Market Recap: Friday, August 7

The markets closed mixed with the Dow and S&P 500 closing in the green after Friday’s trading session. The markets were primarily driven by a better than expected July Jobs Report, escalating tensions between the U.S. and China, and disappointing news from the stimulus conversations. The Final Round panel discusses the latest.

Video Transcript

SEANA SMITH: Welcome back to "The Final Round" here on Yahoo Finance. I'm Seana Smith. We have the Dow and the S&P here in the final minutes of trading turning positive. All three major averages were in the red for most of the trading day. As it stands right now, Dow and S&P-- although S&P right around the flat line. Dow, at least, holding onto gains of just around 30 points. The NASDAQ, though, still in negative territory, off nearly 1%. Technology, the weakest performer here sector-wise today.

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And that does it for the trading day today. As we shake things out, looks like the Dow and S&P will hold onto gains to close out the trading week. The NASDAQ, though, ending in the red, off just around 9/10%, so off its lows of the day.

A couple of big headlines here driving today's action. What investors are digesting-- that jobs report that we got out this morning. On the jobs front, we've got that better-than-expected number. Nearly 1.8 million jobs added back into the economy in the month of July. Still, though, have only recovered 40% of the jobs lost in the pandemic, so questions just about that piece of the recovery, not seeing the snap back that I think some were expecting to see on The Street.

And then, of course, the escalating tension between China and the US on the heels of President Trump's executive orders last night. And then, of course, the stalled negotiations down in DC. We had some headlines crossing here within the last hour. The Dems were meeting with the White House today, some headlines out of that, Senator Schumer saying that the talks were disappointing. So we'll, of course, bring you the latest from DC on those negotiations.

But taking a look at the sector action today, it's pretty interesting when you take a look at the outperformers. Financials here gaining some momentum. It's similar to the action that we saw a little bit earlier this week, a couple of days ago, but the XLF the big winner today. Also taking a look at the KW Banking Index, that up just around 2% today. In addition to the the financials, we also saw some defensive sectors getting the boost. Utilities and real estate here among the winners.

On the flip side, I mentioned the weakness that we're seeing in the technology sector, along with communications services sector. A big reason for that is that President Trump's executive orders that he signed last night, targetting both WeChat and TikTok. That, of course, is putting pressure on the broader tech sector here in the US today. Apple, for example, off just around 2 and 1/2%, and Microsoft, one of the biggest decliners in the Dow today.

I want to bring in my co-host for the next hour, joined by Myles Udland. Along with Akiko Fujita, we have Jared Blikre and Ines Ferré with us on this Friday afternoon. And Myles a couple of headlines to digest today. The jobs front, the latest with President Trump's executive orders, also the stalled negotiations out of DC. But what do you make of today's market action?

MYLES UDLAND: I think the market action itself all week, and really, for the last couple weeks, has just been fascinating. I think you look at the way that those cyclical plus defensive trades in tandem moved higher today on a day that, ultimately, kind of turned around. And we only had 2 out of the 11 sectors in the S&P finish today's session in the red, and that was communication services and technology. And so ultimately, a fairly positive day for the markets overall.

Now, because of the market cap weighting in some of those big stocks, it looks like a day where not a whole lot happened. The S&P finishes higher by 6 basis points. The Dow is up 17 basis points. You'd sort of think, well, OK. Markets were a little bit lower. But this is now the second time in three days, to cap off this week, that we saw the banks get involved. And we all know how much that trade has been left behind.

Gold took a slight step back today, but finished the week over 2,000. And I know that, you know, we could do a whole seminar on this. We won't. But as Jared Blikre will certainly remind us, the weekly close for any asset-- that certainly impacts the technical setup for that chart, and gold is a very tech-- all commodites, very technically-driven markets. So now a weekly close above 2,000 for gold is certainly significant going forward.

