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Market Recap: Friday, October 15

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Stocks rose on Friday to post a robust weekly advance, with stronger-than-expected earnings and economic data. Victoria Fernandez, Crossmark Global Investments Chief Market Strategist and Clinton Warren, Global Investment Specialist at J.P. Morgan Private Bank joined Yahoo Finance Live to discuss.

Video Transcript

- We are down to the final minutes of the trading day. S&P on track for its best weekly performance since July. We have Victoria Fernandez, Crossmark Global Investments Chief Market Strategist, and Clinton Warren, Global Investment Specialist at JP Morgan Private Bank here to help us break down the recent action that we've been seeing. Victoria, help kick us off here. I guess, your big takeaway. How would you sum up this week's trading action on the heels of many of those better than expected earnings reports that we started to get for the third quarter?

VICTORIA FERNANDEZ: So Seana, I think that's the key right there. I mean, there was a lot of concern coming into this earnings season. Expectations had been coming down over the last few weeks because we had such huge growth in the second quarter. And there was a lot of concern with the supply chain issues. Was the consumer pulling back because of Delta? So there was some concern as to what these numbers were actually going to look like.

And we started off this week really strong. The banks have done great. JB Hunt did really well too. So I think that started to relieve a little bit of people's concerns, especially when you had the CEOs of the bank saying the consumer looks strong. And that, I think, is going to be the key for the market going forward. If the consumer is there and they're willing to spend, which we've seen in the month of September retail sales started to come back a little bit, then I think that gives a little more optimism to the market that as we continue to reopen, as earnings are strong, the consumer will be there, and the equity markets will continue to trend higher.

- All right. Clinton, we'll get to you in just a minute. But first, let's take a look at where things stand because we have less than an hour-- or less than a minute, excuse me, to go until the closing bell. Dow, S&P, and NASDAQ all moving to the upside. You can see Dow just off its highs of the day, up just around 391 points right now. S&P looking for an 8/10 of a percent gain today. The NASDAQ up just around a half of a percent. In terms of some of the individual movers that we're looking at today, Amazon posting gains. It's actually on track for its biggest daily gain that we have seen in more than two months.

Microsoft, Apple, Google, Amazon. All four of those names on track for their second consecutive week of gains. So certainly, we've been keeping a close eye on a lot of those big tech names. In terms of the sector action that we are looking at today, financials by far the leader with the XLF just around 2%. We're also seeing significant gains from consumer discretionary, energy, and industrials.

[BELL RINGING]

And there we go. That wraps up today's trading week. Again, you're looking at gains across the board for today. Also, the Dow ending the week in the green. The Dow closing up today 382 points. S&P up 33. And the NASDAQ up just around a half of a percent. Let's bring back in our panel. We have Clinton Warren and Victoria Fernandez to help us break down the action. And Clinton, we just heard Victoria's assessment of the week. How would you sum up this week's gains for us?

CLINTON WARREN: It's just nice to see some green. I mean, we were spoiled the first eight months of this year with, all-time highs happening over 50 times. And I think September gave some people some pause as we started to see volatility again because people were questioning things that got us those great gains so far, like monetary policy. People were getting concerned about what the Fed was going to do. Fiscal policy. Is the Congress really going to do something with this infrastructure bill?

And now it's all about guidance. So what are c-suite executives going to say in their earnings reports? And so far this earnings season, they've been talking about supply chains. Over 3,000 times they've used that phrase. So for me, I'm listening to what c-suite guys are going to say-- and gals. I'm going to be focused on supply, what's going to happen from labor, to inputs, demand. Is it really going to be supportive? And then, obviously, inflation concerns. Are they're able to pass on these increase in prices to their customers? So it's good to see some green. I hope it stays. And we are confident that it can.

- I hope it stays too. But Clinton, you just mentioned the supply chain issues. I guess, how much of that do you think is already baked in to some of these stock prices?

