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Market Recap: Monday, March 1

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U.S. stocks staged a rebound rally on Monday, with each of the S&P 500, Dow and Nasdaq jumping as retreating Treasury yields and vaccine optimism boosted risk assets. Each of the three major indexes increased by more than 2% around noon in New York, and the small-cap Russell 2000 outperformed with a gain of nearly 3%Villere Balanced Fund Portfolio Manager, Lamar Villere, and SVP and Head of Research & Strategy at Global X ETFs, Jay Jacobs, joined Yahoo Finance Live to discuss.

Video Transcript

ADAM SHAPIRO: We're heading toward the closing bell on Yahoo Finance Live. And helping us get there, Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs. Also Lamar Villere, Villere Balanced Fund Portfolio manager. Lamar, there's that expression-- I'll butcher it, forgive me-- that nobody ever became poor taking profits too early. Is now the time to take some risk off the table?

LAMAR VILLERE: Absolutely. I think, you know, you've seen a massive run, particularly on the growth side, and then more recently, in the small cap side. So, you know, the NASDAQ is up almost 60% in the last 12 months. So that's before the pandemic really hit, or at least, the shutdown in the market tanked. We're up almost 60% since then. So I think you want to stay invested, but maybe take a little bit of that risk off the table. Look for a little bit more of a value type posture.

SEANA SMITH: All right, Lamar and Jay, just hang on tight. We want to head to our markets reporter, Jared Blikre, for a closer look at some of these movers into the close. And Jared, we were talking earlier, quite the rally underway with all 11 sectors, it looks like, trading in the green.

JARED BLIKRE: That's right, and we got the Russell 2000. That's a big outperformer of the day, up about 3.3% here. So nice start to the month of March, the best start for the NASDAQ since 2020. That would be one year ago. I checked, so I just had to say that twice. All right, Apple's up over 5%. Facebook, Alphabet each up over 2%. Tesla up 6%, PayPal 7%.

So a lot of these names, and also, Zoom, by the way, Zoom's up about 9%, 10% today, announcing earnings after the bell today. We're going to be bringing that to you live, but Pinduoduo, that's a stock that saw some selling last week on the concerns over China tightening. Tesla's back in the game, Splunk. So the list goes on, and it looks like some of the software and chip names that were getting beat down last week are back in focus here and trading on the right side.

So we got Microsoft. That's up 1.8%. Adobe up 2%. And just taking a look inside the chip sector-- we're not going to spend too much time on this-- you can see Broadcom and Intel and Applied Materials, Micron, those are all up over 3%, Lam Research up 5%. So, nice to see this outperformance in a group that doesn't always get mentioned, but is definitely a big part of the tech story.

And let's take a look at the pharmaceutical scene here, and we got J&J up 0.4%, providing a lot of optimism with that vaccine news today. We're also going to bring you Novavax earnings right after the bell. And guess what? Ahead of these earnings, up 4% today, although you can see over the trailing month, down about 10%. We're looking for an adjusted loss of something like $2.30 per share. Do not quote me.

But let's also take a look at the commodity complex because we have crude oil settling down today, but guess what? Energy has been on fire as of late. Not the best performing sector today, but still up over 2%. Crude oil did close down, but there is optimism over OPEC Plus. What's being priced in right now is a 500,000 barrel per month increase by the complex and also Saudi Arabia is expected to stop that 1 million barrels per day voluntary production cut that they've been doing. So with all that priced in, and we got crude oil still holding around, what is it, $60 a barrel here, I'd say all is well in the oil market for the time being.

Also taking a look at cryptocurrencies here. Now we've got Bitcoin coming off that 43,000 low that we saw over the weekend, up 8%. Ether's up 9%. Just got some news today that Goldman Sachs is restarting its crypto desk. Hopefully this isn't a sign of the top because guess what? They closed it down right at the bottom. Here's the closing bell on Wall Street.

[BELL]

SEANA SMITH: And that wraps up the trading day today. Again, a broad-based rally that we saw to start the month of March. You could see it on your screen, the Dow closing up just over 600 points. So, off the highs of the day, but still a massive rally, up nearly 2%. S&P closing about 2.4%. NASDAQ was by far the leader today, closing up just around 3%. Some of those big tech names that Jared was just rolling through really leading today's action. Apple was up over 5%, Google and Facebook both up just around 2%. Sector wise, all 11 of the S&P sectors trading to the upside today. Financials and technology are the two leaders.

We want to bring back in our markets panel. We have Lamar Villere. We're also joined by Jay Jacobs. And Jay, let me go to you. We just heard from Lamar just about taking some of that risk off the table. What do you make of the levels that we're currently trading at? Do you think some of this exuberance in the market is a bit overdone?

