Market Recap: Thursday November 12th
Stocks fell Thursday, with the Dow and S&P 500 adding to Wednesday’s losses as optimism over a COVID-19 vaccine moderated further. Jack Manley, JP Morgan Asset Management Global Market Strategist and Brad McMillan, CIO for Commonwealth Financial joined Yahoo Finance's Jared Blikre, Seana Smith, and Adam Shapiro to break down today's market action on Yahoo Finance Live.
Video Transcript
SEANA SMITH: Just around four minutes to the closing bell. We want to bring in Jack Manley. He's the Global Market Strategist with JP Morgan Asset Management. We're also joined by Brad McMillan, Chief Investment Officer for Commonwealth Financial.
Jack, let me throw it to you first. We're looking at a down market today. The Dow off the close, but still down nearly 370 points. What do you make of some of the worry and some of the fear that we're seeing in the market today based on some of those latest coronavirus numbers that we're getting?
JACK MANLEY: I think the market is grappling right now with some short-term pressures versus some longer-term, I think, hopes. We got that really good news earlier this week on the vaccine. And that means that the light at the end of the tunnel that we always knew was kind of there, I think, has a little bit more of a firm position than it had prior to that announcement.
At the same time, though, we do have these new case activity-- or this new case activity. We're going through that third wave. It's worse than the second one, which was, in and of itself, worse than the first. The wave of new COVID cases is bad for the short term.
It may mean some unwinding of some of the reopening activities and may hurt fourth quarter growth a little bit. It may hurt fourth quarter profits a little bit. But at the end of the day, I still believe the vaccine is the big news. It's the big-picture item. And I think that while it may be tough over the next few months as we go through this next wave of the pandemic, I think investors should still be pretty optimistic about what the future holds.
ADAM SHAPIRO: Brad, would you agree with that because, I mean, if you look at the jobs numbers, it sure does indicate, despite increasing cases of COVID, there is recovery underway?
BRAD MCMILLAN: I think that's exactly right. I think we've-- largely, the economy has adapted. We've seen the economy start to-- I emphasize start to-- decouple from the pandemic. Now, that doesn't mean we're not going to react to the news. You know, certainly everybody saw the vaccine news and said, hooray, this is great. We're all set. Well, no, we're not all set. We're not all set.
We've got a situation where it's going to be months before the vaccine comes out. The data hasn't even been peer reviewed. So I think there's naturally a little bit of reality setting in about the vaccine. But going forward, we can see that the economy is growing, despite the pandemic, and that's very likely to continue. So on balance, yes, I agree.
SEANA SMITH: Jack, we heard from Jay Powell earlier today-- going off of what Brad was just saying-- just talking about how the economy is going to look different once we get beyond the pandemic, Powell saying that this post-pandemic economy is going to look different in various ways. How are you positioning yourself for that, just to make sure that you are capitalizing on some of that growth that we will see going forward?
JACK MANLEY: Well, Seana, I'll tell you, first of all, that I'm an unapologetic tech bull. I'm a big tech fan. And I think that, frankly, this trend of increased tech adoption has only been accelerated by what has happened recently because of the pandemic. The fact that we are conducting this interview virtually, the fact that most of us are still working from home, conducting meetings, conducting interviews, whatever they are virtually, I think all of this is an indication that technology has enabled us to continue to live our lives, I think, pretty seamlessly, all things considered, relative to where we were before the pandemic hit.
Obviously, some differences around the margins, some things that we have to get used to, but generally speaking, I'd say this works. So as we look to a post-pandemic future, kind of a virus-free run rate, I do see technology continuing to dominate our lives. I think it's only going to become a bigger part of things than it is right now. And for that reason, I continue to view tech, tech adjacent names, as being very much a longer-term secular trend that investors still probably want to lean into if they're looking for long-term growth.
SEANA SMITH: Yeah, Jack, you're certainly not the only one. We know tech has been a favorite here amongst many investors over the last several months. Jared, we're just around 30 seconds to the bell. What are you watching as we head into the close?
JARED BLIKRE: Well, I'm watching a longer-term chart of the S&P 500. And I just want to bring everybody's attention to a couple of things here before the bell. We broke out of this negative trend line, we all know that, earlier this week. And for the fourth day, we are just kind of testing this breakout area right here. So as long as we don't head any lower, we're--
[BELL RINGING]
SEANA SMITH: Take a look at the three major averages, but all 11 of the S&P sectors also closing the day in the red. Energy was the worst performer, XLE off over 3 and 1/2%. We're also seeing some bleeding from financials, one of the worst performers materials, utilities on that list. Technology, which we've been talking about here over the last couple of minutes, technology also closing in the red, with the XLK off just around 1%.
Jared, I want to kick it back over to you. Just in terms of some of that selling pressure that we're seeing, I know you were taking a look at some of those crucial levels, some of those technical levels, as we look ahead to tomorrow, what are you also keeping an eye on?
JARED BLIKRE: Well, it's Friday. We're going to see who wants to keep their money in the market over the weekend. Could be another day of rotation, and we've seen a lot of that this week, and it's come in fits and starts, which is actually what's happened over the last few months. Every time we see value and cyclicals get going, the rug kind of gets pulled out from under them after a big surge, and then it goes back into tech. And then everything sells off, and that's kind of where we are this week.
So if we're looking at the Dow today of the heat map, we can see that the staples are largely in the green. We have Procter & Gamble, Walmart, and also health care, J&J and UnitedHealth both in the green as well. But some losses in the tech sphere. Now, tech wasn't the underperformer of the day, as it has been earlier in the week. That would be left to energy and materials.