CLINTON WARREN: I think it's baked in a little bit. I mean, if you at all the ports in California, there's still a ton of ships that are out there. And I was meeting with a client earlier this week, and they were saying that their input costs have gone up 15% to 30% so far this period. And they're able to pass on those costs to their buyers. And the question that I have is, how much will consumers take on these inflationary prices? But I think supply concerns are going to be here for a while. Hopefully, with some of the things that the administration did to go to 24 hours of port relief, it looks like FedEx and all these other companies are relieving some of the strain. Hopefully, that will ease it. But it could be here for a little bit.

- Victoria, back to you. Going back to what you were saying before the bell, you were saying that the consumer looks very strong. Obviously, that's evident in the retail sales number we got out this morning. But when we take some of those supply chain issues that Clinton was just talking about into view here, I guess, what's your view on some of these retailers and what we could potentially see over the next couple of months as a result?

VICTORIA FERNANDEZ: Right. I think these supply chain issues, a lot of people thought they were going to be shorter term than what they are. I don't think we expected them to go on quite as long as they have. And when we look at the backlog that's there, first we saw it in housing. Remember how the housing backlog started and builders were saying, look, we can't even sell any more homes because we have such a big backlog, and we need to build those. I think we're seeing some of the same thing now in the merchandiser. So they're not getting their goods in. We don't have the truckers to take the goods from the ports to the stores.

But saying that, the stores that have strong online presence, the ones that have strong trucking services themselves, like a Walmart, I mean, their logistics component is massive. Those are going to be the companies that I think are going to be able to do well during this holiday season. We recently added to our Target position because they do have such a strong component there with their online sales. So I think you can find room within retail. But you're going to have to go for quality. You can't just go for everyone in the pack right now. You've got to do that bottom up fundamental analysis. And hopefully, the supply side of the equation will work itself out over the next quarter.

- Speaking of stock selection, Clinton, I know that this is something that you mentioned in your note. You were saying that in an environment that we are in right now like this, a stock selection is key. So what are you looking for when you're identifying some names to buy?

CLINTON WARREN: Yeah. I think stock selection is going to be very key. Just the broad-based improvements in the market isn't going to be the go-forward basis. So you have to pick sectors and individual stocks that you think are going to do well. And we think a barbell approach makes the most sense. So having some defensive sectors and individual securities. Me, personally, I like the financials for a number of reasons. One, the increase and the steepening of the curve, the yield curve. Second, it looks like the credit situation across the US and the globe isn't as bad as people thought. You're starting to see banks return some of their reserves back and into their earnings.

And on the growth side of things, I'm liking technology and health care. Health care for me makes a lot of sense. There's an older growing demographic. And when you get older, you spend a little bit more on prescription drugs. There's a lot of innovation in the drug sector. And I anticipate there to be a pickup in M&A in this sector, as well as a lot of corporations have a ton of cash on their balance sheet. So I totally think sector selection, stock selection, is going to be key for me. Having a barbell approach makes a lot of sense.

- Victoria, one thing we haven't mentioned is the latest down in DC because it looks like the debt ceiling issue obviously has been resolved, at least for now. But certainly, there are still questions that remain about the infrastructure package and also that $3 and 1/2 trillion reconciliation bill, although will likely be less at this point. I guess, how is the market looking at the latest developments down in DC?

VICTORIA FERNANDEZ: Well, we saw the market take a little bit of a positive turn when the debt deal-- I wouldn't say that we resolved it, right. We kind of kicked the can down the road until the first week of December. And the unfortunate thing is that that's going to align then with the budget issues that we have to solve at the same time. And it's going to be at the holiday season as well.

So I think we're setting ourselves up for another battle in probably six weeks time. But look. It's uncertainty that drives the market. And there's a lot of uncertainty in Washington right now about what these packages are going to look like. Is it going to spur inflation? Is there going to be a lot of new Treasury issuance just as the Fed is starting to wind down their balance sheet and start their tapering, either in November or December. So I think there's a lot of unknowns. And the unknowns is what's going to cause volatility in the market. And that barbell approach we were just speaking about, that's going to serve you well in that volatile environment. So I think that's where you need to probably position yourself as we go through the end of the year.

- All right. Victoria Fernandez, Crossmark Global Investments, and Clinton Warren of JPMorgan. Thanks to you both for joining us. And have a wonderful week.