Market Recap: Friday, January 8

Stocks ended a choppy session at record highs Friday afternoon as investors attempted to gauge the likelihood of additional stimulus out of Washington. WealthWise Financial CEO Loreen Gilbert and Bankrate.com Senior Economic Analyst Mark Hamrick joined Yahoo Finance Live to break down the details.

Video Transcript

SEANA SMITH: Just a couple of minutes here from the closing bell. We're taking a look at the markets. We have Dow, S&P, and NASDAQ all on track to close at new records. We want to bring in Loreen Gilbert. She's WealthWise Financial CEO. Also joined by Mark Hamrick, Bankrate.com senior economic analyst. Loreen, over to you first, just because the market able to shake off this much weaker than expected jobs report, the fact that we did see jobs decline for the first time since April. What do you make of this/ Why is the market able to look past it?

LOREEN GILBERT: Well, when we look at what the reason for it, we look at the lockdowns again, shutting down of businesses in December. And hopefully, that's temporary. And I think the markets are looking beyond it, saying, those hardest hit that we saw were restaurants, hotel, leisure. Those were the payrolls that were hit the hardest. And I would say that we're looking forward to the reopening of the economy with, hopefully, the vaccinations starting to increase to that 20 million marker that we were looking for.

ADAM SHAPIRO: All right, Mark, I want you to stand by because I want to get to Jared Blikre, who is watching the markets as we move toward the closing bell. And one thing in particular, too, the information technology sector has been on a tear, as we know, for 52 weeks. It continues to go higher.

JARED BLIKRE: Yes, it does. It was one of the leaders last year. It was a leader for most of last year, taking a back seat to the value and cyclical play, as we've seen over the last few months. But as long as it goes up-- it doesn't have to go up every day-- the markets are going to be fine probably.

So let's take a look at the markets here. Now this is today's action in the Dow. You can see we spent most of the day in the red down here. But we're closing in the green after that payrolls number that we were talking about. I have to think that this is a market where bad news is maybe good news. We have these incredible tailwinds from fiscal stimulus, monetary stimulus. And we have earnings beginning next week. Next Friday really kicks it off with some of the big banks. Yield curve is allowing them to show some nice returns here.

So let's take a look at the NASDAQ 100 as we close out the final seconds of this first week of the trading year. Get this up. Here we go. We can see the mega caps, which many of these started out the day, some of them in the red slightly are now solidly in the green. The real standout here is just Tesla. Tesla another 7.9% up, 25% over five days. Here's the closing bell on Wall Street.

SEANA SMITH: And that does it for the trading day, closing up the week here on Wall Street. All three of the major averages, like Jared was just saying, ending in the green. We have the Dow up 56 points, S&P up just around a half of a percent, and the NASDAQ up 1%. You can see it closing above 13,200. Dow, once again, closing above 31,000, a record high for all three of the major averages. Small caps, though, not participating in this rally. We're seeing the Russell 2000 closing under a bit of pressure today in the red.

Sector wise, consumer discretionary, real estate, and utilities leading the gains today. We want to bring back in our panel Mark Hamrick of Bankrate.com, senior economic analyst, and Loreen Gilbert, WealthWise Financial CEO. Mark, over to you, just on this jobs report, the fact that we did see such a big decline in jobs in the month of December, what's your take on it? And I guess, what does it tell us just about what we can expect over the next couple of months?

MARK HAMRICK: Well, I would ask people rhetorically how many of you had it on your Bingo card that the pandemic would be raging out of control to the extent that it is right now. And then, you have to think about the fact that, obviously, this survey period was in the second week of December, as these surveys tend to be. We'll soon be doing the work, or the government will be, to gather the data for the January reading. That was weeks before it was finally resolved that Congress and the president agreed to the stimulus legislation, or relief legislation, as I prefer to call it.

So we are still very much in the winter of our discontent with respect to both the economy and the pandemic. And obviously, when you see the massive number of jobs that were lost in leisure and hospitality, building upon the earlier job losses-- also, by the way, let's not forget more than a million jobs lost at the government level during the course of 2020. So, there is more work to do about putting this pandemic behind us.

And obviously, when we see these headlines about the Biden administration making it a priority to basically push the vaccines out much more rapidly than was earlier planned by the current administration, these two things are joined at the hip, so to speak. And we need to get past the pandemic so the economy can begin to reopen and heal.

ADAM SHAPIRO: So, Loreen, hearing what Mark just said about getting the economy open and [INAUDIBLE], which sectors-- and I'll let you pick the time horizon-- over the next quarter, next six months, or even the next year-- should we as investors pay attention to? I would imagine healthcare, obviously, but correct me if I'm wrong.

LOREEN GILBERT: Yeah, healthcare is definitely one of our top sector picks. I also would say consumer discretionary was a big win this last year. And we expect it to continue. If we think about the potential for tax increases that we do think are going to happen maybe not in 2021, but maybe in 2022, we see historically that consumer discretionary has actually done well prior to those increase in taxes.

