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Market Recap: Wednesday, September 16

The markets closed mixed with the NASDAQ and S&P 500 dragging as investors weighed the Federal Reserve’s monetary policy statement and Federal Reserve Chair Jerome Powell’s statements. The Final Round panel discusses the latest.

Video Transcript



SEANA SMITH: Welcome back to The Final Round here on Yahoo Finance. I'm Seana Smith. We see stocks closing the day mixed, S&P and NASDAQ in the red, the Dow barely holding on to gains. We saw a huge reversal just around an hour and a half ago. At first the market seems satisfied with what we got from the Fed statement today that was released at 2:00 PM.

But once Fed chair Jay Powell started his press conference, the Q&A, that's when we saw the markets start to roll over a little bit. We had the S&P closing off just around a half of a percent and the NASDAQ off over 1% today. Now it's Powell's comments on the economic recovery during the Q&A that did spook the markets just a little bit.

Powell said that he saw some areas of the economy that are going to struggle until we do get a vaccine. He also said that he's not sure that the faster-than-expected recovery is going to continue. Of course, a lot of the focus was on inflation, the target of-- the Fed's target for inflation that was specifically laid out in the statement, the Fed aiming for inflation above 2% for some time. Jay Powell also reiterating his call for more fiscal stimulus today.

Taking a look at the sector action, energy by far the winner in the market today, but that sector closing up over 4%, financials holding on to gains of nearly 1 and 1/2 percent, industrials also the outperformer. If you take a look at the underperformers today, technology and communication services were under a significant amount of pressure. And that's no big surprise when you see the losses in the NASDAQ today.

Taking a look at yield, yield rising a little bit. We have the 10-year up just around 1 basis point. Also, the S&P-- or, sorry, the 30-year treasury also up. It was just around 3 basis points, now up 1 basis point. A huge mover in the market today, when taking a look at some of those individual names was in the IPO, and we got snowflake there.

The biggest IPO of the year, the biggest software IPO, ever soaring in its public debut nearly doubling or did double in today's first day of trading, showing that the success in their traditional method at a time when we see [INAUDIBLE] and direct listings getting a little bit more popular.

But I want to bring in my co-host for the next 60 minutes. I have Myles Udland, also joined by Yahoo Finance's editor-in-chief Andy Serwer. We also have Ines Ferre and Jared Blikre here to help us break down all of today's market action and, of course, the Fed statement.

And Myles, let me just go to you first. Big news today coming out of the Fed, our colleague Brian Cheung getting in his question there at the last minute. He was asking Powell about inflation. It was interesting because he was asking how he would explain it to main street, to the average person, when it comes to the Fed's plan for inflation. But in terms of what we got today, not only on inflation, but its updated guidance in terms of its GDP and growth prospects, what stood out to you in today's meeting?

MYLES UDLAND: Well, I think overall, and we can-- again, we mentioned it briefly in the last hour-- we can sort of leave the Neel Kashkari versus, you know, Bob Kaplan, President of the Minneapolis and Dallas Fed respectively, we can leave that food fight out of this. And I think if you look at the dots more broadly and the Fed's inflation outlook, their growth outlook, we have two main takeaways. The economy is likely to not contract by as much in 2020, as previously feared.

But the inflation outlook and how that is going to impact monetary policy, i.e. rates are going to remain low for at least the next three full years and the balance of 2020, which we-- you know, that was telegraphed in Jackson Hole, and now that's been confirmed. So I think that is the way that markets are likely to proceed from here, assume zero rates for at least the next three years.

And I think that's-- that's the beginning of how we start to move through this next phase of kind of Fed policy. I would just add, though, that while we did see a market sell off today, I'm not sure that the market sees Powell's view on where the reopening goes from here the same way. I mean, when I pull up the corona travel basket that I have, I'm looking at airlines that are up 3%, 4%, 5%. Hotels are higher, the OTAs are higher, the cruise lines are higher today.

And the FANG names are the ones that are selling off. So we continue to see a rotation away from what's worked and towards what could benefit if we do indeed see any kind of a sustained recovery here in the markets. And just looking at S&P sectors, financials up better than 1% today, while technology is the worst performing sector. And so I do think that the reopening trade and the rotation towards that continues here.

- Yeah, that's interesting there. And Andy, I'd love to get your thoughts on that, just in terms of the reaction that we did see in the markets because broadly speaking, we did see selling. But then when you take a look at some of those individual names that Myles was just mentioning that you would expect to be under a little bit of pressure, at least today, they actually ended the day in the green.

ANDY SERWER: Yeah, well, I think what that means-- a mixed response like that, Seana, means a muted response. So in other words sorting through the tea leaves, parsing. And you know, it's interesting because we started off with the Fed announcement-- oh, it's dovish, it's dovish. And the familiar narrative is, it's dovish. They got our back, it's fine.

And then, of course, you drill down a little bit more, and the Fed chair is a little bit less optimistic than maybe some participants would prefer. You know, I can just see, you know, President Trump or maybe Peter Navarro tomorrow saying, he just needs to shut up, you know just put the top line out and leave. Sorry, but Jay Powell wants to actually give us a dose of reality.

So-- but if you think about it, you know, it's-- it's kind of a downer, right? I mean, the fact that rates are going to stay [INAUDIBLE] zero to 2023, you know, what does that tell you? That means we need a lot of help. And then, you know, he talks about the fact that the recovery has the potential to be slower than some people anticipate. That's not great news either.

Having said it, it's kind of-- you know, the-- the Fed chair's job is to-- to tell it like it is, but it's also-- I'd like to think it's to, you know, undersell it a little bit, right, so that the economy over-delivers. I mean, you know, typically this person's not supposed to hype the economy. So in other words, if the economy ends up doing better than the Fed chair wants, that's a good thing. And the Fed chair should err on this side, which is the side of caution. And I think he did that today.