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U.S. jobless claims fall more than expected

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Yahoo Finance’s Alexis Christoforous and Michele Schneider, Marketgauge.com Partner, discuss the latest market trends as U.S. jobless claims fall more than expected.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to stick with the markets and bring in Michele Schneider. She is partner and director of trading research and education at MarketGauge.com. Michele, welcome. Lots to dig into here. I want to begin, though, with the optimism we're seeing in the market today. Is it warranted, given the job numbers that we got? I mean, yes, there was a drop in weekly unemployment benefits, but we're still at historically high levels.

MICHELE SCHNEIDER: This market is very divided right now between what we're seeing in two distinct indicators, which is price, as you just said, doing very, very well, and yet momentum, which keeps declining, or at least, holding steady, showing a negative divergence to price, which I'm finding particularly fascinating. Basically, what momentum is telling us is that the velocity of the whole movement up has slowed to the point where any catalyst can bring the prices down.

Or in the reverse, considering we're looking at a hopeful situation with stimulus after the good reports, could also bring the momentum up to crazy and bring these prices up. And we can see another really big blow-off type rally. We're really in an either or situation right here.

In terms of some of the fundamentals stuff that's going on, as you mentioned, yeah, we saw the rotation into the small caps, which we've talked about for a while. It's healthier not only for the market, for the economy, if you see the money coming into the Russell 2000, into the transportation, into the retail, and now, of course, the banks have been participating as well, mainly because the yields have been going up. And also, the dollar has been strengthening. So it'll be really interesting to see how this plays out and whether the market will take a breath if the stimulus doesn't get passed, as they are expecting it to do.

ALEXIS CHRISTOFOROUS: Certainly, earnings have been a big catalyst for this market's move upward lately. We said at the top of the show the majority of companies who have already reported have beaten estimates. And the outlook has been pretty good for those companies that are actually sharing outlooks during the pandemic. What has been the big takeaway for you from earnings season? And what are your expectations going forward?

MICHELE SCHNEIDER: Well, a lot of the instruments that we're already in haven't reported yet. So it's going to be interesting to see how stocks like Datadog, and Teledoc, and-- let's see-- Fastly, and those type of stocks are looking. Run, some of the solar stocks, haven't reported yet. So there's still a long way to go as far as we're concerned.

What we weren't in and happily not in is the big tech. And as they reported-- and when I'm talking about big tech, I'm talking mainly FAANG and Microsoft, minus the Netflix, because that's in its own little world. They reported unbelievably well, but yet the price has still continued to be disappointing. And my explanation for that has been for a long time now, that they're just so saturated. Where are they going to go?

If you look at Amazon alone, the earnings were amazing, right? But yet, the stock is down, and in the last six months, it's been one of the worst performers in the whole NASDAQ space, only up about 7% since its peak high in September. So I think that big tech is really telling you something, that it's time to move on. And we're looking at that as a great opportunity to take a look at some of these other newer techs, these IPOs, these SPACs that are coming out. That's really what I think is exciting.

And once we get through these next couple of weeks, I think, as I said, if things hold up, stimulus comes through, we could see some wonderful places to put some money.

ALEXIS CHRISTOFOROUS: What if stimulus doesn't come through, Michele, or what if it comes through, but not as big as Wall Street is hoping for? Maybe we don't get the $1,400 checks, but we get the $1,000 checks. Is that going to really change the dynamic for Wall Street? Or is it just enough that we get something?

MICHELE SCHNEIDER: I think it would be enough that we get something, especially since so much of the money, as we've learned from this whole Reddit thing, is going back into the market. People are taking their stimulus checks, whatever they are, and they're putting it into the market. So I think something would definitely be helpful. Obviously, the more irrational exuberance we might see.

If we don't get any stimulus, which I doubt, then any kind of correction would be welcome. Because we have another factor-- two factors, actually. One is we have the Federal Reserve, and Yellen is in an interesting situation because she's Treasury Secretary, but also a former chairman of the Fed, working very closely with Jerome Powell. They've already committed to keeping the rates low, to keep the bond buying program going, to keeping inflation potentially running hot. And so, I think that's going to be a big factor.

And then the other factor is like you mentioned earlier, is that some of these statistics that are coming out are showing that we are actually possibly heading into a better recovery, and that the virus maybe in the next few months will be under control because of the vaccine rollout. So, you have so many factors at play, I don't know if one thing is going to be the catalyst.

ALEXIS CHRISTOFOROUS: Michele, before we let you go, I know you always bring along some good stock picks, possible stock picks for investors. What did you bring along with you today?

MICHELE SCHNEIDER: I love when you ask me this question. It's my favorite thing. Well, I like to look at different sectors, right? So right now, I'm really into food. We talked about food commodities before. And I'm still really, really interested in them. So I also started looking at agritech, and there are two stocks. One is called Origin, and the symbol for that is SEED. And it's just sort of been consolidating here. I think that's got big potential.

And the other one is App Harvest, which is actually a really alternative farming that's starting to come out of all of the different problems that we're having in the farming community. And that is APPH. Both of those are very heavy on the radar. No skin in the game yet, but watching.

ALEXIS CHRISTOFOROUS: And ironically, we had the CEO of App Harvest on just the other day when their SPAC came to market, and they had a pretty nice first day. All right, Michele Schneider of MarketGauge, always good to chat with you. Thank you.