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Shawn Cruz, TD Ameritrade Senior Market Strategist, and Simona Mocuta, State Street Global Advisors Chief Economist, break down the day of trading.
SEANA SMITH: It's about 2 minutes here until the closing bell. You're looking at losses accelerating into the close. The Dow now off nearly 250 points. S&P off just around a half of a %. NASDAQ is holding onto gains. We have Shawn Cruz, TD Ameritrade senior market strategist and Simona Mocuta, State Street Global Advisors and chief economist here to help us break down the recent action that we're seeing. What we could expect going forward. Shawn, first to you, just how would you sum up today's action? Because we're seeing the selling into the close, but yet we're still seeing the outperformance from some of those big tech names.
SHAWN CRUZ: Yeah, and I think that really is what has been holding this market up throughout the day. And Jared alluded this in the last segment. And that was if you really look across the spectrum-- and I was looking at the S&P 500 earlier-- in particular on that heat map, there was a lot of red and then maybe three or four blocks of very bright green. But those were very big blocks because they have a higher weighting. And that was really masking a lot of weakness in this market.
So I think it makes sense that going into the end of the week, probably going to see some adjustments and repositioning that there may be some choppiness, some volatility as we get rebalancing and also maybe some of that overall weakness in terms of breadth in the market really starts to take hold.
SEANA SMITH: All right, Simona, we're going to get to you in just a second after the close. But we quickly want to take a check in here where things stand in the final minute of trading. Again, the Dow off 251 points. Some of the worst performers in the Dow today. Visa, Dow Inc. and JP Morgan-- those three stocks are leading the way to the downside. And you can also see Walgreens, 3M there among the worst performers in the Dow today. The S&P also in negative territory-- off just around a half of a percent. The worst performers sector-wise today-- energy, financials, and materials. The outperformers-- consumer discretionary, communication services, and technology.
And that does it for today's trading action. Again, the Dow and S&P both slipping from record highs. The Dow closing in the red for the first time in the last four trading sessions. The S&P off just around a half of a percent. The Dow closing off 265 points. The NASDAQ just basically on the flat line, barely above up less than a point.
But let's bring back in Shawn Cruz and Simona Mocuta for a little bit more on what we're seeing. And Simona, we're seeing investors, at least, be able to look past some of the softening that we're seeing in data or the slowdown, I should say, that we're seeing in the econ data during the third quarter. Anything that's worrisome to you? Or do you think that consumers and the economy still remain on track heading into the end of the year?
SIMONA MOCUTA: I think we are still looking at the very solid economic backdrop. And, in fact, I think the market's right to look through some of the third quarter weakness. Remember, you know, a lot of what we've seen lately in terms of the softness in the data is not really a destruction of disappearance of demand. It's simply a matter of supply chains that are forcing demand into the future.
So I think it's the right interpretation of where we are in the business cycle. There is still a lot of strength ahead of us. There is a lot of money waiting on the sidelines in consumer savings and checking accounts that I think bode well for 2022. So I'm still quite positive on what is likely to come in the next six months in terms of growth prospects for the US economy.
SEANA SMITH: Shawn, where are you seeing the most opportunity right now? Because I think investors are parsing through the recent data that we've gotten looking at the strong earnings season that we're having so far. We're not even halfway through. So we certainly have a long ways to go. But where are you seeing the most opportunity today?
SHAWN CRUZ: Yeah, I think there's still some opportunity out there selectively within that tech space. And if you look at it, it's going to be a little bit more of a stock picker's market in here. It's not going to be enough, I think, to just go in and try and follow an index, say, like the NASDAQ 100 because you've actually got a pretty big mix of the tech world in there.
But I think some of these companies that are providing these services are going to be the companies where you want to go in, find the companies that are getting traction. As a lot of these big corporations are starting to get more and more into the digital and cloud world for their operations, there's going to be some companies that are going to probably take some pretty big market share there. And that bodes well for the company moving forward.
SEANA SMITH: Simona, do you think inflation-- is it going to be more persistent than we initially thought? And I guess, what does that mean just in terms of what we could expect growth-wise?
SIMONA MOCUTA: Well, I think it's already proven more persistent and more intense than we anticipated in early 2021. I think this backdrop of elevated inflation continues for some time. It does appear as though we might be in the worst of the supply chain issues. And we should see the situation alleviate, start to improve over the next few months. But there's still a lot left ahead of us.
And again, I come back to this idea. You already living in a world now where the consumer is in a very strong financial shape. I think that speaks a lot to pricing power-- the ability to pass through some of these cost increases. And I am convinced that what we've seen so far in terms of pass through of cost is not the entirety of the cost that some of these companies had had to absorb. So there is more to come.
At some point, we are going to roll over. There is no question inflation is not going to keep going higher and higher and higher forever. The big question is where do we settle when these big swings, the base effects sort of fade away? Are we below two? Are we above two? I would venture to guess it's somewhere above 2% and certainly higher than where we were settling going into the COVID crisis, at least, for some time still.
