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Market Recap: Monday, June 28

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Stocks were mixed on Monday, with the S&P 500 and Nasdaq rising to notch fresh record levels, as traders looked ahead to more key economic data later this week. Bill Baruch, Blue Line Futures President and Frances Newton Stacy, Optimal Capital Director of Strategy joined Yahoo Finance Live to discuss.

Video Transcript

- And about 90 seconds here until the bell. We want to bring in Bill Baruch, Blue Line futures president there. And Frances Newton Stacy, Optimal Capital director of strategy. Bill, to you first, the performance that we're seeing in the market today. Yes, tech is outperforming. We're seeing major underperformance in energy, industrials, materials there among the laggards. What do you make of today's action?

BILL BARUCH: Well, it's the 2020 playbook. The middle of the year, a lot of COVID uncertainties out there before any vaccine news. And it's that Delta variant. I think it's headlines driving it. But I'll tell you what, the market is very resilient. Technical levels in the day and the S&P, the NASDAQ held very well. I think we're battling back. I wouldn't be surprised that the Dow and those industrials, those energies all surprise people tomorrow.

- Let's take a look at where things stand. Exactly 30 seconds here until the bell. We have the Dow off 150 points, so well off its lows of the day. Boeing, a huge underperformer. That's been the case throughout the day, off just around 3 and 1/2%. We mentioned the weakness that we're seeing in energy today. Chevron is one of the worst performers in the Dow as well. That stock off just around 3%. S&P holding on to gains, up just about a quarter of a percent.

The outperformers sector-wise today, I should say, technology, with the XLK up just over 1%, as well as communication services. On the flip side, in addition to the weakness that we're seeing in energy, we have financials off about 9/10 of a percent. Industrials and materials are laggards as well.

- And right there is the closing bell. That wraps up trading for today, Monday, June 28. And we can see that the NASDAQ's closing in the green. It was a good day, up about 1%. Looks like it's still settling at the final numbers. But the Dow having a bad day, down about 1/2%, down 150 points.

I want to direct this question to you, Frances. You've been watching tech and kind of the correlation with bond yields. Interesting to see today that the 10-year longer dated bond, down about six basis points, while the NASDAQ had a pretty good day. So what's going on in that space?

FRANCES NEWTON STACY: Well, obviously, interest rates affect balance sheets, which affect valuations going forward. But the big question out there right now, has inflation peaked ahead of growth? [AUDIO OUT]

And if that is in fact the case, and we're going to see that going forward in the month-over-month numbers, if that's decelerating, if we're still gaining month-over-month, but the rate at which we're gaining is decelerating, and we've already seen peak inflation, which is possible because we have some deflationary pressures coming to the system in the latter half of the year, then you're going to see tech outperform.

Also, the fiscal stimulus, the infrastructure bill coming in. Even though it's not as large as some would have thought, that puts pressure on interest rates. And so that interest rate-tech correlation, or negative correlation, I should say, is playing out.

- Frances, you mentioned the fiscal policy, the breakthrough that we got in the infrastructure talks last week. How much of that do you think has already been priced into the market?

FRANCES NEWTON STACY: I think it's largely been priced into the market. I don't think we're seeing much movement in the market around that, good, bad, wrong or right. Thus far, it's about half the size that maybe investors would have thought. But the thing is, as fiscal starts to wane as far as the stimulus goes, and that's going to keep the Fed purchasing assets for longer. Because if the fiscal side of things is, from a rate of change perspective, actually going into a tightening mode, where it's adding less money at less of a rate, basically, than that's going to keep the impetus on the Fed to keep those asset purchases high and the rates low.

Obviously, we have a record amount of debt service, so keeping those rates low is going to keep the recovery going, and markets are going to like that.

- So, Frances brings up the point about monetary policy. So I guess, Bill, question for you. I know you've been watching Fed speak. We did get a few speeches today, but I counted far fewer speeches this week than the flurry of commentary that we got last week. I'm glad we all survived that.

But look, we went through a whole week of Fed speak after what's a pretty remarkable pivot in Fed communication without any sort of rip-up in bond yields. So what's your interpretation of what's going on there? And do you think, for the most part, that we've avoided a taper tantrum, at least for now?

