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Market Recap: Friday December 4th

Stocks hit record levels on Friday as traders shook off a disappointing print on job creation in November.

Mark Hamrick - Bankrate.com Senior Economic Analyst and Ted Oakley, Oxbow Advisors Managing Partner, joined Yahoo Finance's Jared Blikre, Seana Smith, and Adam Shapiro to break down today's market action on Yahoo Finance Live.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: Looking at gains across the board with the Dow up just over 200 points as we count down to the closing bell. We want to bring in Mark Hamrick. He's a Bankrate.com senior economic analyst. And we also have Ted Oakley of Oxbow Advisors Managing Partner there. Ted, let me start with you just in terms of the market's reaction. The market's up today despite that weaker than expected job report. How do you think the market is viewing this slowing growth that we saw in the month of November?

TED OAKLEY: Well, Seana, I think what we've had now is a momentum push. You know, when you go up every day and you keep on going up, nobody wants to do anything about that. And to me, it's just more of a momentum play right here. I don't know when that finishes out. But I don't see that as some reaction to something's going on in the economy right now.

ADAM SHAPIRO: I am curious, though, Mark. When you take a look at the economy and the different sectors, we've watched energy just been on a roll for the last two weeks. But there are some sectors that need some help. What would you say?

MARK HAMRICK: Well, I mean, I don't really comment on stock price valuations. But, you know, certainly, you can talk about areas of the economy that have been underloved for quite some time, and energy is certainly among them. And, you know, I've been thinking a lot lately about sort of what it's going to look like in, let's say, the second half of next year. And I think that despite the damage that has been done and is being done to the economy and individuals' personal finances, it's going to be a little like a roller coaster ride in a positive way.

We're going to shoot up pretty quick once we get this widespread deployment of the vaccines. And so, you know, from a bank rate perspective, I want people to think about saving their monthly now because they're really going to want to spend when you can go to a baseball game, go to a concert, and go inside a restaurant. So I think that we might be underpricing the strength of the economy in the second half. But right now, it's a rough patch.

And so, you know, it's anyone's guess as to where valuations ought to be in the near term. But you need to be positioned for that rebound. And obviously, investors have been trying to do that for some time.

SEANA SMITH: Jared, taking a look at the market and what we're seeing today, investors seeming to look past any of the weakness that we're seeing in the economy with all three of the major averages here on track for a record.

JARED BLIKRE: Yeah, and you have to wonder if the market is actually pricing in stimulus more-- stimulus possibilities based on that headline number that missed this morning on the payroll side. But we're looking at some decent gains for the week. The S&P 500 here looking at the Wi-Fi interactive, that is up 1.6%. NASDAQ up the most here, 2%, and the Dow up about 1%. But really, the Russell 2000 has been the story of the week again. That's up about 2% as well. And here's the closing bell on Wall Street.

[BELL RINGING]

ADAM SHAPIRO: All right, there you have it. We're watching markets settle, and the Dow is going to be positive by over 200 points. The S&P 500 will settle up above 30 points, and the NASDAQ looks like it's going to settle above 80 points. Also want to let you know, small caps still on the rise, going to settle up over 2% today as we finish the trading session and the first trading week in December.

Want to go back to our guests on all of this and want to go back to Mark. Because when you look at that jobs report that we got, and so many millions of Americans who are unemployed, and yet, so many other millions of Americans are still getting a paycheck but are saving that money. When that money starts-- or when we get the vaccine, do you expect that money to flood back into the economy, or are people going to hold on to it, afraid to spend that money?

MARK HAMRICK: Well, obviously, we're talking about the breadth of the American population. And so there's not going to be a one-size-fits-all. There will be some people who, much the same as the Great Depression, will change their own personal practices. And we hope we'll learn to save money for emergencies and for retirement because we found a bank rate over time, the number one financial regret is the failure to do those two things.

