Stocks were flat Friday as investors took a pause after a four-day rally and continued to await election results from key states. However, the three major indices posted strong weekly gains. Chris Rupkey - MUFG Chief Financial Economist and Lisa Erickson, U.S. Bank Wealth Management Head of Traditional Investments join Yahoo Finance's Jared Blikre, Seana Smith, and Adam Shapiro to break down today's market action on Yahoo Finance Live.
JARED BLIKRE: The NASDAQ is up 9%. That is the outperformer. And the S&P 500, that's up 7%. We'll also take a look at the Russell 2000, which closed the day down. It was a mixed day in the majors as well. That's up 7% for the week. So basically, 6% to 9% is what we're looking at.
Now, here is the NASDAQ 100, but I'm going to sort to the NASDAQ winners of the week. And if we go to five-day performance here, we can see some of the bigger names. Facebook up 11 and 1/2%. Tesla up over 10%. Nvidia up 16%.
And you'll notice some patterns here. We do have a lot of chip stocks in there, but by far and away, the big leader was Biogen, up in the upper left, that's up 30 and 1/2%. It has to do with some of their drugs and licensing that came out of the FDA. Then we got Pinduoduo, that's up 27%. MercadoLibre up 22%.
So you can see, all in all, a nice mix. Biotech is on fire. It is, if you look at some of the ETFs in the sector like IBB, it is threatening to get up to a new high, a record high, potentially next week. And if that does happen, that would end a five-year consolidation, and so lots of space there.
Also, looking at the Dow winners here, we can see Apple and Microsoft, 9% and 10 and 1/2%, respectively. Biggest winner was UnitedHealth, that's up nearly 14%, followed by Salesforce and then Honeywell. And just a quick look at the sector action for the week, tech, the big winner, up almost 10%, followed by health care. Had a really nice breakout day, I believe it was Wednesday, day after the election. And then materials and communication services, those were the outperformers. The energy sector was the biggest loser, but it was still up 7/10 of a percent, guys.
ADAM SHAPIRO: Chris, you know, when we look at the data we're getting and how the markets seem to be off to the races, we have analysts saying it's going to go even higher into 2021, the job situation. We could find lots of negatives, but there's also a lot of reason to be optimistic. What do you think?
CHRIS RUPKEY: I don't know. Do you want me to be positive or negative here?
ADAM SHAPIRO: Be yourself.
CHRIS RUPKEY: I could easily go either way, because the household survey found that there were 2.243 million more jobs created, which is quite a bit more than the 638,000 from the payroll jobs survey. So it's kind of-- you know, throughout the day I think you've had a lot of negative commentary or people very concerned about the outlook, so maybe I could just chime in with that, I don't know.
SEANA SMITH: Well, Chris, then, going off of that, what does that mean for stimulus? What does the economy need at this point, because I think lot of questions out there, just in terms of the size of the package that's necessary?
CHRIS RUPKEY: Yeah, you know, the old-fashioned Keynesian type of stimulus that comes in and the federal government spends when private companies and consumers back away, the federal government fills a gap, priming the pump, that sort of spending really isn't necessary, right. I mean, this is a very unique pandemic recession, which is being controlled by the virus, and it's hurting expenditures by consumers on services. So I don't really know if there is that much more needed to push GDP growth faster.
You know, spending is needed from the federal government. You could give more to the tremendous number of unemployed out there in the country, re-up their benefits that are exhausted. You can give more money to state and local government that, you know, one side of the aisle doesn't really want to see. There's various things you can address. But in terms of trying to push the economy faster, we don't need it. Retail sales-- retail sales is setting a record right now.
ADAM SHAPIRO: Lisa, I'm curious for investors who might be suffering from the fear of missing out, is there a danger, as COVID cases spike here, that we get the kind of lockdowns that threw the economy and the markets into a tailspin eight months ago?
LISA ERICKSON: Well, we would agree with you, Adam, that really, the progress on the coronavirus is going to be a key determinant of both economic and then, of course, stock market action. In terms of lockdowns, though, it's very clear that really, there's a COVID fatigue, not only here in the US, but globally. And so our sense is really that there's not the political will at this point for the same kinds of more severe lockdowns. And so while we certainly have seen an alarming increase in counts as the colder weather has set in, it seems like really the response has been more measured. While there still are lockdowns, they're certainly not as restrictive as they were, again, back in the spring.
SEANA SMITH: Chris, going on that, what's your base case scenario? Are you forecasting any lockdowns here in the US, and then that, of course, potentially hampering economic growth?
CHRIS RUPKEY: Well, I keep hoping that we'll get through this. I know the UK, and Germany, and France are back in lockdown temporarily. It is a little scary. I just-- you know, there's headlines that US cases, positives, are at records. I just keep hoping that we're near the crest of the wave.
