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Market Recap: Monday, October 4

Stocks sank on Monday as traders awaited new economic and earnings data. Ross Mayfield, Baird Investment Strategy Analyst and Sylvia Jablonski, Defiance ETFs Co-Founder & CIO joined Yahoo Finance Live to discuss.

Video Transcript

- We're down to the final minute of the trading day. Again, selling across the board. We have Ross Mayfield. He's Baird Investment Strategy analyst, and Sylvia Jablonski, Defiance ETFs' co-founder and chief investment officer to help us break down what we are seeing today.

But let's take a look at where things stand with just around 45 seconds until the bell. Again, you're looking at selling across the board, although the Dow well off. The lows of the day now off just over 300 points. S&P still off just around 1%. And the NASDAQ, the biggest laggard today, off just over 2%.

Now the declines in the NASDAQ coming as we see a number of the large cap tech names under pressure today. Apple, NVIDIA, Amazon, Microsoft among the names in the red. Amazon back in negative territory for the fifth time this year. And the selling in some of these big tech names coming as we see the 10-year yield rise just a bit slightly, moving higher today. Facebook another standout to the downside. Shares off just over 5% on the widespread outages and also that [INDISTINCT SPEECH]



- All right, we have a closing bell and a gavel. Let's see where we're going to wind up for the day because it has been another sell off. We've got the Dow closing down just about 1%. It'll settle around negative 322 points. The S&P 500 fell another 1.3%, closing around 56 points down. The NASDAQ is going to be off about 311 points down, more than 2%.

As we go to the panels on all of this, Sylvia, you remain optimistic about the potential for us to finish the year, at least on the S&P 500 further up. Why are you optimistic?

SYLVIA JABLONSKI: I think that the market still has a lot of good stuff going on behind what we saw happen today. So there's ample liquidity in the markets. I think the Fed will remain supportive. I think fiscal and monetary policy will be accommodative in general. There're trillions of dollars of savings sitting on the sidelines. There are in money markets that are earning zero. You have COVID, seemingly getting back under control for this sort of fourth run around.

And I think the companies just have loads of cash on the balance sheet right now. I don't think that the 10-year matters a whole lot right now. We're not at levels that are difficult or discouraging for tech. And I think inflation will probably prove to be transitory. It's something we'll keep an eye on.

You just have some news that's creating volatility in the markets around the debt ceiling and perhaps inflation. But I just think that these are great opportunities to buy on the dip here. These companies are worth a lot more than what they're trading today.

- Ross, what do you think? Do you agree or are you using this as an opportunity to buy some of those beaten down names?

ROSS MAYFIELD: Yeah, absolutely. We think most of the dips here are buyable. I concur with the idea that the legs that the bull case stands on, which are accommodative policy, fiscal, and monetary, plus just really strong corporate operators, and a really strong consumer are enough to outweigh the headline risks of, say, debt ceiling standoff or some of the policy machinations.

Further, you know, we're in the midst of a secular bull market here, and the pullbacks and recessions and corrections within those bull markets tend to be a little bit quicker, more viable, and then you continue on higher. So that's how we think about it. I tend to agree there.

- And, Sylvia, what do you make of what's happening in crude oil? We're looking at WTI approaching $80 a barrel, OPEC meeting again. It's all about production but maintaining high prices. Does this put a damper, perhaps on the outlook that you have for us to go higher?

SYLVIA JABLONSKI: I think it's a supply and demand story now, and I think we're going to-- I think, if anything, the price will probably continue to go a little bit higher. We're coming into some of the colder winter months so if you have this sort of supply shortage, I think, that'll propel the prices up in the near-term. But overall, so certainly, I think it's a short-term trade. I think, traders can benefit from looking at this and trading, whether it's futures or the different ETFs that are tracking the commodity in the short-term.

But longer-term, I think that we're probably going to start looking at alternative types of energy, some sort of more bullish about things like hydrogen in the future, for example, with the commitment on becoming carbon-neutral by 2050. Investment in hydrogen and things like that on the Biden platform. But short-term, sure, I think that there's some juice in that trade.

- Ross, taking a step back just a bit and talking about one of the macro issues that could impact potentially the market here over the next couple of weeks is the debate over the debt ceiling. We heard from President Biden earlier today. He was warning that we could start to see an impact on this as early as this week. How is the market viewing this? How big of a risk do investors see this being to the market over the next couple of weeks and months, potentially?

