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Market Recap: Friday, January 22

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Stocks traded mixed on Friday, with the S&P 500 and Dow pulling back from record highs as COVID-19 concerns resurged and questions over whether more substantial stimulus would be passed in the near-term arose. The Nasdaq, however, set a fresh closing high. LPL Financial Chief Market Strategist Ryan Detrick and The Haverford Trust Company Hank Smith Co-CIO joined Yahoo Finance Live to discuss.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: 2 and 1/2 minutes left in the trading week. Dow and S&P in the red right now, and for that, we want to bring in Ryan Detrick. He is LPL Financial's chief market strategist. We're also joined by Hank Smith, the co-chief investment officer at the Haverford Trust Company. Great to have you both on this show. Ryan, I'll toss it over to you first. Just, what's your take on today's action? We're seeing some selling pressure, but technology here holding on today.

RYAN DETRICK: That's right. And we've seen it a couple of days now, right? Where under the surface, some of the previous leaders may be a little bit weak, but all of a sudden, the stay-at-home stocks, technology-- you know, the previous guest put it best. He said, you know, this is where the earnings growth is coming from, right?

People kind of forgot that in September on a relative basis, where tech didn't do as well. So it makes sense now we're seeing these strong earnings. Oh, that's right. Technology and stay-at-home stocks really are still a place probably for investors to look for some continued strength, really, the rest of this whole year is how we see it.

ADAM SHAPIRO: All right, let's go over to Jared Blikre. Stay on deck there, Hank, because Jared's going to walk us up to the closing bell. And there are some leaders even on a down day in the Dow. I mean, like, Apple's up almost 2%.

JARED BLIKRE: Well, within the last hour, Adam, Apple reached another record high, at least on an intra day basis. Probably get that closing high as well. NASDAQ also had a record. So the NASDAQ was in the red most of the day. Now slightly in the green. And interestingly, the outperformer of the day, Russell 2000. And we've seen big tech and small caps change places several times this week. So we'll have to see what happens going into next week.

But just taking stock of the action today, we can see the large caps are in the green. Now only Amazon is down 40 basis points right now. But Apple, we were just talking about, up 1.7%. Alphabet, Tesla, Microsoft, all around half a percent there. And then, looking at the sector action, we can see real estate, utilities, and communications services all in the green, while we got some of those value and cyclical plays, like financials, industrials, and energy. Those are the biggest laggards right now.

Well, I do want to bring attention to something that our guest in the audience here, Ryan Detrick, just tweeted yesterday. Here's what the S&P 500 does with the new president in office-- weakness after the inauguration and into March. And here's January through February, just going to trace this out real quickly. Here is that weakness that we could see into March. But then, typically, green into the end of the year. Love to get his thoughts on this after the bell, which we are approaching right now.

[BELL]

ADAM SHAPIRO: All right, we got a closing bell. And when it's all said and done, this goose is cooked, we're going to probably have the S&P 500 settling down about 11 points. The Dow is going to be off about 180 points. NASDAQ, however, it's going to be positive, still around 12 points into the green. And the Russell 2000 is going to be up, by the way, almost 20 points. Regarding sectors, we were dogging energy not earlier than the program. It was down today, the energy sector, about half a percent.

But the gainers today, utilities, real estate, communication services. Let's take it back to our guests because, Hank, you pointed out all of this concern-- and it's legitimate concern-- about unemployment in the United States is literally going to be nonexistent once the restaurants and the service economy come back on. How confident are you of that post-pandemic?

HANK SMITH: Well, very confident. I mean, you've got to view this, really, as a natural disaster. And once you go in and the natural disaster's over, whether it's a hurricane, a flood, there's such a rebuilding effort, and things get back to normal much quicker than anyone ever expects.

And this pandemic, while a massive natural disaster, I don't think is going to be really any different. And you're going to see, once this pandemic hits the rearview mirror, confidence surge and an unleashing of pent-up demand. And hotels, restaurants, hospitality venues, they won't be able to hire quick enough to meet that demand. And I see that happening in the second half of this year.

SEANA SMITH: Ryan, I want to go back to you with what Jared was talking about earlier, and that, of course, is the performance of the markets after we get a new administration in office. We saw that happen this week, markets actually hitting a record high the day of the inauguration. But what do you think investors could expect over the next couple of months?

RYAN DETRICK: Well, you're right. Look at the seasonality. February is kind of a choppy, rough month, but post-election year, when you have a new president, it is actually the worst month of the year. And maybe that's some uncertainty over the new policy and just uncertainty over the new guy in charge, to be quite honest. So after a 70% rally, we'd be open to that.

Kind of building on the previous guest just mentioned about the economy reopening, when you take a look at what groups and sectors do the best under a blue wave, you know who it is? It's the cyclicals historically have done the best, your industrials, materials, and financials. So those are groups, again, that kind of builds on all the stimulus that's likely coming with the reopening. Those groups have done well. They haven't done so well the last couple of days, but the last several months, they have. And we still think that's definitely a group that can do pretty well when all is said and done when '21's all over.

ADAM SHAPIRO: But you also point out, Ryan, that there's a number to keep your eye on. Because in previous bull markets, once we've got to a certain game, watch out. You want to share your number with us? And I mean, is it pretty consistent?

RYAN DETRICK: Yeah, it sure is. If you think about it, up about 70% in about 10 months, like what we just did, that's actually what happened after the '82 bull market started and after the 2009 bull market started. But once you get to about right here, for instance, the next five or six months can be choppy.

And if you think about back to 2009, big rally, what happened early in 2010? 10% correction, then a move to new highs, and a 16% correction in the summertime, the eventual move back to new highs. We'd say something like that could happen again after a 70% rally. We're tracking, honestly, almost to a T, the 2009 bull market. So let's see if it lasts 10 years. We're not going that far. But maybe some choppiness will be perfectly normal for investors to be aware of here over the next three to four months or so.

SEANA SMITH: Hank, you're very encouraged here over the next couple of months, what we will likely see. You laid out a very, very strong point, just in terms of the potential growth for GDP going forward. So what does all this mean, though, for corporate earnings? Because we're in the midst of earnings season right now. What do we expect going forward for this year?

HANK SMITH: Well, I'd just like to agree and with Ryan that, look, we could use some choppiness over the next few months, as corporate earnings do exceptionally well. They've outpaced any expectations so far, post the initial phase of the pandemic. And if we're right about the second half, you're going to see corporate earnings surge. And if the market takes a little bit of a breather, that means valuations come down. And that would be a very healthy phenomenon for the market and maybe also temper some of the speculation that has creeped in over the past quarter or so in the market, which, if it continues, is not healthy.

So we're very positive on corporate earnings. The pillars of this bull market are clearly in place-- massive stimulus, vaccine success, and strong corporate earnings. And that is not going to change throughout the year. So any pullbacks or even a correction should be viewed as a buying opportunity.

ADAM SHAPIRO: Hey, Hank, real quick. Listening to what you say, second half of the year, we're hearing that for 2021, people predicting GDP of 4 and 1/2%. Sounds like that's going to be too low, that it would actually be much higher than that.

RYAN DETRICK: Right, that's for the whole year, 4.1% or 4 and 1/2%. I think the second half, you're going to have very high single digit, 8, 9, 10, maybe even double digit offsetting the slower first and second quarter. And that's going to continue into 2022. So for the entire year, if the consensus is wrong right now, it's wrong because it's too low. That number is going to be ratcheted up closer to 6, maybe even over 6% for 2021.

SEANA SMITH: All right. Hank Smith, always great to have you on this show. And our thanks to Ryan Detrick as well. Thanks so much for joining us. We'll talk to you soon.