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Market Recap: Wednesday, March 3

Stocks traded mixed Wednesday after sliding a day earlier, as investors weighed optimism over widespread post-pandemic business reopenings against concerns over economic overheating. The Dow rose while the S&P 500 fell in afternoon trading, while Treasury yields resumed advancing across the curve. The yield on the benchmark 10-year Treasury note closed in on 1.5%. A disappointing report on private payrolls growth in February also weighed on risk assets Wednesday, suggesting the labor market was still struggling to make headway amid the ongoing pandemic. Albion Financial Group CIO Jason Ware and CIO at Advisors Capital Management Charles Lieberman joined Yahoo Finance Live to discuss.

Video Transcript

[MUSIC PLAYING]

ADAM SHAPIRO: We got you in the front seat to the closing bell. And joining us for the ride is Jason Ware from Albion Financial Group, he's the CIO, and also Charles Lieberman. We're going to refer to him as Chuck going forward. He's the CIO at Advisors Capital Management. Before we hear from these two folk, let's go over to Jared Blikre, who's driving us to the bell.

JARED BLIKRE: All right, well, let's take a look at the Y Fi interactive here, because we are hitting session lows in the major indices. Here's the Dow. Had been in the green over the last hour, but now it's firmly in the red, hitting those session lows right here. But the NASDAQ is the big loser of the day. That's off 2 and 1/2% now.

Take a look at the price action over the last two days, boom diddy boom diddy boom, still by these session lows here. So not the most positive development, especially considering all the losses that we're seeing in some of the mega caps in the tech industry. Now here's Bitcoin, that's green. Ether's green.

But let's go back to the NASDAQ and concentrate on stocks here, if we can for a second. There we go. Apple's down more than 2%, so is Microsoft, Amazon, Alphabet. Facebook down 1%. And we're seeing the losses accelerate in Tesla, heading towards $600. Still at $653 right now, but really don't have a lot of support until that $600 level.

Also looking at some really steep losses in the chip sector, and the semis, and software, so we'll take a look at the semiconductors. You can see on the lower left, Nvidia is off 4.3%. And we've just charted a lot of these stocks kind of breaking through important points, important levels here. Could be forecasting something bigger to come.

Now, if you take a look at what's happening in the interest rate sector-- well, here's the VIX. Let's start out with that. The VIX is creeping up, that's above 25. Now it's at 26.10 here, so seeing some more volatility come into the market. But here's the 10-year T-note yield, that's up to 1.47%, which is right around the S&P 500 dividend yield.

Lots of systematic programmatic strategies around this. So if we've got another surge above, let's say, 1.48%, 1.5%, could see some additional losses in equities in the following days, so we'll be keeping track of that. As we head into the final seconds here, we're just going to take a quick look at the US dollar index, because that is up slightly from yesterday, guys.

[BELL RINGING]

SEANA SMITH: And that does it for the trading day today. Again, as Jared was saying, right, we have stocks closing right around session lows. Dow, S&P, and NASDAQ all lower for the second day in a row. You can see it on the screen, the NASDAQ closing off 2.7%, the S&P up 1.3%, and the Dow dipping just around 119 points. With the NASDAQ up 2.7%, it's the worst two-day loss that we have seen for the NASDAQ in quite some time.

Technology, consumer discretionary, the worst-performing sectors today. Jared was just showing the heat map there of some of those big tech names we see, a lot of the bigger names in the red. Apple, Microsoft, Amazon, Google, all of those names off just around 2%, off more than 2%, I should say.

We want to bring back in our market panel. We have Jason Ware and Chuck Lieberman joining us today. And Jason, let me start with you because of the selling pressure that we are seeing in tech. I know you have long favored a lot of these big tech names. What do you think of some of the losses that we've seen not only today, but over the last several trading days?

JASON WARE: Yeah, good afternoon, guys. So I think we just have another example of the reality show for finance geeks and that is bonds behaving badly. And as rates rise, as yields rise, what we're continuing to see is this push against owning growth companies, in particular big-cap technology. And I think at the outset that makes sense. It starts to shake some complacency as yields go up. And portfolio managers, especially those that are more short-term oriented, start to rethink those positions.

But if you're a long-term investor in good companies and good businesses, does it make sense to own the cash flow streams and earnings of Microsoft, Apple, Google, Adobe, et cetera? Or would you prefer own some of these more beaten-down, lower-quality companies that were thrown out because of the pandemic and may have some upside in terms of the trading price of the stock? I understand the allure of the latter, but we're sticking with the former as good investors.

ADAM SHAPIRO: All right, but when you look at the financial sector, it's in the green today. It was up 3/4 of a percent. And Chuck, you've pointed out that a stock like Citi, basically cheap, trading below tangible book. And also, you've pointed out that they've got too much capital.

So how do you expect them to deal with that issue in '21? Where would they deploy that capital, because it still seems precarious? Am I going to get a stock buyback? What's going on here?

CHARLES LIEBERMAN: You are going to get a stock buyback, and you're going to get a dividend increase. And it's funny for me to hear companies like JPMorgan Chase, and Bank of America, and Citi described as lower-quality names. These are great companies, and they're out of favor. They were hurt by the pandemic, because people were worried that a lot of their loans would go bad. That didn't happen.

In fact, quite the opposite happened. The Federal Reserve increased the capital requirements on these companies, so they were forced to keep capital. They were not permitted to increase dividends. They were required to-- to stop their buybacks. So they've been building capital. They had capital in supply, in abundant supply before the pandemic, and now it's coming out of their ears.

So at some point, the Fed is going to let them start buying back stock. These things are cheap. They have great upside potential. They're quality companies. It's pretty hard to run an economy without a banking system. So they're going to participate in the recovery.