BILL BARUCH: I do think we've avoided a taper tantrum for now. And I think you made a really good point, too. One of the ways we'd would characterize this, not just last week or the way the Fed handled it, but in months recently, it's sort of a Jekyll and Hyde approach. They give you what in this scenario is a more hawkish rhetoric, and then you know, you can flush it out further with Bullard on that Friday. And then you start to see it pare back just a little bit through that week, sort of a softer blow.

What they're doing is probing the market, and they're probing it for its resolve, really. But I've applauded the Fed for months. I'm definitely not a Fed critic. I do think they caved on their inflation expectations just a little bit due to a bunch of criticism. You know, however, that's where the bonds react. The bonds react because the Fed basically had called for peak inflation. And to Frances's point, I think that's what the markets are pricing in right now is that peak inflation.

So I don't think anything really happens in a straight line, and things are still being digested at the moment. But I do think that last week was sort of that softer landing, where the Fed had came out, they're coming out a little less hawkish. And now we're setting up into jobs, and so I'm really curious to see if we get that job growth that storms back, or it's another sort of lukewarm number. And that's what the markets are waiting for now.

- Let's take a look at crypto. Because Bitcoin moving to the upside today, up just around 5%. Jared Blikre's still with us from the floor of the New York Stock Exchange. And Jared, when you're taking a look at this action here, what's your big takeaway, I guess? From not only today, but what we've seen as of late?

JARED BLIKRE: Yeah, well, this is the first time I've mentioned Bitcoin today, so I'm glad I'm not remiss for that. Let's go to the Wi-Fi interactive and check out the seven-day price action for Bitcoin. And it's been in a tight range. So I'm just going to put this out there, if it breaks 35,000 to the upside decisively, probably the worst is over, maybe. If it breaks 30,000 to the downside, guess what? That opens up 20,000 pretty quickly. So this could be a very monumental time over the next couple of days for Bitcoin, where it decides what it wants to do.

I also want to pull up quickly a chart of Ethereum over the same time period. It has broken to the upside. So if it's leading, that would be a positive development for Bitcoin, but price has to confirm first.

- Thanks, Jared. Yeah, that seems to be a surprise given the commentary that we got from the Fed governor earlier today, saying that Bitcoin might just be a lot of hype right now without a lot of teeth, that it's just simply a volatile asset. But I want to point this question over to you, Frances, just in terms of the data we did hear about the-- just commentary around the expectation for this week's jobs number. What do you expect on Friday covering last month in terms of those job gains?

FRANCES NEWTON STACY: Well, really, it's just if it comes in line with expectations or if it's surprising. If it comes in line with expectations, then all of the former Fed speak and all of that is going to continue to be digested as it were. If it's abnormally low, then obviously the markets are probably going to get excited about that, from the perspective of "the Fed's going to be easier for longer." So bad news is good news on the job fronts for asset prices. If it's higher than expected, then we might see a little bit of a reversal in that inflationary trade.

- Bill, how do you think the market has been looking at the slower-than-expected, I guess we can say, growth that we've seen in the jobs market over the past couple of months?

BILL BARUCH: I first think that's what brings a really big benchmark. I mean, the analysts who put projections out there, and everybody's been wrong for the last two months. The real benchmark is, say, about a million. And within distance of a million, so somewhere in that ballpark, if we start getting over a million jobs, that's what's going to sort of restart those talks that the taper need to come sooner. But if we're anywhere, if we, say, hang around half a million jobs created, I think it just continues to be a Goldilocks and it keeps the Fed patient.

One of the takeaways I had last week, was from a couple of the speakers, was three to four months. They still want to see three to four months more of data. And really, that was why I was surprised they caved with those inflation expectations just after two numbers. I mean, we had the April number and then we had the May number. And really, that became-- they brought it up 2.4% to 3.4%, which is a pretty big jump.

But, yeah, I think that overall, if we get a sort of lukewarm job growth, it's just going to continue to be Goldilocks. What's going to matter is those July and August numbers that we get in August and September, and that's going to show if inflation is really here to stay or not or if it was only a transitory period. And that's what the Fed's waiting to move on.

- Bill Baruch, always great to see you. And Frances Newton Stacy, thanks to you as well for hopping on here and joining us today.