Market Recap: Tuesday, October 27

The markets closed mixed on Tuesday with a selloff pushing the Dow and S&P 500 to their biggest one-day drops in more than a month. The Final Round panel discusses the latest.

Video Transcript

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SEANA SMITH: Welcome back to The Final Round here on Yahoo Finance, I'm Seana Smith, as we wrap up the trading day. It looks like stocks end the day mixed, with the Dow and the S&P in negative territory. The NASDAQ, though, holding on to gains. The Dow off just over 200 points as we shake out the final trades.

Of course, among the weakest names in the Dow today, Caterpillar and 3M, both of those stocks under significant amount of pressure following their earnings reports, both stocks off just around 3%. S&P off just around 3/10 of a percent, and the NASDAQ, like I mentioned, holding on to gains, up just around 6/10 of a percent today. Of course, a surge in coronavirus cases continues to weigh on investor sentiment. And also the uncertainty around the election, that is keeping investors on edge.

Taking a look at the sector action, I mentioned NASDAQ is the only major average in the green today. And that has a lot to do with the fact that growth seems to be back in favor. Technology and communication services among the leaders today.

We've got the big deal in tech in the semiconductor space, AMD announcing a $35 billion deal for Xilinx. Xilinx shares rallying on that news, up just around 8%. AMD under a little bit of pressure, although that, of course, is to be expected there.

On the flip side, the cyclical trade is under pressure. We have industrials and financials among the worst performers. Financials here under a little bit of pressure as we see the 10-year yield retract just a little bit, right around 78 basis points. So that, of course, putting pressure on the financial sector.

And then industrials, one of the laggards, and a lot of that has to do with those earnings I mentioned at the top. Caterpillar and 3M, both those stocks off just around 3% today. Well, the earnings are going to continue this hour. We have Microsoft, waiting on that report. We expect it any minute here. And of course, we'll bring you those results as soon as they cross.

I want to bring in my co-host for the next 60 minutes Myles Udland. He's still with us. We also want to bring in Akiko Fujita, Rick Newman, and Jared Blikre all here to help us break down today's trading action. And Myles, let me just kick it over to you first, because Dow tracking lower once again today, and really struggling, I guess, to shake off yesterday's sell-off that we saw. So investors here still staying on the sideline, or a little bit hesitant at least, we can say at this point.

MYLES UDLAND: Yeah, I think it's just a really interesting day when you look at sort of how things shook out last week, yield curve steepening and kind of that pro-growth trade, I guess we could call it. We saw a little bit of that with what happened in the financials, and so on. And then really, this week has been now two straight days where the kind of negative corporate news that actually impacted the market I think has now kind of been in play.

We saw SAP obviously with their announcement yesterday morning, certainly a sobering kind of piece of commentary from their executive team there. This morning, we get the news from Caterpillar. We see the way that JetBlue's report weighs on the earnings-- or on the entire airline sector. The TSA kind of passenger data, that has started to level off.

There was a lot of excitement around first day a million people flew in the US. Well, we haven't seen one now in a couple of weeks. And you know, this is still at a very depressed level. And so I think that with a whatever we want to call this wave, certainly in Europe it's a second wave, in the US it might just be one big continuing wave, but the virus is as much in play as everyone, I think, feared it would be headed into the fall and the winter, more notably.

And now we have a couple of companies coming out saying that the backdrop is perhaps not as exciting as investors may have been implying. And so we'll see how things shake out. Obviously, Microsoft coming up here in just a bit. And then we get a lot of earnings later this week. But I think those pieces of news are very interesting as they start to kind of add up here.

SEANA SMITH: Yeah, they certainly are. And Jared, it's interesting when we see just what's in favor, going off of what Myles was just saying, that tech trade that's been working over the last six or seven months, investors finding reason really to buy a lot of these big tech names. We mentioned Microsoft there, their earnings coming out right now. We're going to bring you those in just a couple of minutes, but that stock gaining ahead of today's release. And then on the flip side, you have that cyclical trade under pressure once again.

JARED BLIKRE: Yes, interesting leadership here, an interesting reaction, interplay between the markets. Typically since March when we had the interest rates, longer-term interest rates coming down, the yield curve compressing, you would see big tech get a boom. That hasn't always been the case over the last few weeks. But today it is, because the 10-year T note yield has come down considerably. You see all that green to the left of the screen, those big-cap, mega-cap names, they like lower interest rates.

Now, let's go to some of the charts here. Here's the S&P 500. Now, a couple of days ago I was talking about it-- and this is the last I'm going to say it-- a cup and handle formation possibly forming. But we've gone down just a little bit too much. You want to see more consolidation in the upper end.

Doesn't mean all is lost here. We simply came down and measured the halfway back from this rally, from the September lows, and it was bought yesterday. So that's somewhat constructive. Probably just take a little bit more time to get to all-time highs, if that actually happens. And the markets might simply be in a waiting pattern over the next few days into next week when we get the election and a couple of days after the FOMC announcement.

Just a quick look at the 10-year T note yield I've been talking about. And here we can see coming down off of these highs about 87 basis points, so roughly 9 basis points off those highs. And if you take a look at what's happened year-to-date, we've seen these spikes before, and they were temporary. Could be another one, although we do note that we are kind of rising here. So is it different this time? I think after the election, we might settle on a new direction, but too early to tell right now.