And by the way, that's what's driving this. There is an economic recovery taking place. It's still got a long ways to go. It's still in early phase. We have plenty of parts of the economy that are still shut down.

The restaurants, the cruise lines, the airlines are all operating way below capacity. There's a lot of room for recovery. But as that takes place, as the vaccine continues to roll out, we're going to see those parts of the economy come roaring back. There's a ton of cash on the sidelines to be spent and to be invested.

SEANA SMITH: Jason, what do you make of the reopening trade? Are you finding any opportunity there?

JASON WARE: Yeah, absolutely. And to be clear, I am not arguing that the big banks are low quality. We own JP Morgan for clients and have for many years. We own Morgan Stanley in some of our strategies for clients as well. So I completely agree that the big banks are a place you can go for relative value. You can go to play the interest rate rise, which we think will absolutely persist as the economy opens up and we see growth in the economy.

So with that said, I think really what we're referring to is the epicenter stocks, low-quality retailers, the cruise lines, the airlines, areas that have been thrown out because the pandemic hit them the hardest. And we're not sniffing around those spots because we think the stock can go up 50% over the next couple of quarters, because that's really just speculation. Instead, I think you can get leverage to the economy and to the reopening of the economy with higher-quality companies, again, like a JP Morgan and some of the banks that were just mentioned, I think, is a fine way to do that.

But in addition, you know, a Starbucks that I think the experience of consumers coming back out into the cafes, which is really what Starbucks is about, it's an experience brand and spending more money in those stores is not priced into the stock. I think Visa's a great secular growth company, high quality, runs in a duopoly with-- with Mastercard, but has also seen a big hit to their volumes because of the pandemic, and in particular with the cross-border volume. So as the economy reopens and travel comes back, Visa, which hasn't done much in terms of its stock over the last 12 months, is a nice setup, we think, into this year. So those are just a couple of examples of how to get leverage to the economy, but do so by owning good businesses.

ADAM SHAPIRO: Jason, you and Chuck are actually somewhat in agreement on a lot of things from the notes that we got before we started talking to you. So Chuck, I'm going to take something Jason pointed out to us, because I think you would agree with this, is that people should want to perhaps consider over the short term the stocks that got beaten worse during the pandemic, the airlines, and the cruise lines are still getting beat, they're not going to start sailing till June. But we had a guest yesterday tell us that this is more of a trade, this isn't really an investment. Would you elaborate on what that guest-- Chuck, would you elaborate on what that guest was telling us, because I don't know if I have the stomach to ride a travel reopening up and down?

CHARLES LIEBERMAN: Well, I don't think of it as a trade. I think of it as an investment. And in fact, if you look at the pricing of these stocks, they've already come back a significant amount. I've read plenty of reports that argue that they've come back too much given where they already are, that it'll take a while for these businesses to fully recover, and that's right.

So you really have to have a longer-term horizon. We're not rushing into the airlines. We're not rushing into the cruise lines. But if you think about the companies that have been hurt the most, those are the ones that probably have the greatest upside potential. So it takes a stronger stomach to buy into Carnival or Royal Caribbean, but they will come back.

Cruises are going to come back. There's no doubt that people want to get out. They want to travel. But there are better ways to perhaps play it where you can get some recovery sooner. And there's a lot of opportunity out there. We, for example, find some of the-- I bought SL Green, which is a hotel-- excuse me-- an office REIT.

So the fear is that people are not going to go back to offices. Well, that's not quite right. We already see that it's begun. There'll be a lot more as the vaccine rolls out. This is a cheap stock. They're collecting most of their rents. They're down only a few percent off of what they were collecting.

It's an extremely well-positioned company. Those are the kind of stocks that still have a lot of upside and still pay you pretty well while you wait for the full recovery to take place. And that's going to roll out. I think everyone recognizes it's going to happen. It's just not going to happen overnight.

SEANA SMITH: We want to get to some breaking news. We have earnings out from Snowflake. Jared Blikre has those numbers for us. Jared.

JARED BLIKRE: Yeah, that's right. The stock is down 6% to 7% in after-hours. That's because of a miss on the bottom line. But it was a beat on the top line, so let's start with that number. Fourth quarter revenue for Snowflake coming in at $190.5 million. Estimate was for lower at $178.5 million. But that loss per share, that came in at $0.70 per share. The Street was expecting a much narrower loss of $0.17. So that's probably accounting for some of the weakness here.

Now, they are seeing product revenue for 2022 of $1 billion to $1.02 billion. The estimate was for $1.01 billion, so basically-- basically in line right there. And they're also looking for-- let me see-- that was the product revenue. They're also seeing a loss per share of-- trying to get this number right here. Sorry. I have a slight technical problem with my readout here, but not getting that number. Basically, a miss on the bottom line.

And let's take a look at what this stock has done since inception. Now, here's the MAX chart, and you can see well off of some of the IPO price here of about $180 per share. But this could be interpreted as a giant head and shoulders formation, which just broke that neck line very recently, maybe today. If we do sustain some more losses, tomorrow probably going to confirm that pattern here. But to summarize, it was a beat on the top line revenue, but a substantial miss, a big-- a much bigger loss than anticipated for Snowflake here, guys.

ADAM SHAPIRO: Jared, thank you. And thank you to Charles Lieberman, the CIO at Advisors Capital Management. Jason Ware, buddy, I didn't even get a chance to grill you on anything. I think your family might say it's time for a haircut in the back there, but you're looking good. We'll get you next time. Come back soon. Jason Ware with Albion Financial Group, the CIO. Thank you, both.