Market Recap: Wednesday, January 13

Stocks rose Wednesday afternoon after fluctuating between gains and losses earlier as traders sought signs of the arrival of more stimulus amid the ongoing pandemic. The S&P 500, Dow and Nasdaq were each higher in intraday trading, and the utilities, real estate and information technology sectors outperformed. Charles Schwab Investment Management SVP and CIO, Passive Equities & Multi-asset Strategies Omar Aguilar and Albion Financial Group CIO Jason Ware joined Yahoo Finance Live to discuss.

Video Transcript

ADAM SHAPIRO: We're heading towards the closing bell. So let me welcome everybody to Yahoo Finance with roughly four minutes to the closing bell. I'm Adam Shapiro along with Seana Smith. Joining us for the next few minutes, we're going to invite into the stream Omar Aguilar. He's Charles Schwab Investment Management Senior Vice President and CEO from passive equities and multifaceted strategies, and also Jason Ware, a familiar face here at Yahoo Finance Live-- Albion Financial Group CIO.

And let me start with you, Jason. You know, people have been very worried about rising bond yields. Is it much ado about nothing? I mean, the 10-year is barely above 1%. It's not at 1.5%. Why all of the sturm and drang over this?

JASON WARE: Good afternoon. It's an important question. And the way that we view it is a rise in bond yields from the ultra-low levels we've seen over the past year because of the pandemic is actually an encouraging sign, because what it demonstrates is that folks in the bond market and investors are becoming more optimistic on economic growth. I think it would actually be more troubling if we saw these kind of expectations for growth this year-- and our expectation for GDP is fairly high-- and we saw this level of stimulus and Fed support, but we weren't seeing rising bond yields.

I think the fact that we're having pandemic-ending vaccines and economic reopening in earnest this year absolutely warrants higher yields. I don't think 1%, 1.5%, or even 2% is problematic for stocks. I think if we get north of 2%, we're going to start having that conversation. But it also depends on how quickly we get there and with what corresponding economic information. So right now, we're OK with it, but we'll see where it goes over the next year or two.

SEANA SMITH: Omar, we just got news there a couple of minutes ago that the vote is now underway in the House to impeach President Trump. How are you looking at this, and how big of a risk could this potentially be to the markets?

OMAR AGUILAR: I think it's going to be temporary. Any political uncertainty usually gets investors to sell [INAUDIBLE]. I think investors will continue to be on this track, at least until the inauguration next week. You know, it's really more a function, not necessarily of the political transition, but it's really more a function of what the responses might be from the society, and particularly as the events of last week if there is anything else that people need to worry about.

I think that uncertainty in itself will bring the market to certain levels of volatility. But it doesn't necessarily will be long lasting. I think the majority of the uncertainty related to the elections and the transition have for the most part moved on to a discussion more about economic growth, new policies, the new potential for a stimulus coming up right away in the next few months, as well as the long term tax policies that the new administration might have.

ADAM SHAPIRO: All right, so Jared Blikre, as we head into the closing bell, we're off the session highs. What's going on?

JARED BLIKRE: Yeah, well, I'm looking at the YFi interactive world map here, and something striking is happening. And this is really a reversal from yesterday. And we're talking about the 10-year t-note yield-- well, it's down about, what, 5 basis points right now. So the Russell 2000 underperforming-- that's down 2/3 of a percent, where you're seeing the NASDAQ 100 here up about half of a percent. That includes all those big cap names that we look at.

And we can see this on the NASDAQ 100 heat map-- just the reversal from yesterday. Apple up over 1.5%, Amazon right there with it. Alphabet, Microsoft, Tesla each up about 2/3 of a percent. And just looking at the sector action today, this also speaks as to that. Now, the utilities and real estate sectors are up the most of the-- utilities about 2%-- benefiting from that lower interest rate on the 10-year. And this is the reverse from yesterday.

So as yields were rising, we saw these sectors get hit. Now they're outperforming today. Materials, notably, the biggest laggard-- that's down 1% as we watch the US dollar still close to historical lows here going back a couple of years. But we've seen some air pockets where it does go higher. So here's the closing bell on Wall Street.

[BELL RINGING]

SEANA SMITH: And that does it for today's trading day. Taking a look at where we are closing-- Dow and S&P, Dow closing in the red, off just a fraction here as we shake out the final trades of the day, off just around 8 points, and not so far from the flat line. S&P and NASDAQ, though, holding on to gains-- S&P up just around 2/10 of a percent.