ROSS MAYFIELD: Well, I think the risk grows by the day that it doesn't get settled, right? So this has happened, obviously, 50, 60, 70 times before where we ultimately raised the debt ceiling. They're going to take it down to the wire. It's political in nature, but ultimately, no politician wants to breach this debt ceiling. There are options to kind of get off this ramp.

As we approach, I think, you'll see it sugar up in really short-term treasury bills. There's a lot of plumbing that will be kind of screwed up if we do breach the debt ceiling, because it's never happened before to this extent. So it is a headline risk, but no politician really wants to see this happen. Here's to hoping they can get something figured out. But they are playing a game of chicken right now, and by the day, the headline risk grows for investors that's for sure.

- Ross, I'm not ignoring you but I got to ask Sylvia because she's bullish on crypto, and I'm looking at Bitcoin approaching $49,000. I mean, last week it was below $42,000. I don't have the stomach for cryptocurrency trading, but you're bullish on it, Sylvia. Where do you think we go from here?

SYLVIA JABLONSKI: I think we go to 100,000 or higher. I'm very bullish on all cryptocurrencies, well, not all cryptocurrencies, but Bitcoin, Ethereum right now. I think just, in general, the blockchain and NFTs. This is basically bigger than the discovery of the internet and the ability to invest in technology companies. I think in the next decade we're just going to see prices soar.

I would say that in a few years, if we're sitting here talking about cryptocurrency, I won't be surprised to see Bitcoin at $100,000. It's being adopted by countries as a currency exchange. You have El Salvador, for example. It's being put up on 401(k) plans, retirement plans. There's debates about ETFs and mutual funds getting approval to give exposure to cryptocurrencies. There are trusts and funds, like GBTC, for example, and Bitwise out there that you can already invest in.

So I just think that there's so much going on with it. More and more companies are accepting. It's going to be a huge thing and I remain bullish on it. I've been buying on all of these dips when it's falling back to sort of the 40s and popping up to the 50s, but I think it's going to soar.

- So, Sylvia, then what's your view just about, well, let me guess, just the volatility of it because, like Adam points out, you need a tough stomach in order to invest in some of these cryptocurrencies. But then also, of course, the question of regulation and of crackdown from other countries on the heels of what we just saw China do a week or two ago. I mean, how big of a risk do you see this being for cryptocurrencies in the future investment options there?

SYLVIA JABLONSKI: Yeah, so that's a great point. And I would say that when I talk about these things, I talk about them as somebody who has the risk appetite and risk tolerance for this. So for investors that don't, certainly, it is a very volatile asset and probably buyer-beware. But if you have risk tolerance and sort of time, this trade will play out.

In terms of regulation, I think that it's certainly something that investors and miners worry about. But to the point on China, I mean, there's a lot of regulation for the biggest sort of most well-known commercial tech companies in their own country there, so it's not necessarily surprising or indicative of what I think the rest of the world will do.

I think, ultimately, we'll land on something, whether it's similar regulation to what we see in equities futures and derivatives markets, but I'm not super worried about it now. And lately, regulators seem to be talking about how versus if, so that gives me some solace.

- Ross, I know that you continue to like financials. I'm curious, is there a timeline for interest rates to start climbing that you think will work to the advantage of the financials or is it so far ahead that those who are betting on that now may be jumping too soon?

ROSS MAYFIELD: I think we've already seen it. I mean, it's moving off such a low level that only a 20, 30 basis point move doesn't seem like much when you talk about absolutes. But in terms of a standard deviation move, it's pretty significant. You saw financials. They sold off a bit over the summer as rates went lower, but they really held up pretty well, and they're starting to move higher again as interest rates are ticking up.

So there's probably a cap on the 10-year. It's not going to shoot back to 5%, 6%, 7%. But in the near term, we expect the 10-year to probably get closer to that 2% level and maybe break through. Should that happen, certainly, financials are a good place to be. And there's a lot of other tailwinds for the sector that I think could really boost it higher, and we saw it in Q3 as one of the best performers.

- Ross Mayfield, Sylvia Jablonski, thanks to you both for joining us today.