But at the same time, we want to reenergize the US economy, help those businesses that have been hamstrung during this experience to recover. And so, you know, I think you'll have a people who maybe have been on the fence so far begin to have a greater sense of consumer confidence. You go back to the tax cut a couple of years ago, consumer confidence actually began to rise just on the anticipation of the tax cut and its impacts, leaving aside the impacts of the tax cut and the detrimental aspects of that.

And so, you know, maybe once we get past the worst of this pandemic, hoping that sooner rather than later, for goodness sakes, people will begin to think about going outside, going outside of their house and doing so safely because they will have been vaccinated. And so I do think that-- like this was a downturn like none other, this will be a recovery like none other.

SEANA SMITH: Jared, do you want to jump in here?

JARED BLIKRE: Oh, I'm sorry, I missed that cue there. Well, I want to ask about the bond market. And in general, we have the 10-year reaching the highest level since pre-COVID, and we're also seeing the yield curve expand. The two's tens is reaching the highest level that it's been in about three years now. So I'm just wondering where we stand within the fixed [AUDIO OUT], what that's potentially saying about the broader market here.

SEANA SMITH: Ted, you want to take that?

TED OAKLEY: I'm-- sure, I apologize, I did not hear the cue on that either. But here's where I think we are. We really have cut back on our long bonds somewhat, not a lot, by the way. Because when you talk about inflation going up, let's try to get a number here. And I'm thinking, you know, that-- let's say you go back to 2% or 2 and 1/2%. I've been in the business a long time, but 20 years ago, that would have been a fantastic rate.

So people get-- they get sort of confused on where you're coming from. So you'll go from maybe a rate that's less than 1 to 2 and 1/2, yeah, that's a big move. Maybe you take your 10-year to 1 and 1/4, 1 and 1/2. But when you think about it, even though that's a huge move from the half a point we had back in mid-summer, that's still not something that probably would thwart everything. It doesn't necessarily mean you get a market crash out of that just because those rates pop back up.

ADAM SHAPIRO: I want to continue what you just said about the 10-year, because it looks like we could very well next week possibly be back above 100 basis points on the 10-year. And we've had guests come on and say it's no big deal. You just said, if I heard correctly, that don't expect a sell off in equities if that should happen. Is there a threshold at which point people would say, I need to rotate back, perhaps, out of equities?

TED OAKLEY: Well, I think what would happen on that side of things is that equities would fall on their own. I don't think it would necessarily be because the 10-year-- it went back to 1 and 1/4, 1 and 1/2. On the contrary side of that, I think equities are extremely priced. Relative, I think they priced in every piece of good news. Whatever we think about the vaccine or on anything, I think they've price the whole thing in for '21.

Because look at the CAPE ratio here, back at an all-time high. And so I can't-- those are two different things to me, to answer that question. But on the bond side, I don't think moving to 1 and 1/4, 1 and 1/2 would crack the market. But I do think what would crack the market is people eventually realize that, hey, we're very, very fully priced.

SEANA SMITH: Hey, Mark, what about what we've seen just in terms of the numbers that we got this morning? The fact that the labor market continues to lose momentum. It was the fifth month in a row that we saw that growth number decline. And this, of course, coming as the unemployment benefits are going to run out here at the end of the year. What does this mean just in terms of economic growth going forward and some of the problems and challenges that present themselves over the next couple of months?

MARK HAMRICK: Well, really, is the next few months being the question, right, Seana? And so getting back to the earlier premise, it's just getting to this destination. And the question is, how precarious is this part of the journey going to be? And obviously, a big part of the question is whether our elected officials in Washington will put reason above their own political differences, and that jury is still out, isn't it?

But I think that, you know, we've been sort of wringing our hands, I suppose is the best way I can put it, wondering what the economic impact of a pandemic that has raged at levels that we wouldn't have normally expected just a few months ago. What is the impact of that on the economy? Some people want to blame the restrictions that are put in place by government. I tend to think that that is less important, per se, than what the consumer does.

In other words, are they going to stay in their homes more often, or will they perhaps think, you know what, I better hold some money back right now? Or the other part is, you know what, I want to start thinking about that vacation next June and maybe think about buying an airline ticket. But I-- to answer the question more succinctly, I think it just heightens the level of uncertainty, at least in the intermediate term, meaning the next three to six months, with the idea that things will be better. You know, not as quickly as we would like, but they will get better.