SEANA SMITH: And, Simona, building on that, in your recent note, you said that the big story heading into next year-- or next year, excuse me, is going to be this story around inflation rotation. What exactly do you mean by that?
SIMONA MOCUTA: That's right. I mean, there are many things that really contributed to inflation this year, right? A lot of the reopening categories. Used car prices have been very much in the news. At some point, again, you move away from that. And you need something else to kind of keep you elevated. And that something else in my mind really centers around housing and shelter cost inflation.
There's been a huge divergence over the course of 2021 in terms of what house prices themselves have been doing relative to what rental costs have been doing. These are two sides of the same market. People need to live. You either buy or rent. If one side of the market goes up a lot, it inevitably leaves the other. So that's what I'm waiting to see. You know, I'm looking very closely at the evolution of rental inflation, housing inflation in 2022 to offset what I expect will be a pullback from some of the categories that drove inflation in 2021. On that, it's still an elevated inflation print, I think.
SEANA SMITH: All right, we want to get to some breaking news, Ford is out with its earnings. Pras Subramanian has that for us. Pras.
PRAS SUBRAMANIAN: Hey, Seana. Yeah, Ford shares a little flat here. But they had a big beat on the top and bottom lines here. The numbers right now for two, three revenue. 35.7 billion. That's beating estimates of 31.56, adjusted EPS at $0.65 a share. That's easily beating expectations of $0.27 a share. Now, both figures are a little bit lower than a year ago. But Ford is noting improvements in revenue, earnings, and cash flow driven by quote, "significant increases in semiconductor availability and wholesale vehicle shipments." They say that chip availability remains a challenge but noting a market improvement from the second quarter.
Guidance for the rest of the year-- they're increasing their full-year 2021 EBIT. Earnings before income and tax is 10.5 billion and 11.5 billion into that window. They also upgraded-- they did that same thing last quarter to upping their EBIT guidance. So that's another positive quarter there for them. One thing we did not hear, though, is more information on the Ford F-150 Lightning, whether that's still on track for its release next year and also an update on pre-orders. This month, we had heard that they had 150,000 pre-orders for that F-150 Lightning. We have not had an update yet. Maybe we'll hear more from CFO John Lawler and CEO Jim Farley on the call later today, Seana.
SEANA SMITH: All right, Pras. Thanks so much. Shawn, we're you hearing from about the chip shortage from Ford? We heard about it from GM this morning. GM's results that clearly showing that the chip shortage is taking its toll on the company. How are you looking at this from a market's perspective?
SHAWN CRUZ: Yeah, I think it was interesting how the market digested some of those earnings. And I think if you look at the internals of some of GMs, the beat that they had, there were some one-off items or maybe some items that really where investors see the value out of GM, which is in the GM financial segment.
I think that for Ford, though, it's really going to come down to this conference call because another thing that really drove some of that selling pressure out of GM was on a conference call there really wasn't confidence in how they were going to handle the chip shortage moving forward. How long it was going to last. That's the sort of thing that can really drive some concern from investors.
So I think for Ford, they are doing better than GM was after these results are coming out. But I think you still want to wait for the conference call. We hear from management on how they are handling some of these disruptions, because chip shortages aren't even really just something focused on the automotive sector or sector. It's something across the board. So what we hear from management moving forward is going to be really important for how this stock I think behaves into the open tomorrow and into the end of the week.
SEANA SMITH: You know, there's worries about the chip shortage and, of course, supply chain issues-- what that will mean for the economy not only over the next couple of months, but really what it means in 2022. How long do you expect some of these supply chain issues to persist?
SHAWN CRUZ: You look--
SIMONA MOCUTA: --anybody can--
SHAWN CRUZ: Op, sorry. Sorry, go ahead.
SEANA SMITH: Go ahead, Simona.
SIMONA MOCUTA: I don't think anybody can give you an exact answer. And I think what we just heard is in situations like this, I think the signals from companies' survey data in terms of macro sources are extremely valuable because they tell you the story almost before you see it in the numbers. We are starting to see more comments from firms saying things appear to be improving at the margin. I think that's very significant and hopeful for what is likely to transfer in coming quarters.
SEANA SMITH: Shawn, what do you think? Do you agree?
SHAWN CRUZ: Yeah, I think one thing is when investors are listening to management on what they're saying about this, they almost also read into how much confidence is behind what they're saying. And what a lot of these management teams are saying is they're saying, you think this should probably be persistent and start to resolve itself in mid 2022? But it's almost like they put a question mark at the end of that sentence rather than a period making it a statement.
I think there's still a lot of uncertainty clouding this outlook. It couldn't have been better. It also could end up being much worse. But I think just that uncertainty is going to act with a little bit of an overhang until investors get a better feel for exactly how long this is going to last and really what the lasting impacts of that could be.