And all of this comes as volatility continues to move lower. The VIX is now towards 22. I think we're going to be talking about the VIX under 20 in not too long of a time. And I think all this really points to what we've been discussing for months, which is before we get to wherever we're headed next, the S&P is going to hit record highs, going to get to a record high, and then we can go from there.

But the market's been saying this for a long time. And I think the day of whatever-- reckoning, celebration, whatever you want to call it-- that day is probably closer than we think.

SEANA SMITH: Yeah, and Jared, just picking up on what Myles was saying, I mean, it's interesting here when we take a look at the action that we saw in the markets this week, because when we started on Monday morning, lots of talk about seasonality, how August is going to kick off this relatively-- or historically, I should say-- slow period for the markets-- August and September.

And we can't make too much out of one week, I know. And I know that you're going to say that to me. But when you take a look at the movements over the week-- the Dow and the S&P up for six days in a row, some weakness in the NASDAQ here, but maybe not as weak of a setup as we thought that we could see here when we started the trading on Monday.

JARED BLIKRE: Yeah. Seana, I just have one thing to say to you. One week a trend does not make. I think you hit the nail on the head there. We're finishing the week up at highs, at least for the Dow and also the S&P 500. I agree with Myles. We have virtually no resistance to get another 35 handles on the S&P so that we can reach record highs.

However, we do have some interesting things going on today, specifically in the interest rate sector. So a lot of talk about what's been fueling the rise in gold and metals, and a lot of that has to do with real yields. And so if we take a look at what's happening with the 10-year, that reversed to the upside 3 basis points today. It was a pretty strong reversal in the real yield, which hit a record of negative 1.1% in the 10-year only yesterday.

And so what's been working and what went differently today? So the trades that I've been working have been the FAANG trades, bonds with yields sinking, gold, silver, and on the strength of the headline numbers today in the payroll report, all of that kind of reversed. So not surprising to see this NASDAQ 100 set up here, where we have the FAANG selling off. Call it profit-taking, except for Facebook. We saw that surge another 1% today to a record high.

But putting it all in context, and we have to see what happens next week, I'm really interested to see if this reversal day has some legs because we are in very oversold conditions for the US dollar. That could reverse to the upside. Very overbought conditions for bonds. That could reverse to the downside with yields going up. So be some interesting things to look out for next week.

SEANA SMITH: Yeah. It certainly will be interesting to see if this trend today at least holds through Monday's trading day. But Akiko, just going back to some of that econ data that we got out this morning, the jobs report, I mean, it was better than expected. Nearly 1.8 million jobs added to the economy. But when you take a step back and stack up where we are today to where we were at the start of this pandemic back in March, we've only recovered about 40% of the jobs that we lost during this pandemic.

So while it is a step in the right direction, I think there is some talk out there that maybe the recovery is slowing a little bit or at least stalling, we should say, at this point, I guess at least for the month of July.

AKIKO FUJITA: Yeah. There's no question the number itself was better than I expected. But given what we've seen since those numbers, I think there's still a lot of concern about where things are headed.

You look at what happened in DC today. Still no resolution on the stimulus bill. And what we're learning, potentially, is that, you know, the additional stimulus that we got, whether it was for the Paycheck Protection Program or whether it was through the help with individuals here, that has helped support the economy in some way. And so if those aren't extended, well, where does that momentum go in terms of the jobs, too?

One other thing to note. And I know I've been talking about this every time we talk about jobs, but I think it's worth noting that, you know, especially with where the virus is gone, and how quickly it's spread, popped up in areas we hadn't seen before, and we've seen the reversal from those reopenings, it's really going to start to heal a lot of businesses. And those calculations are being made as we speak, even though we're several months away from the beginning or several months out from the beginning of the pandemic.

So yes, the jobs number was better than expected today. But there's still a lot of layoffs that are likely to come. And the question is, you know, whether this momentum can at least be maintained, or are we really going to go back now, given just where we are with the virus and the fact that we just don't have a handle on it right now.