Market Recap: Friday, August 14

Stocks ended mixed on Friday as investors digested mixed new economic data and dimming prospects of further fiscal stimulus in the near-term. The Final Round panel breaks down the details.

Video Transcript

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SEANA SMITH: Welcome back to The Final Round, here on Yahoo Finance. I'm Seana Smith. You just saw the closing bell, wrapping up the trading week today. And today, S&P and the NASDAQ closing to the downside. It looks like S&P right around the flatline. The NASDAQ, though, off just around 0.02%.

We're still shaking things out here, but looks like the Dow will end the day in the green. Lots of hype going into today about whether or not the S&P would rally, reach that February record high. But again, closing off just a slightly negative territory. So we're going to have to wait a little bit longer to reach that milestone.

On a weekly basis, though, all three of the major averages recording gains. The sector action today, technology taking a bit of a break. We've seen a little bit of rotation, I guess, a back and forth, if you will, for most of the week. But today, though, some of those cyclical names returning to favor, financials, industrials, and materials, it looks like, holding onto the gains today. Among those outperformers, energy was also a big winner, even though we have oil moving to the downside.

Some of the economic data that we got out this morning, and that's what investors were focused on, we had retail sales up 1.2%. So below what the Street was expecting, although it was still trending in the right direction, the third month in a row of gains. And then we also got consumer sentiment up, holding pretty steady in the first half of August. Still though, historically speaking, it is a pretty low reading.

But I think that overall, when you take a step back, remember that the fact that we did see a jump in coronavirus cases throughout the first half of August, and then also that extra unemployment benefit of $600 a week running out at the end of July, the fact that we were flat I think is OK here for the markets at least.

I want to bring in my co-host for the next hour, Akiko Fujita. She's filling in for Myles Udland. I'm also joined by Rick Newman, Brian Cheung, and Jared Blikre.

Akiko, let's just start with you. What sticks out to you in today's action? Because taking a look at it, I think just stepping back overall, it doesn't look like we moved too far from the flatline. But I think once we digest all the econ data that we got out today, and [INAUDIBLE] any closer to a stimulus deal, the fact that we didn't see massive movements across the board, I think, is a pretty good sign.

AKIKO FUJITA: OK, I'm going to apologize in advance for my dog barking in the [INAUDIBLE]. But let's talk about [INAUDIBLE] close today. Because you know, I think you're right. It seems pretty flat. We haven't hit that-- you know, the S&P 500 hasn't broken past that all-time high. We keep talking about it every day.

And you get the sense that there's a bit of exhaustion that's coming through, right? When you look at the retail data that came in today, it's a little mixed. It is up. It is up for three consecutive months. And yet it didn't go to the level where it was expected. If you look at consumer sentiment, yes, it is pushing higher, but there's still a lot of questions about this stimulus. Congress is in recess until Labor Day here.

And so that debate isn't likely to get picked up. And that has been a big part of the recovery. When you look at that enhanced unemployment benefit, that has driven spending. We've seen that in the numbers. And so, you know, I think investors are kind of looking that and saying, OK, look, we know that the recovery was sort of intact going into July. But where are we today? And how do you keep that momentum going?

And it's hard to answer that question without a proper stimulus bill in place, without knowing what the specifics are going to be moving forward.

SEANA SMITH: Yeah, indeed that is the big question. Maybe your dog can make an appearance before the end of the show. You never know. It's Friday. The more people, the merrier.

But Jared, just thinking, going off, I guess, what Akiko was saying about what we need to keep this market's momentum going, we've seen some rotation. We've been talking about the fact that investors day in and day out are favoring a lot of these tech names. This week, though, we did see a little bit of a rotation into some of those cyclical sectors. But what did you make of where we are today and then also what we need here for this momentum to keep going going forward?

JARED BLIKRE: All in all, it's a constructive week. Internals are good. We have pretty broad breadth in this rally. Still doesn't look like it wants to roll over and [INAUDIBLE]. I think it was my presentation about 30 minutes ago, I was making the case that the S&P 500 is flagging, set for a breakout probably to the upside next week. We'll have to see if that happens.

But let's take a look at what happened this week. And it's going to be very instructive. So on the NASDAQ 100, we have a heat map here. And you can see, the big FAANG stocks, really not a lot of movement. Apple was up 3%, Facebook down 2.7%, but not a lot going on there.