JAY JACOBS: Well, we certainly have high valuations in the market right now, but there's positive things to look forward to. A lot of people are expecting growth in the United States at over 6%. We just saw the J&J vaccine get approved and basically a huge increase in distribution of vaccines. So I don't think we're far from the-- I think we have a while to go until we reach the top because there's a lot of good things that can happen over the next six months that are really going to get this economy roaring back to life.

ADAM SHAPIRO: From a larger perspective, Global X China Disruption ETF, you've just launched that. And I'm curious, how are you identifying funds or, you know, the members of the ETF, looking at what's happening in China?

JAY JACOBS: Yes, so we've been doing thematic investing for 10 years at Global X and looking at things like cloud computing and e-commerce at a global scale, looking at what's happening in the United States and Europe and Asia. But what you see is that within China, it's such a unique market. It starts at the top with the government looking and making these five-year plans, these even 30, 40-year plans sometimes, and identifying these key industries that they want to support and grow through an increasingly privatized market. And it just-- it behaves very differently than what we see in the United States, which is a more kind of organic form of innovation.

So we're looking at the-- from the top down, what are these powerful themes that, largely, the government is setting as the priorities for China? And then our active managers are picking the stocks that are really leading in the development of those innovations going forward.

SEANA SMITH: Lamar, what do you make of the value versus growth trade right now? Where are you finding the most opportunity?

LAMAR VILLERE: Right, so, you know, I mean, traditionally, we are growth investors, more growth at a reasonable price. We're not buying the super aggressive Tesla type names. But right now, we have been finding a little more value in the value names. So some of these growth stocks, like I said earlier, the NASDAQ's had such an incredible run. The Russell 2000's had such an incredible run that, really, we're moving a little bit more towards a slightly more defensive posture, kind of things like in the health care sector, financials, that type of thing where, again, we're staying invested. I do agree. I think the economy looks to be in very good shape. But given the valuations, we think it's prudent to take a little bit of that risk off.

ADAM SHAPIRO: Well, some of the stocks, Lamar, that you highlight when you talk to people, for instance, Steris, I think it is, what makes them attractive from a health care perspective? What is it that they do?

LAMAR VILLERE: Sure, so Steris is basically focused on all things infection prevention. You know, one in 20 people go into a-- who check into a hospital wind up catching an infection from the hospital. It's a $10 billion a year problem here in the US. So Steris is focused on prevention of that. We think that's a very defensive way to play the health care space.

And at the same time, you're getting almost a 1% dividend yield, which used to seem like an afterthought, but now in this interest rate environment, that's actually a pretty meaningful dividend. So, some nice growth, defensive growth, while getting a dividend at the same time, that's the kind of place where we're finding a little bit more attractive valuations.

SEANA SMITH: Jay, at what level will you start getting a little bit concerned about the 10-year yield? Because it sounds like at least at this point, you're still not worried about some of the levels that we saw last week when it reached that new high.

JAY JACOBS: Yeah, I mean, we just have to go back and realize, we were in an extraordinary period where the 10-year yield was well below 1%. So this is really a normalization with not even long term normal trends. This is a normalization with just the last few years. You know, if we were to really see normalization with long term trends, you could see a 10-year yield back at 2 and a 1/2%, 3%, 3 and 1/2%. So this is still pretty small potatoes. Of course, the market is going to get whipsawed around whenever you see bond moves move as fast as they did in the last few weeks.

But at the end of the day, I think the market is saying, you know, this may have been a little bit premature. We saw a lot of buying of tech stocks, which tend to be a little bit more sensitive to 10-year yields. But we saw a lot of buying of that today. So I think we're just trying to absorb a little bit of yield movement, but it's not changing the course of people's expectations for the growth of the economy or the attractiveness of these high tech names.

SEANA SMITH: We have some breaking news here. Novavax is out with its earnings report. Jared Blikre has that for us. Jared.

JARED BLIKRE: It's a beat on the top-line number, but not the bottom. So let's get straight to, though, to those numbers. Revenue coming in at $279.7 million versus $8.82 million a year ago. That's much higher than the estimate of $202.6 million. But the bottom line number coming in with a loss per share of $2.70, and that is quite a bit greater, wider than the estimated loss of $2.24.

Also noting that cash and cash equivalents ended $553.4 million versus $78.8 million a year ago. And here's some commentary from the release. They're saying that significant increase in revenue was comprised of revenue for services performed under the Coalition for Epidemic Preparedness Innovation's agreement and participation in Operation Warp Speed. So my read of that is, it's expensive to be in the vaccine business, but hopefully, it pays off eventually.

