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Market Recap: Monday, February 1

Stocks rose, recovering some losses after last week’s selloff. The S&P 500 gained about 1.6%, after closing out last week with a 3.3% weekly loss for its worst since October. The information technology and consumer discretionary sectors led advances, while energy and consumer staples lagged. The Nasdaq outperformed as tech shares jumped, and the Dow also gained. Research Affiliates Chris Brightman and The Conference Board Chief Policy Economist & Former OMB Chief Economist under Clinton Joseph Minarik joined Yahoo Finance Live to discuss.

Video Transcript

SEANA SMITH: We've got three minutes to go until the bell. And with that, we want to bring in Joseph Minarik. He's the Conference Board Chief Policy Economist and former OMB Chief Economist under President Clinton. We also have Chris Brightman of Research Affiliates. Chris, looking at the market today, Dow up 274 points. S&P and NASDAQ also in the green. What do you attribute some of today's buying to?

CHRIS BRIGHTMAN: I think it's just a bounce from a difficult week last week, perhaps with some relatively benign turn in the news from COVID.

ADAM SHAPIRO: Very quickly, want to go to you, Joseph, because as we look at this bounce, are you concerned about this back and forth so quickly?

JOSEPH MINARIK: I'm concerned. Well, I am afraid about optimism given the state of the virus. I think that's probably the underlying theme here. We have case numbers going down. We have a lot of risks to the outlook in terms of the effect of the virus. I think you could definitely hit a ceiling and bounce back. So that would probably be my biggest concern watching things right now.

SEANA SMITH: We want to bring in Jared Blikre who, of course, is watching this buying action today. And, Jared, when we take a look at the markets today, certainly a different picture than what we saw several trading days last week.

JARED BLIKRE: Yeah, it seems from one day to the next the opposite tends to happen here. So let's take a look at the YFi Interactive at today's price action, and it's really been about both the mega caps and the small caps. Look at this, NASDAQ and Russell 2000 each up more than 2%. And S&P 500 behind at 1.7%, and the Dow up 0.84%.

But you take a look inside the NASDAQ 100 today. Those mega-cap names really stand out. Alphabet and Microsoft each up more than 3%, and then we also had Tesla up 6%, Amazon up 4%. And we will be getting Amazon and Alphabet earnings this week.

A couple of these names here, especially in the software space, have been breaking out recently. Now, Amazon hasn't quite done that. It's been trading sideways for about six months. But you would think if they're going to have a great earnings report, this could be the catalyst that finally propels it to record highs, which it hasn't seen in a while.

Same kind of going for Alphabet, although Alphabet already broke up. Still has been going rather slowly at that. And then you take a look at the sector action for today. Tech, discretionary, real estate, and communications services all outperforming. But again, those small caps also rallying as well. Here's the closing bell.

[BELL RINGING]

ADAM SHAPIRO: All right, we're into the history books when the hammer comes down. We got a closing bell, and it looks as if the Dow's going to be up about 240 points when it settles. S&P 500 will be up about 60 points when it settles. And the NASDAQ up-- are you ready for this-- 332 points, 2 and 1/2%. Components, as Jared was saying, the big winner today on the Dow was Microsoft. Looks like it's going to settle up 3.3%. But don't discount Visa. They're going to be up it looks as if about 2.5%.

We're going to go back to our guests to break some of this down. And, Chris, I want to bring you back into the conversation because of the unintended consequences of wealth inequality. Some people today got wealthy, or others saw their retirement accounts get better. What's the real story?

CHRIS BRIGHTMAN: Well, one of the indicators that we ought to pay attention to from a market perspective is the VIX at 30. That's warning of trouble ahead, and I think that's directly related to the income and wealth-inequality issue that you're talking about. Almost without question the Fed and the Treasury have inflated stock prices by pumping liquidity into capital markets, as recently explained by Professor Shiller, among others, and explicitly acknowledged by Jerome Powell.

The unintended consequences of this excess liquidity is speculative trading activity and intergenerational conflict in addition to the wealth inequality, and that you see borne out in very entertaining ways with the recent drama surrounding Robinhood and GameStop, et cetera.