ADAM SHAPIRO: Mark, following up on something, as the dollar gets weaker, what are the inflationary impacts on average Americans and what that could hold for the economy going forward over the next six months?

MARK HAMRICK: Well, I mean I do tend to think, as the earlier guest maybe referenced, that sometimes when the most basic assumption becomes close to universal, that's the greatest reason for it to be suspect. And now that so many people are, including the Federal Reserve, are saying, you know what, call me back in three years and we'll talk about inflation. I do just wonder, almost rhetorically, whether we're underpricing that risk.

And that would be associated with this kind of moonshot for the economy in the second half of the year, even if that means, you know, annualized GDP of 3 and 1/2%, which we'd welcome at the moment, meaning it would just be great to get back to something like that. So I do think that there are implications. And so, you know, that's all about making sure your personal finances are positioned to weather that down the road and having a diversified portfolio.

But basically, just being very aggressive about your saving because that's the mistake that people had coming into this downturn that we could have never foreseen in the sense of a pandemic being the source of it. But knowing that unforeseen things do happen, and whatever they are, we need to try to maximize our personal finances for that.

SEANA SMITH: Hey, Jared, taking a look at some of these record highs, the record closing highs that we're seeing in the market. A lot of times when we focus on the NASDAQ or the rally in technology, we focus on those big tech names. But semiconductors have really been an outperformer here recently with the stocks. The semiconductor here, ETF closing at another record high today.

JARED BLIKRE: Yeah, and the semiconductor industry group as a whole has just been really strong throughout the entire rally since March, doesn't really get the banners all the time in the headlines. But you take a look at some of the stocks reaching record highs today, Qualcomm up another 5%. That's at a record high. Micron not yet eclipsing its 1999 highs, but up 41% this month. And then you have ADI, Analog Devices, that's a record high, 14% for the month.

Overall, it's been a really big contributor to the tech gains that we've seen. But that's not it. We've also seen some big gains in some of the hot money areas, like pot stocks. So cannabis, here's what's happened today, but let's do over a five-day period and sort by performance. You know, we had that landmark bill pass the House today, probably not going to pass the Senate any time soon. But seeing a lot of growth here, especially in some of these smaller Canadian names that people might not be familiar with.

And then just check into sector leadership. Overall for the week, we can see that energy is the big gainer here, followed by health care, then tech, communication services. Only downside was in utilities and discretionary. All in all, we have market internals flashing pretty strong here.

We're getting record highs in a lot of the internal measurements, like the New York Stock Exchange, advance-decline line. So momentum is definitely to the upside. And that tends to carry through the end of the month into early January. What happens from there? Anybody's guess.

ADAM SHAPIRO: Ted, when Jared just mentioned energy is a big winner, I was curious. What we've seen in the price of oil going up globally, is that a reflection of a weaker dollar, or is there real demand out there as the global economy might be recovering from this pandemic?

TED OAKLEY: I think, Adam, what you're seeing is-- and you notice this when the large public companies started buying other energy companies. I think what they were looking at is that you got to a point to where you could buy-- you can buy people as opposed to drilling up for energy. And that's really what happened. But the supply and demand situation, I think it's looking ahead about six months. But-- and we own energy. We own pipelines, we own some energy companies.

And we upheld all along that they had sold them too much. They really riddled this group all year long. And the idea that we were going to have some sort of EV situation in the next five years, where you didn't need energy at all, was really far-fetched. And I think that it's working its way back in now. But we're high on energy now still, we have been and still are for the first quarter.

But I don't think it's necessarily the dollar doesn't help you, you've got a point. But I think it's other things as well. I think you're starting to see people drive more, they're getting out. All of a sudden, things are moving around a little bit. And I think that's important.

SEANA SMITH: All right, Ted Oakley, always great to have you. And Mark Hamrick of Bankrate.com, thanks so much for joining us today,