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Market Recap: Friday, September 17

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Stocks fell on Friday as traders continued to digest a slew of mixed economic data and its implications for monetary policy. Jim Smigiel, Chief Investment Officer at SEI and Shannon Seery, Wells Fargo Economist joined Yahoo Finance Live to discuss.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: We have just about three minutes to go until the closing bell. We want to bring in our panel here to help us break down the action that we're seeing today, also what we've seen over the last couple of trading days. For that, we have Jim Smigiel. He's Chief Investment Officer at SEI. And we're also joined by Shannon Seery, Wells Fargo Economist.

Jim, first to you. Another day of selling. We have certainly have seen the markets come under pressure in the month of September. What's your reading on some of the selling action that we've seen?

JIM SMIGIEL: Well, I think we saw the sentiment numbers earlier today, which probably speaks a lot to that, a lot of concerns really building up, whether it's Delta, maybe whether it's debt ceiling. We do have a Fed next week. A lot of mixed signals coming out, I think, in several different places. Interestingly, flows into the market seem to be buoyed and actually are fairly strong and robust. So some mixed messages coming in there for what investors are thinking versus what they're doing, kind of voting with their dollars.

SEANA SMITH: And Shannon, speaking of mixed messaging, the economic data recently has been mixed. We got the consumer sentiment number out this morning. That, of course, disappointed a bit. In terms of what this means for the recovery, how are you looking at this number?

SHANNON SEERY: Right. So I think the consumer picture has been incredibly mixed lately, right. So we got that better-than-expected retail sales report earlier this week. We did caution that that was mostly good spending and was in nominal dollars, so it didn't give us a clearer read for overall consumer spending. And some of this high-frequency data is really pointing to a plateauing in some of these in-person activities.

And I think we really did see that in the confidence print this morning. So confidence remains bogged down at near a decade low measured by that university of settlement measure. And I think we're really due for this kind of slow patch here in consumer spending in the near term. But consumers remain financially in pretty good shape. So we're pretty confident that consumer spending will pick up again later this year and perhaps into early next year.

SEANA SMITH: All right. Well, let's take a look at where we are, because we have under a minute to go here until the close. We're looking at losses across the board for the day, and also for the week. The Dow off 131 points, so seeing some buying here into the close. We're well off the lows of the day.

The S&P off just around 8/10 of a percent, as well as the NASDAQ. In terms of the sector action today, materials, communication services, and technology are the worst performers. We mentioned that weaker-than-expected consumer sentiment number. That, of course, is keeping things in check today. And then options expiration adding a little bit more volatility in these final few seconds of trading.

[MUSIC PLAYING]

[BELL RINGING]

[MUSIC PLAYING]

There we go, wrapping up the trading week. Again, losses for the day, and also losses for the week. Dow, S&P, and NASDAQ all moving to the downside today. Investors a little bit worried about the rise that we've seen in COVID cases, also the mixed economic data that we've gotten out this week. And you can see the Dow closing off the lows of the day, off just around 168 points.

We want to bring back in Shannon and Jim to help us break down exactly where we go from here. And Jim, when you're advising clients right now, I think there's lots of confusion about whether people should still be in a risk-on strategy or if it's time to take some of that risk off the table. Where are you seeing opportunity?

JIM SMIGIEL: I think we're still in a risk-on position, for sure. We do like the value sectors of the economy, value sectors within equity, even value around the world, which would mean more into emerging markets, more into non-US securities, and then, finally, commodities. So we're kind of playing the reflation trade that's taken a little bit of a breather in the second and the third quarter. But we remain confident that that is the play and the best place for investors to put some of their risk assets going into the end of the year.

SEANA SMITH: And Shannon, the big event next week is going to be the Fed meeting. There's certainly a lot riding on it. We're not expecting anything too substantial to come out of that meeting. But what do you think the message should be or needs to be from the Fed?

SHANNON SEERY: Right. So we're also not expecting an announcement of tapering or anything at next week's meeting. I think the message from the Fed will be that they're continuing to monitor the data as it comes in. So I think they'll be paying very close attention to the September jobs report, which obviously comes after next week's meeting. And I think that will really set the tone for the timing of tapering, so are they going to officially announce tapering at that November or perhaps that December meeting and kick it off maybe later this year or the start of next year?

SEANA SMITH: And Shannon, you mentioned the jobs picture there. Certainly that has been one area that's been slightly weaker than the rest of the economy when it comes to this recovery. Lots of talk about whether or not the expiration of enhanced unemployment benefits, also people-- kids heading back to school, whether-- how significantly that is going to boost the jobs numbers. How do you see that impacting the number over the next couple of months?

SHANNON SEERY: Right. So I think you highlight two specific reasons we think that the jobs recovery is going to gain a little bit of speed here. So that expiration of benefits should pull more workers back into the labor force, particularly since we've seen wages rise across a number of industries. And the fact that children are returning to school, it takes off some of the burden from working parents allowing them to return to the workforce.

I think how the Fed is looking at it, though, is, yes, we got that disappointing report in terms of the August jobs number. But they're really looking at it from a cumulative perspective, right, so how much progress has been made? And I think, depending on how strong that September report is, you know, is it a couple of thousand again or is it closer to that 500 to a million jobs added range, that will really set the tone in terms of their tapering process.

SEANA SMITH: And Jim, when it comes to the Delta variant, we certainly have seen the number of cases continue to rise, although some of the skyrocketing numbers have pulled back just a little bit. In terms of how the market is reading this, how big of a concern do you see Delta, at least, being to stocks over the coming weeks?

JIM SMIGIEL: I think it's hard to discount it. I mean, we've seen it in the consumer sentiment numbers. No doubt Delta plays a big part of that. You know, the news cycle all the time is relatively varied, but there's big drops. Today, we had the FDA panel come out and reject the boosters, which were hanging, I think, over investors' heads.

You are right, though, those early states that saw this third wave spike have clearly peaked and are heading down. There is a lot of positive news out there. If we do want to focus and separate cases from hospitalizations and deaths, there is good news in there.

And there's even some of the experts in the field that have been with us through the entirety of this process, like Scott Gottlieb, who is really looking favorable into the fourth quarter, that the peak of Delta is behind us, and it's going to be an influence on the markets, for sure. We've seen it already. But dare we say, I think that influence itself may have peaked in terms of investor concerns around Delta.

SEANA SMITH: Jim Smigiel, great to speak with you, Chief Investment Officer with SEI. And also our thanks to Shannon Seery, a Wells Fargo Economist. Thanks to you both for joining us.