The NASDAQ was the outperformer of the three major averages, up nearly a half of a percent. Jared was just mentioning the sector action today-- utilities, real estate, and technology, those three sectors leading the way. On the flip side industrials and materials continuing to lag. And taking a look at some individual movers that we've been keeping a close eye on, inside the Dow, Intel was the outperformer today-- a big reason why we're not seeing bigger losses from the Dow today. Intel closing up just around 7%.

Walgreens and Apple rounding out the top three performers for the Dow today. We want to bring back our guests, Omar Aguilar and Jason Ware. And Jason, let me just toss it over to you first, because technology one of the performers today. I know you closely follow that sector. Where are you seeing, are you seeing any opportunity in some of those big names right now?

JASON WARE: Yeah. So I think the opportunity lies in the fact that so many of those large cap technology stocks within FAANG, even outside of FAANG, have consolidated. And it's been a healthy consolidation for the better part of the last six months. So if you look at Amazon, for example, it's trading at about the same level today as it was in early July.

The last time we saw Amazon undergo a sidelong trend after a big breakout was from middle of 2018 through the beginning of 2020 before the pandemic. And then, of course, we had that huge return. We see the same thing kind of going on with Apple and Microsoft, Google to a lesser degree.

But I think what that says is that these are strong bases. This isn't a breakdown in the stocks. It's not a breakdown trend, it's just a healthy consolidation before the next move higher. And I think as long as the fundamentals of those businesses-- sales, profits, cash flows, et cetera-- continue to be market besting type of trajectories, then these are good areas to buy these companies if you have a longer term view.

ADAM SHAPIRO: Omar, for investors here in the United States who might be concerned about how the dollar has weakened over the last year, should they be looking offshore at emerging markets? Or is it still should they focus inward?

OMAR AGUILAR: Yes, I think the rotation towards cyclicals, the rotation towards a full economic recovery usually provides an abundance of liquidity to the markets. And I think we have seen that already. We started seeing that at the end of last year when we saw the news around the vaccine and the optimism around the potential end of the health crisis.

And that usually tends to lead to higher opportunities internationally-- the weaker dollar, the increase in commodity prices, oil prices moving up, as well as the overall low levels of interest rates usually tend to translate into emerging markets outperforming. They do have tactically, just because of the way that this economic recovery is happening, an opportunity to adjust and do better than international-- again, a lower dollar usually is a big tailwind for those markets as well as higher commodity prices. But if you think strategically, demographics and even just there are policies around how to deal with the health crisis continue to provide health wins for the majority of emerging markets, especially in Asia.

SEANA SMITH: Jason, how are you looking at emerging markets right now? Are you finding any investment opportunity overseas?

JASON WARE: You know, we don't have much direct exposure to emerging markets overseas. Instead, we have that exposure expressed through strong multinational companies that do business in China and Southeast Asia, et cetera. You know, a company like Honeywell, for example, that is selling into that market, Apple the number two market for them is China-- you can go down the list.

You know, Intuitive Surgical, which is a health care technology company that we're very optimistic on sells 13% to 14% of their surgical systems into Asia. So there are ways to play the growth in emerging markets. And I don't think there's any question that the economic upswing is durable in emerging markets with rising middle class and growing populations.

But as far as direct exposure to companies that trade on those exchanges or that do most of their business in those markets, we're more US-centric than that.

ADAM SHAPIRO: Omar, some of the stocks that you point to as good companies that people might want to consider owning, Visa and Starbucks-- I get it as the economy opens, I need my cup of joe. Why Visa?

OMAR AGUILAR: Well, we don't necessarily provide a lot of individual stock recommendations, at least not at this level. But certainly the areas of the sectors and industries that you point out as we see the economic recovery usually tend to lead for more consumer spending. So just think about the concept of a stimulus package going in.

There are $600 going into people's bank accounts. But the potential for that going into spending is what makes that particular part of the market attractive. At the same time, you know, even through the worst part of the pandemic, the majority of people ended up spending money in areas that were used to it-- because, again, this was not the traditional recession where people suffer as much as they did.

The stimulus provided that particular floor where even at the worst possible time, people were still going to buy their coffee. They were still going to buy their staples, even if they needed to save more money. So I think the fact that we have a very strong support on the fiscal side, it is an area where we'll provide faster recovery on the consumer.

