Market Recap: Wednesday, May 13

Stocks fell Wednesday, with declines in the three major indices accelerating into the last hour of trading, as traders digested commentary from Federal Reserve Chair Jerome Powell.

Video Transcript

[BELL RINGING]

JEN ROGERS: You can't talk at the same time as the closing bell. I mean, you can get arrested for that in business news. There it was. That's the end of the day here at Yahoo Finance. For the second day, we've got red here across the screen-- off the lows for the session. We saw some selling just in the last 15 minutes here. Checking out sectors, really no surprise to see that it is red across the board. Energy here the biggest decliner-- we're back in that game, yes again, down 4.5%, and the financials as well-- financials off more than 3% today.

A lot of talk today about negative interest rates-- could they happen, and what would happen? They would not be good for the financial names. We saw pressure there. I want to bring in my co-host Myles Udland. So, Myles, we had Chair Powell talking today, and, I mean, negative interest rates top of the tongue-- everybody is discussing it. Why-- I see what's happening with the financials, but as we listened to Chair Powell the last time he spoke, I believe I said I was very comforted by it. Today, I think fewer people felt the same way. What do you think the big takeaways were from the chair?

MYLES UDLAND: Well, I mean, I think he is-- so if you look at the end of his speech, he said it may take time for this recovery to gain some momentum. And you know, he said in his prepared remarks too-- so this isn't off the cuff-- that the Fed has lending, not spending powers. And so while he is continuing to emphasize how forcefully the Fed has acted here in response to the crisis, he is now for the first time during this period talking a little bit about the limits of monetary policy, right-- the limits of what the Fed can do.

And I think, you know, negative interest rates-- and you know, I know Andy and some others have their thoughts on that-- that's going to be a part of the conversation. But I think what the market can concretely look at from Powell's commentary today is that he is-- he's done what he can do and probably what he will do in terms of that soft fiscal monetary coordination. He has laid out the stakes that lawmakers need to respond to. But ultimately, it is the job of the House, the Senate, and the executive branch to pass those spending bills.

The fed will always be there with the money, but it's someone else's job to get those bills through. And Powell is outlining that, you know, it's not my job. So I think that, at least in my reading, that's a slightly less encouraging outlook from the Fed chair.

JEN ROGERS: So, Andy Serwer, you just got name-checked there by Myles on the negative interest rates. So again, I mean, look, financials are getting hit on that, Myles talking about the tightrope that he's walking here between the two power centers, really, of what we can do on policy. What did you think of his remarks today?

ANDY SERWER: Well, they were negative, but they were realistic. And I-- yes, I'm not a fan of negative interest rates, and so I was glad to hear that Jay Powell continues to not be a fan-- the president's weighing in not withstanding, because President Trump continuously calls for negative interest rates, which are an experiment that I think will end badly at some point. Yes, they've been around in Japan and Europe for a while.

But I think that Myles made a really great point about Jay Powell signaling that there are limits to what he can do and what should be expected of the Fed. And you know, at some point, the punchbowl must get taken away. And it's hard to talk about a punchbowl because this isn't a party, but it's sort of like, you know, we're living off that. And that's the support that we get. So--

RICK NEWMAN: It's an Irish wake, Andy.

ANDY SERWER: I guess that's right, Rick. You know, we had that and then, you know, we had also negative comments from David Tepper and Stan Druckenmiller, which we might get to as well later on. So you had three prominent voices weighing in in different ways, and we'll discuss that I guess-- which made for a kind of a downer of a day. And you know, it makes sense.

JEN ROGERS: Yeah, let's get into that right now. So we had Stanley Druckenmiller. He's come out and said he doesn't like the way the market is set up. Tepper from Appaloosa saying that he thinks this is one of the most overpriced markets he's seen-- second only to 1999. And we all know what happened with the dotcom bust. Rick Newman, President Trump tweeting about rich guys. Is that the new smart money? He was saying that rich guys speak negatively about the market. You need to kind of be careful here, because maybe they could be short on it. But really, a lot of them are saying what you've heard on this program here for weeks, right?

RICK NEWMAN: Trump giving us a little finance lesson that you don't always bet long. Sometimes you bet short, and you bet that things are going to get worse not that they're going to get better. Of course, we all know what Trump's motivation is here. He wants the economy to get back to normal as fast as possible. And he wants to have the best possible economy in October and November when voters are thinking about voting and actually voting.

I remain mystified by Trump's strategy of just continuing to try to talk this thing up, when he could actually be doing one important thing that we've been talking about for weeks, which is get a really robust national testing program going with contact tracing. That is the thing that's going to provide the confidence to allow people to go to work and to isolate the virus if there are resurgences. And he's not talking about that at all. He's just trying to talk up the markets with happy talk.

ANDY SERWER: Yeah. And, Rick, you know, it's interesting to me as well that, you know, he was bashing-- and I think it was mostly Stan-- it was Druckenmiller rather than Tepper-- that he was responding to. And you know, listen, Druckenmiller has been a fan of Donald Trump's. So he said that, actually, the market was in good shape before coronavirus, in part because it looked like Trump was going to get re-elected. So you know, with friends like that, I guess-- but you know, Stan is a tough guy. He can take it.

JEN ROGERS: It does feel like we're back to talking about retesting the lows here. And, Akiko Fujita, I want to bring you in on this, because that was a constant debate, really, as we came off of the lows in March-- were we going to go back there. And then we put that to the side. But as we've gone through the list of big money managers now kind of turning dark here, I want to also bring up a Scott Minerd, who tweeted just in the last hour that stocks have clearly topped the recent uptrend. And now, we find out if this is 1930 all over again. Has sentiment just completely changed here?

AKIKO FUJITA: It's more just that the market's catching up with the reality, right? I mean, we've talked so much about the disconnect that exists between the economic data that has been quite gloomy and then why the markets have continued to move up as a result of it. Now, obviously, you want to keep this in context, given the lows that we saw back in March-- a long way to climb back up. But you know, to add to Rick's point, what the president is doing is not just to try and talk up the market, but also trying to point fingers in case the market doesn't come back up to where he wants it to be.

And so we're seeing on the one hand that strategy farming, and then what we saw in the markets today-- I mean, I would argue that it shouldn't be a surprise that we got that kind of message from the Fed chair, given what we have heard from companies through these earnings calls. You know, they haven't pointed to a quick bounceback. That's been expected. But somehow, the market has continued to move. And maybe we're starting to get a bit of a reality check where the two sides are starting to maybe kind of move in tandem.

RICK NEWMAN: You guys notice this week, Remdesivir, not a story-- having no effect whatsoever. It's like that little ballooning effect we got whenever there was-- what appeared to be some encouraging news, coupled with some less encouraging news, pushed the market up-- hear nothing about it. And I feel like that's the way it's going to be for months. We're going to have these little snippets of possibly something happening, and then it's going to take weeks and months for actual developments.

AKIKO FUJITA: Yeah. And, Rick, you know, we've talked about this before, and you have to wonder at what point the market does not respond to every single headline that comes out on that front, because the reality is, as we've seen over and over, this is a 12-month, 18-month process in terms of finding some kind of vaccine. And then even with Remdesivir, which is just a treatment, that's going to be a long road too.