I expect with Democrats in control of all three branches of government to see efforts to mitigate these unintended consequences through further regulation, including looking at payment for order flow, tightening regulations on securities lending, and inevitable witch hunts for speculative-- you know, evil speculators. And those will probably lead to a whole other round of further unintended consequences.

SEANA SMITH: Joseph, one of the things that investors watched or are watching and continue to watch, obviously, but one of the data points out this morning, CBO predicting a faster recovery than I think we initially were expecting. Say that GDP is expected to reach the previous peak by the middle of the year. Labor market is going to be back to those prepandemic levels next year.

I'm curious. From your perspective, do you think that this is overly optimistic at all?

JOSEPH MINARIK: The one thing we have to be concerned about is the businesses that have been damaged on the way down. You know, the effects of the pandemic have been so concentrated in the narrow sectors of the economy with respect to entertainment, hospitality, and so on. The question really is how quickly can those sectors come back because of the concentration of job loss among people who hold those kinds of jobs?

It's going to be, I think, a difficult road up. You know, we will regain last year's GDP level probably at some point within this year. That, of course, is not the finish line because, you know, we've got a much bigger population and a bigger-- you know, potentially bigger economy now. We've got to go further than that to get all of the people who lost their jobs and all of the new entrants into the labor force to work.

And that is not necessarily going to be easy because we don't have all of those doors, all those restaurants and hospitality and entertainment facilities all set to go back into business. That will take a while.

ADAM SHAPIRO: And what would you say to the critics in Congress who say too expensive, the stimulus plans, that are being debated to do that?

JOSEPH MINARIK: Some of the money that is being contemplated for spending will not go out the door if the economy recovers? So for example, building up unemployment compensation benefits for the folks who are out of work and have no real prospect for getting back. If they find jobs, they are-- those benefits are not going to be paid. I'm less worried about the ultimate cost than I am about the possibility of a lingering weak economy with a lot of suffering going on.

SEANA SMITH: Jared, one of the big movers that we've been talking about today is silver. Silver is by far-- though not the only commodity that we're seeing posting gains. I'm curious just what you make of this action, and what does this tell you just in terms of what we could see play out over the next several weeks?

JARED BLIKRE: Yeah, let's go to our commodities heat map on the YFi Interactive, and there is a lot of green here. Guess what? Silver's up 8% right now, still trading electronically. Up 15% over the last five days. And you can see it really started to break out late last week, and we did cover this a bit on some of the shows.

But natural gas is up nearly 10%. Of course, this is a winter phenomenon, but you look at platinum, heating oil, crude oil up over 2 and 1/2% today. And put it together on a day when the US dollar was broadly stronger. I think that's impressive.

And I've read a number of analysts making the case that, long term, we could be in another secular bull market for commodities. And that's because the Goldman Sachs GSCI Index, that has basically been consolidating for a number of years, and it's just now breaking out.

And put it all together, yeah, the GameStop, Reddit, Wall Street Bets phenomenon definitely juicing some trades here, but the silver thing I think is a little bit outside maybe some of those stocks, and we can take a look at a couple of them. The smaller miners benefited from some Wall Street Bets love today.

But other than that, I wouldn't discount this rally that we're seeing in commodities now, and I think we're going to see more in the year-- as the year develops, and it's really bullish on the reflation trade overall.

And just to close out here, Healthier Choices Management-- now this isn't an energy ETF, but this is up 118% today. And then here's the silver play, looking at Avino Silver & Gold Mines, up 60% over the last five days. And last week they announced that they are able-- that they're going to do another stock offering of a few million shares, and they're going to be able to do this at vastly higher prices. Now so if this is, in fact, Wall Street Bets, really helping out this particular issuer.

SEANA SMITH: All right, Jared Blikre, thanks so much. And we also want to thank Joseph Minarik, the Conference Board's chief policy economist, and Chris Brightman of Research Affiliates. Thank you to you both for joining as well.