Market Recap: Wednesday, September 15
Stocks pushed higher on Wednesday after dropping a day earlier. Jay Jacobs, Global X ETFs SVP and Head of Research & Strategy, and Akshata Bailkeri, Bruderman Asset Management Equity Analyst joined Yahoo Finance Live to discuss.
Video Transcript
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SEANA SMITH: Got just about 2 minutes here until the closing bell. Again you're looking at some gains across the screen with the Dow now up just over 200 points. We have Jay Jacobs. He's Global X ETFs Senior Vice President and Head of Research and Strategy, and also Akshata Bailkeri, a Bruderman Asset Management's Equity Analyst.
Jay, let me start with you. The buying action that we're seeing today, the leadership coming from energy. Jared was just walking us through some of the gains that we're seeing there. We're also seeing some solid gains in financials and materials. What do you make of this move to the upside that we're seeing today?
JAY JACOBS: Well, this is a little bit of the inflation trade that we saw back in Q2. These are traditional value stocks that benefit from higher interest rates, because they tend to be able to pass through inflation. That's-- energy companies can pass through higher oil costs. Financials can pass through higher interest rates in the form of higher lending margins.
So this is a little bit of Q2 all over again, but this is probably pretty short lived. We've seen this trade between value and growth trade back and forth a lot over the last few months. This could be more of a short term daily trade rather than a long term trend.
- All right, let's take a look at where things stand here with just about a minute to go, because we are looking at gains across the board. The Dow holding on up just over 230 points. We're looking to snap some of the selling action that we've seen to start this month. The S&P up just around 8/10 of a percent. The NASDAQ up a 116 points.
Looking at some of the individual winners here. Within the Dow, Walgreens. That stock up nearly 4% today. We're also seeing gains from Chevron stock up just around 2% as well as Microsoft Caterpillar and Boeing. Those stocks are the top five performers within the Dow today. Again, all 11 sectors moving to the upside. The biggest gains by far coming from the energy sector with the XLE up just over 3.5%. We're also seeing gains from financials and materials, those two sectors up just over 1%.
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ADAM SHAPIRO: [CHUCKLES]
I love those sunglasses. All right, pound that coffee into submission. We have a closing bell. Let's see where we're going to settle today. The Dow is going to finish up 236 points. The S&P 500 up 37 points. NASDAQ up 123 points here. Heard Seana talking about the sectors and again sector action.
We've watched energy. Earlier this week, energy was the outperformer. That sector was up about 2.5%. Today it's going to be up almost 4%. But let's go back to the panel and talk about what's going on here. And this is an appropriate question for Akshata, because you pointed out that the concern when we talk about correction or pullback, everyone keeps predicting the pullback is premised on a very important question. Why do markets keep rising? Well, why?
AKSHATA BAILKERI: Yeah. Well, you know, that's a great point. That is really kind of the concern a lot of people have around these corrections. Equity markets have been positive for seven consecutive months, which is quite rare. This occurred only 4% of the time since 1950. So yes, investors are rightly concerned, like oh, does this keep going up? Is it actually sustainable?
But the reason why we're seeing this is really because these earnings behind a lot of these companies are continuing to grow. And that's really what's driving these index values higher. It's a really strong correlation between the SPX and like 12 month earnings of the S&P 500 companies. It's a 92.2% correlation according to our analysis. So we're really seeing it because of that.
And we believe they're actually indeed sustainable due to lower interest rates, lower earnings, volatilities, and an overall change index [? mix ?] that we see.
- Akshata, when it comes to the leadership that we have seen, we were talking to it with Randy Frederick of Charles Schwab last hour just in terms of real estate being an outperformer during the first eight or so months of the year. When it comes to the leadership that we'll likely see in the final few months here of 2021, how do you see that playing out?
- I mean, there are definitely several sectors that are affected by many other things that we've seen going on here. Basically, what we look at are more long term trends, not just like the ones that are coming up. So we think companies with very strong underlying secular growth are essentially going to be attractive the next couple of months and in the longer term as well.
So for example, we're looking at companies that are invested in pet ownership, for example. We think it's a very strong underlying secular trend-- so companies like Zoetis, Freshpet, Chewy. We've seen a banner year for pet people taking in pets during the pandemic. And we think some things like that are really going to benefit.
And also companies with really strong recurring revenue models like Adobe and Amazon. The subscription models of their Creative Cloud in Adobe make for great earnings visibility. And their model really drives free cash flow. And similar with the Amazon Prime subscriptions as well.
- Jay, I'm curious. When we look at the world that's going to emerge and is emerging right now from the pandemic, we talk about supply chain, contraction, and issues. And you said that companies are going to rethink their global supply chains. But no matter where you put stuff, if you're going to have an inventory accessible by the moment you need it, aren't you setting yourself up, regardless of where you have your supply chain, for trouble at the next pandemic?
- Yeah, it's a good point, but there's certain factors you can control more than others. I mean, right now think about all the things that are impacting global supply chains. You have geopolitical risk. You know, back in 2018, we had a trade war with China that's still somewhat ongoing. You have shipping risk. We've seen shipping containers go through the roof in terms of the cost it takes to ship things around the world today.
You have labor risks. You have social risks. You have all these different risks that only get greater when you look overseas versus the United States, where these companies have a much better hold of the regulatory system, a much better hold of the political and socio-economic situation. But even on top of that, they're trying to disintermediate those risks and mitigate them.
That labor and social risk, people are trying to mitigate with more robotics right now. So everywhere along the supply chain where there's risk, companies are trying to mitigate that risk and take it out of the equation.
- All right. Jay Jacobs, Global X ETFs Senior Vice President and Head of Research and Strategy, and Akshata Bailkeri, Bruderman Asset Management Equity Analyst. Thanks to you both for joining us today.