And we actually have seen that already where, you know, consumer optimism continues to just get higher and higher. And I think with the stimulus, that will actually translate into more spending.

SEANA SMITH: Jason, how critical do you think it is that we do get additional stimulus at this point? And what exactly is the market looking for?

JASON WARE: Yeah, it's a good question. And it's a question that was asked often a month ago, prior to the last stimulus package. And the answer feels like it should be the same from an economic perspective, which is we're still in an economy that is struggling because of the pandemic. And until we put the virus behind us and we can truly open up the economy and get it back to what we were doing or close to what we were doing prior to coronavirus, I think stimulus is needed, and it's important.

The last bill was smaller than it should have been. The direct help to those who are unemployed, the direct checks to households-- all of it was probably smaller than we would have liked to have seen as we're kind of running the numbers on the back of the envelope and what we think would be helpful to the economy at this time. So as we look at the new administration in Washington and a Congress that's tilted toward the Democrats, we do expect more stimulus to come down the line.

It's probably not going to happen over the next couple of weeks, but certainly by the spring, I think, an extension of unemployment benefits for those who are still out of work, maybe a boost to what they're getting on a weekly basis, and then fresh stimulus checks closer to $2,000 might be something that has an appetite in Washington as a result. And we would celebrate that. That would be good for the economy until we get on the other side of this.

ADAM SHAPIRO: Omar, any concern about pending bankruptcies that might have an impact on the economy? Because they didn't materialize to the extent that a lot of people had worried last year.

OMAR AGUILAR: Well, I think to answer your question, I'm not necessarily concerned about the impact directly. I think it will impact the speed of the recovery. I think when you look at the labor market, when you look at the credit market, and particularly because we continue to see bankruptcies-- and we are still in the midst of the lockdown. You know, those economic effects and what is being called the caring of the economy is what really will drive the speed of the economic recovery.

So with the GDP forecasts continue to be higher and higher, the question is, when do you actually get to that place? You know, I am more encouraged because of the manufacturing numbers that we have seen. It's not surprising that a lot of the bankruptcies seem to be in areas of the service part of the economy. But at the same time, you know, we do think that there's enough support to get through that period. I think the bigger question mark, it is more about how fast the roll-out of the vaccines will be to avoid a more deep scarring of the economy down the road.

SEANA SMITH: Jared Blikre, we want to bring you back into the conversation, because a huge outperformer today in the Dow was Intel-- the stock was settling up just around 7%. We had many other of the chip names moving on the heels of that news as well.

JARED BLIKRE: Yeah. And I think this highlights a trend that's been going on for many years-- Intel playing a little bit of a game of catch-up here. I think it's notable that Intel there at the top spot, up 6.97% for the day. You look at what it's done over the last month, it's picked up recently. But over the last six months, it's really underperformed most of the other chip stocks.

And then AMD, its arch rival, down 3.75%-- so what one has or what one gains in one day tends to take away from some of the others. And I think that's why we're seeing this mixed board. But back to the main point, you have the fabricators in the chip business, and you have the designers.

And in Intel, they are integrated, same thing at AMD. We had Dan Loeb come in a week or two ago, shake things up, and maybe split these businesses apart. Taiwan Semi over here, that's down about 3%, but this has been a huge outperformer. They are a fabricator.

And so I think Intel is probably going in the right direction. They got a shot now. But all of this may be overshadowing what's happening at Qualcomm. Now, here's another stock-- this is up 2% today, 72% over the last few months.

They just announced they're buying a company called Nuvia. And this is a $1.4 billion deal. This is going to help them break into automotive, the internet of things. They are already in the mobile space in a big way-- they licensed their IP-- but this is going to allow them to expand their business.

So I think the chip companies realize what's going on here. And Intel's innovating a little bit maybe too late. We'll have to see if they turn it around. But this is a sector overall-- you look at what's happened over the last two months, lots of green here, even as the FAANG stocks have been lagging in the tech and communication services sectors here, guys.

ADAM SHAPIRO: All right, let's say thank you to Omar Aguilar, Charles Schwab Investment Management Senior Vice President and CIO, Passive Equities and Multi-asset Strategies, and Jason Ware, Albion Financial Group CIO. Both of you, we appreciate your being here on Yahoo Finance Live.