Market Recap: Monday, September 13

Stocks ended mixed on Monday, with the S&P 500 and Dow rising to end five-session losing streaks while the Nasdaq ended narrowly in the red. Simona Mocuta, State Street Global Advisors Senior Economist and Rebecca Felton, RiverFront Sr. Market Strategist & Portfolio Manager joined Yahoo Finance Live to discuss.

Video Transcript

SEANA SMITH: We want to bring in our markets panel. We have a Simona Mocuta, State Street Global Advisors Senior Economist. And we're also joined by Rebecca Felton, RiverFront Senior Market Strategist and Portfolio Manager. Let's take a look at where things stand here in the final minute of trading. Because you're looking at a mixed picture. And this has been the story throughout most of the trading day. Although the action, especially in the NASDAQ, has been back and forth, especially this morning, the Dow now up 247 points.

S&P is also holding on to gains. You can see the NASDAQ, though, continues to be under pressure, off just around a tenth of a percent. In terms of where we are seeing action today, Dow leadership coming from UnitedHealth. That's the outperformer in the Dow today, up just over 2 and 1/2 percent. You're also seeing gains from Intel of just over 2%. Chevron, Boeing, and Amex rounding out the top five performers.

Chevron, I want to point that out, because energy is actually the top performing sector today. You can see energy leading by a wide margin. Chevron one of those names that stand out in that group. We're also seeing gains from Exxon, Occidental, Petroleum among the big winners today. In terms of what is not working in today's action, health care, technology, and materials are the underperformers.

Investors are also favoring some of those reopening names. We saw hotels among the leaders today. In today's action, airlines holding on to gains, as well as a number of the cruise lines. And here's the closing bell.

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ADAM SHAPIRO: All right. Give us the gavel. Come on, there you go. We got a closing bell. Let's see where we finally finished the day. And it looks like the S&P 500 and NASDAQ all were able to turn it around. Let's break it down. The Dow will close up 264 points. S&P 500, which was up at the beginning of the trading session about 20 points, but then fell negative for most of the trading session until the last hour, is going to settle up about 10 points. NASDAQ pulled off its session lows and will close down roughly 10 points.

Again, as Seana said regarding sector action, you saw energy was the strongest performer, up almost 3%. We had a guest on in the 3 o'clock hour who talked about real estate, being bullish on real estate. That sector is going to close up about half a percent. Let's bring in our guests to talk about what you should do with your money. And I want to start with you, Rebecca. Because you point out that equities are going to move higher over the next 12 months, as recovery momentum continues.

This sounds a little bit contrarian to the screechy headlines of the last 10 days, which are like, run for the doors, panic, panic. Why are you optimistic?

REBECCA FELTON: Well, thank you for having me. And we would expect that, in the near term, we might run into some headwinds, to your point about some of these negative headlines around COVID and concerns around the employment numbers or inflation. But ultimately, we believe that the recovery has solid fundamental underpinnings, and that we will continue to move higher in terms of the economy, as well as the markets.

SEANA SMITH: Right, well, what's your reading on the recovery? Because the econ data that we've gotten out lately has been mixed. We're going to be getting some key reports over the next couple of days. We have CPI tomorrow. We have retail sales later this week. Where do you think we stand in this recovery?

SIMONA MOCUTA: I agree with your other guest. I think there is still more to go here. And I think the most important thing in trying to read the recent data disappointments is to understand what's driving them. It's a huge difference when you have a very poor, say, motor vehicular sales screen because there is no demand, versus a situation, such as today, when the reason for that is the lack of supply. So, on headline, we actually are in line with what we expected to see. Consensus has moved lower. But I do sense that, right now, perhaps the headlines are becoming a little too alarmist.

The demand that cannot materialize today is going to materialize down the line. And to some extent, the weakness of today supports the outlook for 2022. So perhaps more of a drawn-out process, but there is more to go here for growth.

ADAM SHAPIRO: When we talk about more for growth, Rebecca, you're also watching consumption trends. And I know, in the short term, there's been a lot of news about people canceling travel bookings. Retail sales perhaps not quite what we thought they would have been. I think the figure was $38 billion for the back-to-school market. Why are you watching those trends, and what are they telling you?

