iceberg orders on there. So more or less as a trader, as much as you might look at economics of it, I always kind of look at, okay, well, somebody was telling me, oh, the stock's coming out with great news or whatever it might be. Let's go check and see what the orders are. Because the street obviously knows better where it's at. And that's usually how NASDAQ has built the whole exchange by working on these ECNs. So like anything else, just like when we were talking about coin, do you know what I mean? I was here past two months, past two months. I kept telling you, I was a big fan. I think that they're going to pass that ETF. But once again, buy-in rumor, sell-on news. Well, I mean, faster to your point, also, we could debate the fundamentals all day long. The street on level two, on BookView, we're showing you, I'm willing to buy here and I'm willing to sell here. Right. So that's where the street, I guess, is valuing that particular trade. Because some people have to get those orders out there and want to sell at those prices. You just want to know where the future is, and the future is using that BookViewer. So that's what most retail traders have to understand. It's not just more or less just seeing what the news on the company is. The news, some people interpret it one way, but it's all about buys and sells. Right. You know what I mean? What the value is, what the value. You could see like, I'm not buying that neighborhood. It's a bad neighborhood. But sure enough, like, why does the prices keep going up? Why are they not dropping yet? It's the same thing about a stock. Yeah. I mean, well, Chris, we've seen it a number of times before, particularly with a lot of these tech names where the valuations might not make sense. But if there is a story behind it and investors are willing to buy or sell at these levels, well, it kind of is what it is in the price action sometimes. When you have a liquid name with more investors, with different varying investment theses that gives ample acquittal to a specific stock, people will be in the market more often to buy and sell. So people buying the stock on news or with prospects of growth and you have people who are maybe more fundamental looking to change and take out some of that profit level that they've made and put it to work in other areas, value, deep value, etc. That's going to bring great liquidity to the market and specifically to stocks that have ample news in it, as you mentioned before. And you'll be able to see that on the book viewer, which is a great idea. You know, level two quotes are fantastic. When most people are especially retail trading there, it's a point click and shoot. They're on some of the different platforms that you're told shows you the top of the book. So when you have multiple investment theses, but the max point when you have stocks that are maybe not as widely followed, you know, companies that are not in one of the S&P major indexes, the five, the four, the six, you know, they're in the bottom tail, the Russell Micro, the Russell 2000, and that's widely followed. The liquidity is not always there. So when you have a solid name with varying investment theses and ample equity and news, it's a good thing. Alright, we'll continue this conversation next week because I know your team does a lot of work on this. Alright gentlemen, appreciate the insight. Thanks for joining us on Trade Talks. And thanks for joining me from MarketSite. I'm Jill Malandrino, Global Market to Porter at NASDAQ.