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Stocks open mostly lower as vaccine rally continues to cool

Yahoo Finance’s Brian Sozzi, Myles Udland, and Julie Hyman discuss what’s moving the markets with JJ Kinahan, TD Ameritrade Chief Market Strategist.

Video Transcript

JULIE HYMAN: But first, let's get more details on the markets and what we could see from here. For that, we bring in JJ Kinahan. He is TD Ameritrade Chief Market Strategist. JJ, it's good to see you.

JJ KINAHAN: Always a pleasure.

JULIE HYMAN: [? Whether ?] stocks from here, right? Because we had obviously a big push after the election. We've gone a little bit of a pause, a breath in that. Is this just a breath that then precedes another leg upward, or are we going to see some choppiness in the coming months as we start to see the debate reemerge over fiscal stimulus, for example?

JJ KINAHAN: I think a lot of the latter, Julie, to be honest with you. It was wonderful to see, you know, everyone very excited on Monday about vaccination possibilities, et cetera. But I think what people really have to keep in mind is that there still has to be some logistics that go on around that. How does it get out to people? Who goes first? So by the time it may get down to you and I, et cetera, it may be late spring next year, early summer.

So there is a lot that's going to go on between now and then. You talk about stimulus. I think the other thing that, in my opinion, the rest of this year could be a little bit choppy. You may see some selling pressure as people may have a fear about, I don't think it will be the tax increase that many at one time were predicting, but it wouldn't surprise me to certainly see that legislation come into the next Congress for a higher tax rate. And with that, be it called stimulus, be it through infrastructure, job programs, whatever it is, it does seem obvious that both sides of the aisle want to get something going that gets more money back into the economy, and particularly if this vaccination is going to take perhaps longer than we think it will.

MYLES UDLAND: You know, JJ, I want to ask you about something we really haven't talked about all that much on the program in the last week, and that's what's happening in the VIX. We've seen the VIX come down considerably. We're back in the mid to low 20s. We had VIX at 40 not too long ago. We were at six month highs. What does that say to you about how investors are thinking about the next year? I mean, you know, the vaccine, election, all that, in many ways, we're still talking about the same story as we've been discussing, but a lower VIX perhaps portends a little bit more comfort with that kind of outlook.

JJ KINAHAN: It absolutely does, Myles, and I think it goes back to what I was talking about in terms of the fact that if there was a blue wave in the election, I think there was a little bit of a fear in the market that that would lead to pressure at the end of the year in terms of stocks selling as people were going to want to realize gains in calendar year of 2020 rather than rolling things over to 2021. And I think, as I say, maybe there will be a smaller than perhaps people thought tax increase. It should keep some pressure on the market, but I don't think it's nearly to the level we saw.

What the VIX was telling us, you know, it was interesting. You saw VIX rallying, you saw bond rallying, two with a three, as I always say, apportionment of risk gold starting to rally. So I think there was some nervousness that that could be something and that would absolutely affect the market overall. Instead, you've got what seems to be a nice divided Congress, and with that, higher rates. And the really good thing I think the sort of, you know, I won't say untold, but sort of not as publicized story around the higher rates is the fact that it allows the financials to actually come out and play a little bit. The second largest sector in both the S&P 500 and in the Russell, and we saw the Russell doing pretty well at some higher rates.

BRIAN SOZZI: JJ, Disney earnings out after the close today. Can that stock work higher so long as COVID-19 infections continue to rise, or is that when these value stocks that investors should be taking a closer look at?

JJ KINAHAN: Well, you know, Brian, it's really going to be tough for people to sort that one through exactly for the vaccination and obviously the parks have now become their number one source of revenue. That switch from some of their networking thing over the last 18 months where parks are now number one, so they need that. Obviously, their movie franchise is off a bit, but with Disney Plus, so I think that, you know, fortuitous timing in terms of when Disney Plus started still remain strong, they can rely on that. And I think those who are more forward looking will say, OK, well, if there is going to be a vaccination that's out, it does hit late spring, early summer, obviously, you hope for a little bit earlier so maybe even at the end of that spring break crowd. [? But ?] [? more ?] [? so, ?] will people will, there'll be this pent up demand to get back to the parks. So I think if you're buying Disney right now, that's truly what you're going to be betting on.

JULIE HYMAN: Hey, JJ, this has been definitely a year of sort of the sexier tech stocks, right? The Big Tech stocks, but you're looking in the area that has not been very sexy, and that's energy, right? We've got oil prices once again trading about $40 a barrel, indeed, above $41 a barrel today. And we've seen energy stocks get a little bit of their mojo back, but it's still a tough slog from here. What do you think?

JJ KINAHAN: It is, Julie, and actually, I look at what our clients did last week, and Duke Energy, they were actually sellers last month after a little bit of a rise. And so, you know, the sort of attractive thing about many of these energy stocks still continues to be that they pay very handsome dividends, and so they have a nice yield. With that, I think the real test comes down to can crude oil hold 40? You guys report on it all the time. How many times have you reported over the last six to nine months, all right, crude oil is over 40, and it feels like two days later you're like, crude oil is trading 36. So it really does have a very, very tough time holding that level. And for me, it's a little bit more of show me that you can hold this for two, three consecutive weeks before I'm really a believer in the [? story. ?]

JULIE HYMAN: Copy that. All right, JJ, great to see you, TD Ameritrade--

JJ KINAHAN: Thank you for having me, guys.

JULIE HYMAN: Chief Market Strategist. Good to see you.