Now, fourth quarter research and development expenses, those increased to $401.2 million compared to $29.3 million in the same period last year. Now let's take a look at the charts here on the YFi Interactive. You can see the stock's up about 3% now after reporting those results. Investors don't seem to be too concerned about those increased expenses. And you take a look at a one-year chart here. You can see quite the wild ride for Novavax, up 1,400%. So just wrapping it up here, we got a beat on the top line, but a miss on that bottom line. Bigger loss than expected, guys.

ADAM SHAPIRO: Jared, thank you. We're going to hear more about Novavax from Anjalee Khemlani in just a bit. But I want to go back to Jay on something. It is expensive, as Jared points out, to be in the vaccine business. But one of the ways you can protect yourself is to be in a health care style ETF. You've guys got EDOC, which closed up about 2.5%. And part of the holdings in that has to do with mental health and the fact that people can now do that. You don't have to lie on the couch in the office. You can do it at home on the Zoom. How big is that?

JAY JACOBS: That's an enormous market. I mean, the broader enormous market here is telemedicine. Because as we see the expenses of medicine rise, whether it's pharmaceuticals, whether it's health care service providers, keep rising every single year, we have to find ways to make it less expensive. And part of that is, can you talk to your doctor at home? It's more efficient. They don't have to wipe down the exam room. They don't have to host you in a park-- driving into a parking lot or in a waiting room. It's these little areas where you can cut and make savings in health care, where it's not going to impact the service at all. It's still, in many ways, it's actually better for patients.

But it's going to reduce the costs. And I think looking at areas like telemedicine that is improving the scale of health care, improving the reach across more people, no matter where they are, and improving efficiency is going to be key to kind of getting the health care system out of this pandemic, which has been a nightmare for the health care system, aside from the tragedy of it.

SEANA SMITH: Lamar, the one thing we haven't talked about yet is the negotiations going on down in DC, whether or not we're going to get this $1.9 trillion coronavirus stimulus package. It looks like we are going to get it. What impact is that going to have on the markets, if any?

LAMAR VILLERE: I don't think it's going to have any impact. I mean, the only somewhat question mark is whether somehow the Senate manages to get the $15 minimum wage in, but I don't think any investors are particularly focused on that right now. It's pushed off. It looks like it's not going to go through, and it's pushed off for a while anyway. I think absolutely the expectation is that it's going to go through, and you saw that in a move like today. That's obviously a very optimistic move. I think investors are assuming that's going to happen.

ADAM SHAPIRO: Lamar, when you say that consumer behavior is coming back faster than expected, where are you seeing that? Is it in-- we had a guest on in the last hour-- travel-related issues, as people try to get out of their homes out of lockdown?

LAMAR VILLERE: Yeah, with travel, you know, we have-- one of our core holdings is Caesars. And Caesars is seeing incredible demand. So-- and all the companies or all the portfolio companies we have that have exposure to consumer, we're seeing consumer really pick up and a lot of confidence. So it appears that maybe they're booking a few months out. Some are booking sooner. Some are booking later. But people are booking things. People are getting out of the house and really looking for ways to spend their money right now.

SEANA SMITH: The earnings keep rolling in. Zoom is now out with its results. Shares moving higher once again here after hours. Jared, what do you have?

JARED BLIKRE: It's feeding a race here. Zoom's up about 5% on the YFi Interactive. But let me go through the numbers here because we got the fourth quarter results adjusted EPS coming in at $1.22 per share. Estimate was for $0.79, so that is quite the beat there. Remember this company came to the market. It listed on the exchange when they were already profitable. Also, revenue of $882 and 1/2 million versus the estimate of-- lower estimate of $811 million. Free cash flow also beating estimates, coming in at $378 million. Estimate was for about 202.

And then the cash and cash equivalents on its balance sheet, $2.24 billion versus the estimates of $1.05 billion, so literally doubling that. And then the forecast looking pretty good as well. They're saying revenue of $3.76 billion to $3.78 billion. Estimate was for lower at 3.53. Also, adjusted EPS for the full year, they're expecting that to come in at 3.59 to 3.65. Estimate was for quite a bit lower, about $2.97. So hitting on all those key metrics all around here. Like I said, nice beat in array. Stock's up about 5%.

Also noting that this was our-- excuse me, our stock of the year, company of the year, for 2020. It's still off about 30% from its highs. But you can see after consolidating after the last few months here, it'd be really nice. And maybe this is a catalyst that it has to create a new rally. Maybe you can search those old highs again.

ADAM SHAPIRO: Jared, thank you, and also thank you to Lamar Villere, Villere Balanced Fund portfolio manager, and Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs. All the best to all of you.