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Market Recap: Friday, July 2

Stocks rose Friday to record levels as investors digested a key print on the U.S. labor market recovery. Chris Konstantinos, RiverFront Investment Group Chief Investment Strategist and Mark Hamrick Senior Economic Analyst at joined Yahoo Finance Live to discuss.

Video Transcript

SEANA SMITH: We have our panel coverage for you. We have Chris Konstantinos-- he's RiverFront Investment Group's chief investment strategist-- and Mark Hamrick, senior economic analyst at Chris, first to you. When you look at this report, look at the market's reaction, it certainly looks like Wall Street is pleased. What did you think of the numbers that we got out this morning?

CHRIS KONSTANTINOS: Well, I think one, as a citizen, as an American, I'm happy to see the jobs recovery-- although I think we need to remind ourselves that we're still something like around 7 million jobs light from where we were pre-pandemic, so we still have a lot of wood to chop there. But I think it's encouraging, and I was certainly wondering with the markets-- you're about to report, I'm sure, that we're going to make new highs on the American indices-- I was wondering whether this would be good news is bad news, in terms of all the Fed-watching and wondering when the Fed's going to start taking away the proverbial punch bowl but it doesn't seem like the market's responding.

Now, I would also note that we're in, probably, a little bit of a volume vacuum going into the 4th of July holiday, so don't read too much in today's move. But look, I'm always happy to see markets making new highs. I think that new highs tend to beget more new highs, and I think from a momentum perspective, it's positive.

SEANA SMITH: Well, let's take a look at those new highs that we're looking at here into the close. Less than a minute to go, the Dow now up 142 points. S&P up about 7/10 of a percent, and the NASDAQ up about 8/10 of a percent. That's a 115-point gain there.

A couple of the standouts here in today's action. Apple, that's up nearly 2%, Salesforce up another 1 and 1/2%. Looking at the sector action, nine of the 11 sectors posting gains right now. Technology and health care are the top performers. I also want to mention Boeing, because that's bucking this upward trend. Shares are in the red today, and IBM off as well. This comes after the company announced that its president, the former CEO of Red Hat, Jim Whitehurst, was stepping down. So of course, those two names bucking the upward trend that we're seeing in the market. But big picture, across the board, we're looking at gains as we wrap up the trading week.




- And there's the closing bell. And check out the pyrotechnics they're throwing in there down at NYSE. We have the gavel. Let's see where we hit. Who was it, what, two months ago, we had people saying we'll be lucky if [INAUDIBLE] 200? Ha, that's [INAUDIBLE]. I realized [INAUDIBLE].

S&P 500 up today 32 point. Dow is up 154 points. NASDAQ up 116 points. You heard Seana talking about some of the winners in the Dow. The losers though, there was the issue with Boeing, the emergency landing of the 737 cargo jet it. Had to ditch into the ocean in Hawaii. You also had IBM. It was off-- or rather, yeah, it was down today about 5%. And then, Walgreens/Boots Alliance was also off 1% today.

One last thing, energy sector was down-- not by a lot, but it was off 1/4 of a percent. Financials were off 1/4 of a percent. Let's get back to our guests and talk about what's going on with these markets. Mark Hamrick, senior economic analyst at, jobs report was really good. Is that enough goodness to have driven these markets as high as they did today?

MARK HAMRICK: Time will tell. I think it was reassuring to the extent that we had some of the best payroll gains in many months. Nevertheless, we're still bouncing around the 6% range with the unemployment rate, where, really, we've been for many, many months now. And for the lack of progress we're seeing, for example, in the labor force participation rate, as you know, one of the questions for the future is, how does the Federal Reserve view all of this? And I don't know that this necessarily helps them to check that box off, the box that they have defined as further substantial progress on the job market.

Yes, it's good to see the 850,000 jobs added, good to see wage gains that are basically keeping pace with recent inflation. The question is, can we accelerate that as we get here into the second half of the year and the fourth quarter once we get past Labor Day?

SEANA SMITH: Mark, let's talk about the wage gains. Because year-over-year, they were up 3.6%. We know employers are doing all they can to attract workers at this point. I guess how big of a challenge, do you think, will it be for those employers to even just retain the workers that they have over the next several months because it's so competitive out there?

MARK HAMRICK: The balance of power is very much in the workers' camp right now, and I think that is among the key challenges for employers, is to find the workers they want to hire, to retain the workers they currently have, and as we know, this is being reflected in things like hiring bonuses. So for workers, good news. But when we attend virtually or just listen in on the next Federal Reserve news conference, there will be this reference to wage pressures, whether they are significant or not. And I just remind people that one person's wage pressure is another person's money in the bank. So there are always two sides of this would-be coin.

- Chris, let's take a look way down the road. I'm looking at 2022. We've seen dramatic growth earnings per share for the S&P 500. But when you look at 2022, I mean, this is such an anomaly given what we're coming out of because of the pandemic. So what should we as investors truly expect when we are back to normal-- I'll make a prediction-- next year.