REBECCA FELTON: Well, we are at pre-pandemic levels, in terms of overall spending trends on the part of consumers, with respect to retail sales. And I do agree that it hasn't been a demand issue. It's been a supply issue. So some of the areas that have been weak in terms of retail sales in the past few months have been in motor vehicles, for example. And there was a lack of supply. But to your point about bookings for hotels and restaurants slowing down, that had a lot to do and, again, it's backward looking around the increase in COVID cases.

And in many states, we've actually seen that seven day moving average turn lower. So we're not just looking at retail sales, we're also looking at savings rates, which have come down from their highs. But they're still at well above average levels on balance. And also, obligations, consumer obligations continue to trend lower in terms of their debt obligations. So there's an awful lot more to it than just those sentiment numbers, even though those are a little bit alarming.

SEANA SMITH: Rebecca, we also had Deutsche Bank. They were out with a survey saying that a majority of investors expect a pullback of at least 5% before the end of the year. We've heard that echoed by a number of our guests here on Yahoo Finance. I'm curious, are you in this camp? Do you think we should be expecting at least a 5% pullback over the next couple of months?

REBECCA FELTON: It wouldn't be a surprise at all, right. You know, we've all been sort of waiting for when will it-- when will this market stop going up? And when we have this sort of pause, and I think, if you look at the sectors, in terms of what's worked this quarter, utilities I think are the best performing sector coming into today. So there's a little bit of back and forth in terms of folks being bullish. But we see what's being bought in terms of real estate, utilities, and the like.

So we expect that these headwinds could persist. But, again, we are looking for year end to be higher, as well as the next 12 months to be better

ADAM SHAPIRO: Simona, do you think that the changes that is expected in employment, now that the extended unemployment benefits have worn off, kids are going back to school, do you think that the pressure we've seen on wages will abate a bit and, subsequently, abate the pressure on inflation?

SIMONA MOCUTA: You know, it's-- I would have said yes. In theory, we are looking at, you know, more labor supply coming in that should put pressure-- reduce the upward pressure on wages. But I'm not entirely sure how quickly that may actually manifest. And you are reading more and more stories about employers proactively hiking either entry wages or adding to other benefits. Once that decision is made, you might not see that downward response in wages that we might otherwise expect. So I wouldn't bet too much on a decline in wages from here on.

SEANA SMITH: Simona, we have the House and the Senate getting back into session, I'm curious, how do you think the market's looking at some of the spending plans that we're getting out of DC and then the likely votes that were expected over the next couple of weeks?

SIMONA MOCUTA: You know, it's part of a broader question. I think the market is trying to digest how does life after the peak growth and peak inflation moment evolve. And also, how is life in a world where policy risk becomes more two-sided? For more than a year now, we've been only getting support from the policy side. And now, to your point, you're looking at potential tax increases. You are looking at debt ceiling issues. You are looking at tapering, so more risk on the policy side.

I think what's important to keep in mind, it's possible that the market pays more attention to the shorter term, corporate tax increases, sort of the hits, versus the benefits. Because the spending is more of a drawn out over some years. The pay fors may hit immediately. So that is a risk, I think, to the outlook, in terms of markets digesting this reality and this tension that's developing.

ADAM SHAPIRO: Rebecca, are you having discussions with your clients or with the people in your office about advising your clients about bracing for potential tax consequences, given what they're debating in Congress?

REBECCA FELTON: Absolutely, Adam. And it is likely to be something that analysts are going to have to adjust estimates for. You know, we talked a lot about this earlier this year. And then, as recess went in and folks weren't in Washington talking about this, it sort of died down in terms of everyone focusing on it. But, ultimately, corporate estimates do have to come down. It could be a 10% hit or something like that.

But we do believe that investors will adjust. It is something that's been known for some time that this had to happen. But you also have to take a look at what's happening on the individual side. So those rates are going to go up as well. And a lot of it right now is going to be based off of how much and who is willing to vote for this. You know, what's in the bill, how big it is, we've even had some centrist Democrats say that they won't vote for the number that's on the table right now. So it should be a heated debate over the next few weeks.

SEANA SMITH: Rebecca Felton, RiverFront Senior Market Strategist and Portfolio Manager, thanks to you, as well as Simona Mocuta State Street Global Advisors Senior Economist.