But we do see most of the FANG stocks off anywhere from a 1/4% all the way up to, it looks like Netflix is down 8/10%, Amazon right there with it. But some of the standouts today pretty interesting. Besides Pinduoduo, which is an earnings story, and then Moderna, we got JD.com roaring back. It got hit pretty hard for a variety of reasons, not the least of which China's going after big tech there.
But look at Zoom. Zoom's up 3.7%, still up 81% over the last three months. But you check out what's happened this week over the last four days, still has a little bit of room to go before clawing back those big losses that we saw on Monday. And then just looking at some other sectors briefly, travel's been under pressure.
The cruise lines getting some bad news, had another misfortune in the Caribbean, where a small cruise had to go back to its port in Barbados. So we see Caribbean's off about 7% there. Banking, banks under a little bit of pressure, but especially those European banks that really did well earlier in the week, HSBC and Barclays each down more than 3% here, Seana.
ADAM SHAPIRO: Jared, you were just talking about tech. Want to let everyone know that the Commerce Department has said that it will not enforce the order that would have effectively stopped TikTok in the United States and forced them to shut down. This is according to "The Wall Street Journal." They cited a federal court ruling in Philadelphia.
So again, TikTok gets another extension from the Trump administration. We'll deal with this a little bit further in the next few minutes. But I want to go to Brad on something. The fact that we closed down today as the markets are settling, but we were off the session lows, what is that telling you, not only as we head into Friday, but what investors are really trying to position themselves for in the next week or two?
BRAD MCMILLAN: I think there are two things going on. First, people are trying to figure out how deep is the damage going to be from the rise in case counts. And that's something-- we're seeing the decoupling, we're seeing the economy grow, but how is that going to rattle? So I think we're seeing people take some chips off the table.
The other thing that I think is very much out there is what we're going to see as we move into the weekend, whether or not we're going to see political risk continue to ratchet up. We're starting to get to the pain point where states are going to have to make some decisions. And a bunch of the rally came from just political risk pulling back. Now, they're starting to weigh on people's minds again, and I think that's something that is going to be increasingly important over the next week or so.
SEANA SMITH: Jack, how are you incorporating some of that political risk into your outlook and where you're seeing opportunities right now?
JACK MANLEY: I mean, I think the political risk kind of goes alongside all the other risk that's out there right now, which is to suggest that I think investors need to remember that we're not really out of the woods just yet. There are still a lot of other things that we have to contend with. You know, the election is over, at least it seems to be, but now we're dealing with the pandemic, which was always the big-ticket item. When the pandemic's over, we'll be dealing with trade tensions between the US and China. If those ever go away, there will be something else out there for us to grapple with.
So I see this political risk as kind of shocking markets back into remembering that it's not all great out there. And I liked what Brad said earlier, you know, the economy is adopting. We are going to continue to grow, but the pace of that recovery, I think, is dependent on a whole lot of things, whether it is the political story, the vaccine story. And so I think we still do want to be a little bit cautious when it comes to allocation moving forward.
ADAM SHAPIRO: Jack, I want to follow up on something you said, because it's most likely we're going to get some kind of vaccine at the end of this month or in December. Doesn't mean people will get it. But if that's the case, is it time to start rotating towards a post-vaccine investment strategy? And if so, I know you've said look at the lower-quality bonds, why would you take that risk?
JACK MANLEY: So if we're looking at the vaccine timetable right now, I think first of all, Adam, it's important to remember, you know, even when the vaccine comes out day one, it's going to take months for folks like us to actually be inoculated. The logistical lift of inoculating 330-so million Americans is a pretty heavy one. It's going to be something unlike anything we've ever seen before.
It's going to take months for this vaccine to actually come into broad-based effect, which means that even if we get something at the end of this month, the end of the year, there are still months left to go before we truly start to unwind this story. Once we do start to unwind the virus story, though, I think we can take a little bit more risk. One of the components of that is going to be lower-quality bonds. Lower-quality bonds, I think, will do better when there is less risk of insolvency, there are less-- there are fewer cash flow issues.
This is not something you hold universal across the bond landscape. There are certain parts of the bond market that I think are going to be in hot water for a little bit longer. I think energy, I think airlines have a longer road to recovery, even after the vaccine. But in general, as long as you're working with, I think, a good active manager in what's a pretty complicated space, you can be willing to take a little bit more risk, whether it's in stocks or bonds, as we move closer and closer to that vaccine date.
SEANA SMITH: Brad, we just heard Jack mention airlines. I'm curious to get your take on that, because I think there's kind of two camps out there. One, they're saying maybe you should buy right before we get this vaccine news or right as we get the vaccine news, because those are going to be amongst the names that [AUDIO OUT] And then, of course, people on the other side will then say, hey, they're in a substantial amount of trouble now for quite some time. How are you reading that sector?
BRAD MCMILLAN: I'm going to be cautious on this one. I'm more in the nature of a show me on the airlines. We were just talking earlier about how life has changed in that we're never going back to where we were. I think we'll probably go a little bit late of the way back, but I'm not eager to jump on a plane anytime soon to go meet with clients. You know, we've been able to do it very effectively, so why would I do that?
Similar way, for me at least, before I get on a cruise, I'm going to have to have a lot more evidence that this is safe. So there's a lot of good news out there, but as he was saying, I mean, the vaccine, the announcement is one thing, the actual data reveal is something completely different. And then even if we get that, the delivery, the supply chain, is very different.
And that's even before we get into whether people will actually take the vaccine. So remember, not only does the vaccine have to be approved and available, people have to be willing to take it enough to get us to herd immunity. So there's a lot of things between here and there. I don't think the airlines or the cruise lines respond until we see a lot more good news there.