And then you look at the biggest winners and losers over the last five days. Tesla stands out. That 5-for-1 stock split obviously the most bullish thing ever, which I say slightly tongue in cheek. But then you have Ulta Beauty, Applied Materials, United Airlines, Ross Stores, Expedia, Qualcomm. And in that list that I just-- I think it's six or seven stocks-- only two of those are tech stocks. And two of those, those two stocks are chips.

To the downside, you got some earnings problems here. Cisco down 10%, Baidu down 6% off of that iQiyi fraud investigation, and then Micron and Zoom. So looking at the sector action over the last five days, you might be surprised to see that industrials, energy, and discretionary are the three biggest leaders.

And then to the downside, we've got utilities and real estate, those are defensive sectors, interest rate sensitive. We've saw the 10-year yield climb by the most in a couple months here. So that's to be expected. They basically compete for investors' interest expectations. And then tech and communication services, those are basically unchanged for the week.

So looking at our leaders here, the canaries. Transports, they had a huge breakout a couple weeks ago. They were up 11 sessions, which they snapped, I believe, yesterday. Transports up 3.6%. Homebuilders at a record high. Regional banks surging.

So that's really what you want to see when stocks are going up in general. We're not seeing any kind of rollover by the FAANGs, which have been propelling the rally. We haven't seen them roll over for more than a day or two at a time. So altogether, I consider this a constructive week here.

SEANA SMITH: Yeah. It think it is a constructive week, especially when you talk about the fact that we're seeing the gains here broaden out a little bit.

But Brian Cheung, I'd love to get your thoughts just on this Bank of America note that we got out this morning. Because I think it was a little bit interesting. It talks about basically they're saying that because of the ineffective health policy response that we've seen in the US to the pandemic, that the US economy is much more dependent on its monetary and fiscal policy than other developed market economies are.

So when we take into account that the CARES Act, the impact of that is fading a little bit now. We don't have a deal. We're nowhere near a deal in Washington on additional stimulus, just what that means for the stability of the US economy here, at least in the short term.

BRIAN CHEUNG: Well, Seana, you lay out what is really quite an interesting foil to what Jared was just laying out, when we look at the rising stock market here, which is that the fundamental story of the US economic recovery is not looking as bright as maybe the stock market would suggest.

As you mentioned, the CARES Act impact is fading. We've been talking about this at length. When you look at, for example, the damage done to the labor market that, yes, we have seen the unemployment come down, but we're still above double digits. And especially when you look at the fact that there's over 16 million Americans still unemployed, that speaks to how far away we are from getting a full recovery in this US economy.

And I think that when we talk about the US economic outlook, we obviously can't overlook the commentary from the Federal Reserve. We've heard more Fed policymakers, as of late, talking more about the health implications of this. If you recall, when March was beginning, when the Fed was taking its unprecedented actions to lower the interest rates and then obviously open up those liquidity facilities to backstop various types of markets, you heard Fed officials kind of keeping into their own knitting, as Jay Powell would say, and not trying to comment on what fiscal policymakers should do, not trying to comment on whether or not we've done a good job from an epidemiological standpoint. They said, look, we're economists.

But now you have a lot of these economists saying we're also not doing a very good job on the health side, which I think underscores the frustration that they've been experiencing as folks on the other side of the equation trying to prop up the economy here in saying, look, fiscal policymakers and the health response are not helping us set up the US economy from what would be otherwise vigorous recovery.

So you have Neel Kashkari from the Minneapolis Fed saying just earlier this afternoon on CNBC that the US lockdown wasn't strict enough. He's been very vocal in saying maybe the US government should institute another lockdown, at least in some portions of the country. And you had Boston Fed President Eric Rosengren saying earlier this week that the inability thus far, was the language that he used, to control the virus is resulting in renewed restrictions on the economic activity here in the US.

I think this is a theme that we'll expect to hear more from the Federal Reserve, especially as we get closer to that Jackson Hole meeting in about two weeks. It will be the theme of, you know, these Fed officials saying, we need to get this virus under control if we want to make sure that we can have that recovery.

SEANA SMITH: Yeah, I think we can certainly expect to hear more from them on that.