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Market Recap: Wednesday, September 22

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Stocks gained on Wednesday as investors contemplated the Federal Reserve's latest monetary policy decision after a volatile start to the week. James Bruderman, 1879 Advisors Vice Chairman and Chris Gaffney, TIAA Bank President of World Markets joined Yahoo Finance Live to discuss.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: Stocks holding on to gains today as we count on the final two minutes of trading. Dow up just around 350 points. We want to bring in James Bruderman, he's 1879 Advisors vice chairman. And we're also joined by Chris Gaffney, TIAA Bank president of world markets.

Chris, let me start with you. We just heard from Fed Chair Jay Powell earlier this afternoon, giving us a potential timeline on tapering, also saying there's no plans to raise rates until we see the end of tapering. What's your reaction to what we just heard from Powell?

CHRIS GAFFNEY: Well, I mean, if you look at the market reaction, it was basically a non-event. He delivered exactly what investors were expecting. He did his best to calm any fears about a premature rate rise. And I think he continues to do a good job steering the US economy. And markets continued to hold on to their gains after the press conference. So I think it was a successful press conference for the chairman.

SEANA SMITH: Certainly looks like that's how investors are viewing it at least.

Let's take a look at where we are because we have the Dow, the S&P, and the NASDAQ all moving to the upside. The Dow up just around 318 points, well off the highs of the day. It did jump 520 points at the session high, but still on track to snap that four-day losing streak. The S&P holding on to gains up nearly 1%. A jump in energy leading today's gains.

And you're also looking at gains in the NASDAQ, with the NASDAQ up 144 points. That's a gain of just around 1%.

In terms of the sector action that we're looking at today, energy by far the leader with the XLE up just over 3%. We're also seeing financials lead the way. Financials up 2%. Materials, real estate, technology among the leaders today. Utilities lagging behind, with the XLU off just around a 1/10 of a percent.

[MUSIC PLAYING]

[BELL RINGS]

ADAM SHAPIRO: There it is. Somebody's got a little too much whiskey for lunch there with the fireworks. All right, we got it. There's the noise too. We like to hear it. All right, we have a closing bell.

Let's see where the markets settled today. The Dow is up 339 points. The S&P 500 is going to end up about 41 points. NASDAQ is going to be up 150 points. And of course, as Seana was just pointing out, big sector action. The biggest sector gainer is going to still be energy, up about 3% for the day.

Let's go back to our panel. James, I wanted to ask you, because I would imagine most investors think about how am I going to make a buck. So given what was delivered to us today, how do we go forward? You're still not going to get it if you're putting it into fixed income in the traditional route. So equities seem to be the only option. But is it the best option?

JAMES BRUDERMAN: I think equities remain a really good option. I mean, what we heard today from the Fed, the markets certainly gave their nod of approval. The Fed's timeline was certainly acceptable.

I think the market and investors' reaction really was an understanding and a belief that ultimately, raising interest rates suggests that there's a strong economy and that the Fed's talking about it suggests that they really believe that the economy is in really good shape. Now, that doesn't mean that longer-term interest rates are going to go up overnight. But certainly, I think there's a downside risk in bonds from these levels for the foreseeable future.

I think that, from an economic standpoint, equities continue to be poised to do really well. I mean, we're not going to see the growth in the GDP that we've seen up to this point in time. But we see no reason why GDP growth of 3% and 2 and 1/2 percent over the next three or four years can't be sustained. And we think that it's very powerful for equities.

SEANA SMITH: James, you just mentioned the downside risk that you see in bonds. And the reaction in the bond market today was extremely muted. We had the 10-year basically flat, just off around 1 basis point at 1.31. What do you think the bond market is telling us at this point?

JAMES BRUDERMAN: Well, the bond market is telling us what the Fed told us, that they're in no hurry to raise rates, that they're going to finish the bond tapering first, and that, if we do see rate increases, certainly '22 is a chance. But '23 is much more likely. So I think with that in mind, that people don't anticipate a very huge move.

I think on the other side of the coin, the bond markets are also telling us that they're not especially worried about inflation. I think that's been well-projected by the Fed chairman. And I think that we will have some wage inflation. But I think it's certainly going to be within an acceptable range. And I think we see inflation moderate and get back within line of the Fed's goals.

ADAM SHAPIRO: Chris, given what you heard the Chair say today in the press conference, when he said liftoff on interest rates is the next big event that investors are going to begin to focus on, he gave us a timeline. He said tapering by the end of the middle of next year. And then if we're at full employment, which it looks like we could be, and inflation-- they're just going to declare most likely inflation victory and let's go home. Looks like we could get the interest rate increase a little bit sooner than the end of the year, doesn't it?

CHRIS GAFFNEY: Well, that's what the dots are showing. But I think Powell made it clear that it's a pretty big hill to climb still on the labor market. And with participation rates where they are, I think the Fed and voting members of the FOMC are going to really want to see proof that the labor market is at maximum employment. And I think we still have a ways to go.

So I am under the belief that the Fed's going to stick to their plan and that interest rates probably won't start being lifted until, at the earliest, the end of 2022 but more likely in 2023.

SEANA SMITH: James, you also heard Fed Chair Powell talk about some of the bigger macro concerns that are facing the market over the next several weeks. He mentioned the debt ceiling. He says that it's extremely important for the debt ceiling to be raised in a timely fashion. How big of a risk do you view this to the markets?

CHRIS GAFFNEY: Well, it's going to happen. Oh, I'm sorry.

SEANA SMITH: Go ahead, James. You first.

JAMES BRUDERMAN: Sure. I don't think it's a big risk. Now, as my co-host today says, it's going to happen. It always does happen. I think, interestingly enough though, that the Republican side of the aisle is going to be a lot more serious about dragging their feet. The Democrats might have to go it alone. But no matter how you slice it, it's going to happen. And I think the Fed chairman's talk today was perfectly in line with what he was obliged to say.

SEANA SMITH: Chris, do you agree?

CHRIS GAFFNEY: Yeah, I sure do. It's inevitable. They're going to raise the debt ceiling. There'll be some gamesmanship back and forth. But we're not going to default. They're not going to let it default. They have the ability to raise the debt ceiling. And it will happen.

SEANA SMITH: Chris Gaffney, always great to speak with you. And James Bruderman, thanks so much for joining the show.