Markets higher as states relax coronavirus lockdown restrictions

Yahoo Finance’s Brian Sozzi and Alexis Christoforous discuss what’s happening in the markets today with Michael Lee of Michael Lee Strategy.

Video Transcript

[OPENING BELL RINGING]

ALEXIS CHRISTOFOROUS: And here we have a new trading day underway on Wall Street. Here to help us break it all down is Michael Lee of Michael Lee Strategy. We've also got Jared Blikre with us and Brian Sozzi. Good morning to you all. I want to just tell you about a tweet that's just coming over right now from President Trump because we talked about this earlier in the show. So President Trump tweeting, the task force-- meaning the coronavirus task force-- will continue on indefinitely with its focus on safety and opening up our country again.

We know that earlier in the show, we were talking about the fact that his administration was discussing dismantling that task force, which left a lot of people confused. So President Trump saying this morning that task force will remain intact. All right, we have got a market higher here this morning. The Dow up about 150 points. Michael, we found out this morning that the economy shed 20.2 million private payroll jobs, yet the market is higher. Are investors anticipating the worst is behind us at this point?

MICHAEL LEE: You know, I-- I think we're at a bit of a crossroads here. I think-- I think we've seen one of the biggest short squeezes in history in that move from that 2,150, 2,180 level of the S&P 500 up to where we are now. So I'd say, you know, certain investors are either completely ignoring the economic news, looking through it, or what I believe is that stocks are the most disconnected from the underlying economy that I've ever seen in my entire life.

So I do-- I think we are due for a couple of sell-offs, at least one. I don't know if we get back down and test those lows at this standpoint. I think the Fed-- what has been called a Fed bazooka is more like a Fed MOAB, like a Mother Of All Bombs, right, with what they've come in and done. Jerome Powell was asked-- I'm sorry, Steve Mnuchin was asked point blank, will the Fed buy stocks? And the interesting part about his answer is he said-- he said, it's unlikely. He didn't say no.

So I do think if we have a sell-off, you know, it's not very difficult for the Treasury to lay out a special purpose vehicle and start buying stocks. So this Fed put, I think, has a lot to do with the levels that we're seeing in stocks right now. However, I just don't think we're out of the woods considering the leadership is concentrated to a very few names.

BRIAN SOZZI: Michael, I like that MOAB. I've never heard of that one before. I kind of dig that. Where do you think the sell-off will start? We've seen the rally in big cap tech stocks. Earnings were good there. But do you fade that good news from big cap tech?

MICHAEL LEE: You know, I don't know how-- I'm just struggling to connect any sort of fundamental reality to the level in stock prices right now. And so stocks-- we've mentioned this time and time again. I think stocks are inherently irrational. We are always overbought or oversold. We are never perfectly valued. It's just, how long can this continue?

So last month, I think earnings estimates for the S&P 500 came down 12% or 13%, and the market was up 12% or 13%. So maybe the news isn't quite as bad as the Armageddon-like scenarios. But if we're losing more jobs in one month and five weeks than we lost in the entire financial crisis, I just don't see how you pick up the pieces quickly to where we're back to any sense of normalcy.

And let's just say, for argument's sake, that this disease is not as bad as it's been made out to be. It's nowhere near as bad. How long before the public embraces that? And that's a big if if it's not as bad if the data shows that. So while this kind of overhang hangs out there, what is that going to do to a consumer-driven economy?

So I think we are looking at slower growth until there's proven therapeutics and maybe a vaccine, but there's no vaccine for SARS. So look, I'm always bullish on America, but I am bearish on stocks at the moment.

ALEXIS CHRISTOFOROUS: All right. So then, having said all that, what's your feeling on Disney, a very consumer-driven company, out today saying that this pandemic took a $1.4 billion bite out of earnings. You know, when are these theme parks going to open again? Actually, the theme park in Singapore is going to reopen-- reduced reopen, though, but a reopening nonetheless. What's the long-term outlook as an investor for Disney, in your mind?

MICHAEL LEE: So look, I still think Disney has huge ESPN problems. I think as soon as these theme parks open, you know, families with little children that have been cooped up inside like, say, my own, will be dying to get there, right? So I think these theme parks will recover a lot quicker than people imagined. I think it'll be harder for the old folks that like to spend all year-round down there, but I would expect a quick return to normalcy for those theme parks as soon as they open them up and they loosen the restrictions there.

I think the ESPN problem is a big problem. It'll be interesting to see what happens later this year when sports come back. That could be a saving grace. But until-- until Disney has a long-term solution for the bleeding subscriptions of ESPN, I am not bullish on that stock. That, I think, is a structural disadvantage for what has been their key earnings driver.

ALEXIS CHRISTOFOROUS: All right.