And you know, for instance, the stock market here really discounts things 12 to 18 months in advance. I'm really afraid here that-- you know, this time a year from now, I'll probably be back in New York City at my office. So if that's the case, you know, people are really buying the wrong stocks, these big five tech companies.
Now, this is for a COVID environment. What's going to happen when COVID goes away? It's going to go away sometime. I sound like the president of the United States, but there you go. It's going to go away sometime.
ADAM SHAPIRO: Look, I'll take that, Chris. I want you back in New York City. I stayed, and I'm glad to see traffic on the streets again. But how do you position that? Because what we also keep hearing from our analysts, Chris, is that the world is forever going to be changed, the new normal, hybrid working, you won't need to be in the office. What sectors are going to gain once there is a vaccine and we get out of the pandemic?
CHRIS RUPKEY: Yeah, I think we're going to go back to normal, frankly. I've seen a lot of tech companies saying that this is going to be the wave of the future. Financial services companies, as well, are going to go to, you know, part time at home, part time at work. But you know, I just don't buy it. Whenever this comes through-- during a crisis, people say things and believe things that often don't happen.
It's hard for me to believe that we're not going to be back at normal in three or four years. I mean, the airline industry is planning for that. It just makes no sense. And for all these CEOs talking about it's OK to work from home and you can think better at home, I've got to push the dog away when I say I can think better at home here.
You know, I just don't buy it. The culture of these companies is going to go away if people don't get back and huddle together in the offices. So I think we're going to be back here fairly shortly.
SEANA SMITH: Jared, taking a look at the bond market, because I think that's something that we haven't touched on yet in this show, we've been focused on it so far this week, the 10-year yield, I guess, up just around, what is it, right around 82 today, 82 basis points. What are you seeing-- or what do you think the bond market is signaling to us at this point, just when you kind of read the tea leaves and look at this week's moves there?
JARED BLIKRE: Well, we had a fairly big range in the 10-year T note yield this week, and this would be these five bars on the Y Fi interactive here. You know, the trend, the short-term trend, is up here. But if you look over the longer term, it's still sideways. This is a year-to-date, and you can see we briefly tagged this spike up that we had in June.
But for the most part, we've been between 50 and 95 basis points, and sometimes at those extremes. Anything beyond that is probably going to be concurrent with a directional move based on events like finally getting the election results in, finally getting a vaccine candidate to market, something like that. Anything else is probably noise.
Then you look at the dollar, the dollar has been weaker. We saw it-- and let me go to a two-month chart here so you can see it even better. We sold off pretty hard in the US dollar. And this is the DXY, but you look at the Bloomberg Dollar Index, it hit two-year lows. And if we look at a two-year chart in this, and actually let's broaden it to a five-year, we are down, but still, this is a relatively sideways trendless market for the last five years in a trading range.
You look at gold, gold broke to the upside here this week. And we'll go back to a two-month chart, and we can see that is a very nice breakout. Looking at the six-month, it looks like we've finally broken out of this negative trend line here. So we could be in another move up in gold.
But I will say this, positioning and also sentiment is very dollar bearish, and so that's probably the pain trade right there. If, for some reason something happened, maybe Trump pulling a miracle upset, that could reverse the dollar strength-- the dollar weakness to dollar strength, you'd see gold reverse, and that would also probably weigh on equities, at least in the short term.
SEANA SMITH: Lisa, what do you make of all this, just in terms of the areas of opportunity? Because I think the thing out there to take away from this segment is that there's still so much uncertainty when you look at coronavirus, when you look at the election, when you look at the pace of the economic recovery. So how are you positioning yourself right now?
LISA ERICKSON: Yeah, Seana, you're right. There still is a lot of uncertainty, and there's a lot of things going on all around policy-wise. But really, if we cut past that and we take a 12 to 18 month intermediate term view, we're really still glass half-full. And if you just look at the key data, on an economic basis what we've had is we've had a nice recovery.
And while it is that growth level is flattening to some degree, it's still holding its own. So we've got the economy in more of that moderate steady state as we're waiting, again, for the economy to further reopen. In addition, we've got a very accommodative environment, both on a monetary basis, as well as generally fiscal has been very supportive. And while the exact size of any further stimulus is unknown, certainly both parties are continuing to move in that direction.
And in addition to that, if you just look at the bottom-up on the corporate earnings basis, we actually have seen companies be much more resilient than people expected, and that's well-reflected in the third quarter with both the number of beats, as well as the absolute amount by which they beat estimates. And so really, that's leading us, along with the fact that we continue to make progress in the medical community, to really, all other things being equal, be a little bit more risk-on in our stance.
SEANA SMITH: All right, Lisa Erickson, Head of Traditional Investments at US Bank Wealth Management, Chris Rupkey of MUFG Chief Financial Economist there, and, of course, our very own Jared Blikre, thanks so much for joining us. Have a great weekend, everyone.