Part of the reason is usually we see a stimulus package that boosts the consumer, and they are willing to spend that money alongside increased taxation. So I would say consumer discretionary is another one that we're looking at. Financials finally, I would say, has been on a tear recently. We have that steepening yield curve. And we still like financials going forward, especially as we look at some of the regional banks, small companies, small value play. We see an opportunity there.

SEANA SMITH: Hey, Loreen, what about some of these small caps? Because we don't want to make too much clearly of one day, but Russell 2000 not participating in the gains today, closing in the red. Why do you think that is?

LOREEN GILBERT: Well, what we've seen year to date is a different story. What we've seen year to date is that closing of the gap, where your large growth hasn't done as well as the small cap area has done. So I would say that I see that as a continuing trend over this next year, is that rotation that we saw happen at the end of last year will continue. Not that we think that you should get rid of all of your large growth companies, but that there should be a balance between value and growth with the opportunities in those smaller and mid-sized companies, as those are acquisition targets.

ADAM SHAPIRO: Mark, I wanted to bring you in to ask a question about capital gains and the capital gains tax rate, especially with stocks have been on such a tear at record highs. What should an investor either fear about an increase in the capital gains tax rate and that Congress could get wrong, or what should an investor not be afraid of, if they should tamper with the capital gains tax?

MARK HAMRICK: Well, you know, Bankrate, we're really all about trying to help people accomplish their financial goals. And for most people, their exposure to the stock market is a long-term perspective, not a day trader or looking to make a killing in some of these more speculative investments. And so, yeah, there may be some short-term pain from that if, indeed, the Biden administration is able to make some changes in that realm. But we've had higher taxes in our country before-- in fact, just a few years ago.

And by the way, I'd like to remind people, the Trump tax cuts are already set to expire in 2023. That seems to be a largely forgotten fact of life. So I'm not concerned about it. I think that longer term, people need to be invested in saving more money. The biggest problem that we have is indicative of the typical surveys that we do at Bankrate that show time and time again, the biggest financial regret people have is the failure to save for emergencies, the failure to save for retirement.

Now, obviously, there are going to be different things that affect the productivity of their investments. But the main thing is to be invested. And if you're failing to do that, that's going to cause some big problems down the road.

SEANA SMITH: Hey, Loreen, I want to get your thoughts on what's going on-- go ahead, Adam.

ADAM SHAPIRO: I-- thank you, Seana. Which taxes are expiring in 2023? I thought we were getting the tax expiration after 10 years from the tax bill in 2017.

MARK HAMRICK: Well, I don't have the list in front of me, but many of these provisions are set to expire. And so, I mean, that's just a fact. It's not well advertised because people, when they're in a position of elected authority, don't like to advertise the fact that these things tend to be temporary. But many of these provisions are set to expire.

SEANA SMITH: Loreen, does that at all change how you're thinking about investment opportunities at this point?

LOREEN GILBERT: It is. I think that we have to put a lens of taxation on our investments, especially this year. I think we have a year to plan ahead. I don't think we're going to see increased taxation in 2021. I think it's too hard to do in the coming out of a pandemic. But I do think that it could be well thought out for 2022.

And then investors can plan for it, both in their investing and look at corporate profitability that would be impacted, as well as their own personal finances and looking at what that could mean for investors. So I would say for investors, this is a year, 2021, to look at your capital gains, to think about what gains you may want to take this year before any potential tax increases would occur.

ADAM SHAPIRO: Mark, as an economist looking out at the next year, as important as it is, as you say, for people to invest, there are people in this economy who don't have access to a 401(k) and the kinds of investing, long-term investing most of us engage in. What do you think is going to happen? Even if we get the $2,000 stimulus or whatever relief bill is going to come on, are the-- I think it's 5 million people who have dropped out, given up working, that we learned in the jobs report. Are they ever coming back into this job economy?

MARK HAMRICK: Some will, and some won't. And I think you're right. You know, we tend to be very focused on the cyclical aspects of what's happening in the economy. But there are structural issues.

And I think that's going to be one of the real challenges that working together with members of his administration-- Janet Yellen, obviously very well qualified for her job, if she's confirmed at Treasury. Marty Walsh, who obviously has another priority in terms of healing the job market, and he has this connection to organized labor. It's a priority for Joe Biden. And then, obviously, Jerome Powell, who has basically said we are going to target unemployment and basically not worry so much about our inflation portion of the mandate in the near term.

So, I think we do need to think very much about addressing the short-term. And that tends to be what we discuss in these kinds of settings. But in the long-term, there are issues that infrastructure can help address, issues such as maybe long-term approaches to tax policy, as well as education and healthcare. And so, those are some of the often talked about, about much like the weather people talk about it, but don't do much about it.

SEANA SMITH: Mark Hamrick of Bankrate.com and Loreen Gilbert of WealthWise Financial, our thanks to you both for joining us today.

LOREEN GILBERT: Thank you.