CHRIS KONSTANTINOS: Sure. I think that double-digit earnings growth is attainable in '22, but I think what you're going to have to see is this global reflation story that's really started in earnest over the last couple of quarters, it's going to have to continue, and it's going to have to be pretty broad-based, I think. So for instance, some of my favorite indicators to look at on a forward-looking basis economically are survey-based data-- soft data like PMIs. You look at American PMIs, look at European PMIs, in some cases, they're as high as I've ever seen them.

But when you look more into the emerging economies-- which, let's remember, economies like India and China, they box pretty high in terms of overall global GDP-- those are actually decelerating, particularly China's. So I think we need to see a globe that's continuing to have the synchronized recovery in order to get earnings across the board that are going to be really, really strong.

I do have pretty high confidence in the United States, though, and we've written a bunch about this. This economy was the strongest economy pre-pandemic, it was the strongest economy coming out of the pandemic, and that's not just for cyclical reasons. I think that's also structural reasons. And that's played into our thesis of preferring US equities to the rest of the world.

SEANA SMITH: So if you look at where things closed today, we have the Dow, S&P, and NASDAQ all closing at record highs. We want to get back to Jared Blikre, who is on the floor of the exchange. And Jared, the S&P now up seven days in a row. I guess what are traders saying about some of this momentum that we've seen in the market?

JARED BLIKRE: Hard to find one right now, but I guess they're around here somewhere. The momentum is on the right side, but there's really not a lot of volume and liquidity, so I think a lot of traders are just taking this movement with a grain of salt. And I'll tell you what-- now that the markets are closed for the next three days, I'm looking at crypto, and I have a Bitcoin seven-day chart on the Wi-Fi interactive here. And we got some exciting liftoff last week when we hit 30,000 over the weekend and we bounced off, but we didn't get much follow-through.

And this is concerning to me. If you take a look at a three-month chart here, you can see it just languishing down near these lows. We test 30,000 again, not as likely to hold. So could be a really interesting and not the best weekend for crypto. But hey, I hope we surge to 35,000 or 40,000 on some offhand tweet. Who knows where that would come from?

SEANA SMITH: Let's kick it back to the panel. Chris, when you take a look at what's needed in order to keep this momentum that we have seen in the market here over the last couple of trading days going, what do you think is the necessary catalyst for that?

CHRIS KONSTANTINOS: Sure, I think that it's going to have to be this central bank lower-for-longer type of action. And I think we're going to need to see that. The other panelist, Mark, brought up, I think, a really, really great point as it relates to the jobs market. He brought up the point that-- the same thing that Jay Powell has been talking about a lot at the Fed-- which is yes, the unemployment rate is decreasing, but that's been partially because a lot of folks have left the job force, and they're not actually back yet. So the unemployment rate, in reality, is higher than it seems on the screen.

And the reason I bring that up is because I do think it's going to keep the Federal Reserve engaged in monetary policy, expansionary policy, longer than a lot of folks expect. And I think that's going to be the catalyst to keep the bid to stocks over the next, let's call it, three to six months.

- Mark, picking up on what we just heard Chris say-- and this has to do with the number of people in the labor force-- for years, the participation rate has been below what we kept being told it should have been. And now, it's as if we're being prepared for It's really not going to go above 62%. If that's the case, how do we have the productivity, how do we have the workforce that would then drive equities higher if people really just aren't in the workforce and aren't coming back?

MARK HAMRICK: Well that's a bold assumption to bet your house on. I think that we will have more people coming back. It's going to take a while. We've, obviously, had a lot of retirements. We do have some issues with the aging population, present company included-- that's a blessing, to be surviving.

But I think that first of all, we don't know that we have a high degree of confidence about measuring productivity in this economy. Do we actually know what's happening out there? And if anything, I think we've had tremendous productivity enhancements here over the past year to 18 months. That will be in evidence for the foreseeable future, to the extent that I'm speaking to you from my home, as many of us are these days, through the efficiencies that are given to us through technology, as just one example that's been omnipresent of late.

Same thing's happening across industry and the digital economy, and I do believe that that is going to yield productivity gains. Whether that's sufficient, whether that can counter whatever happens with labor force participation, those are, obviously, going to be key issues to watch. But I think that the US economy-- as was indicated by my fellow panelists just a few minutes ago-- is really going to be the star player here for the foreseeable future. And we know it's going to be the largest single national contributor to global growth this year and-- who knows-- might get enough momentum, particularly if we do get, quote, unquote, "infrastructure" passed by Congress and signed by the president, that'll be another tailwind pushing the US economy forward for some time.

SEANA SMITH: Mark Hamrick, senior economic analyst with, and Chris Konstantinos of RiverFront Investment Group. Thanks to you both.