Market Recap: Thursday, April 15

Stocks jumped Thursday to reach record levels as traders eyed a much stronger than expected print on consumer spending and a sharp improvement in the number of new jobless claims. The Dow gained more than 200 points, or about 0.7%, to reach a record intraday high and break above the 34,000 level. The S&P 500 and Nasdaq also rose to reverse declines from a day earlier, with tech stocks leading the Nasdaq higher by more than 1%. Shares of Coinbase, the largest cryptocurrency exchange in the U.S., jumped after closing below its opening trade price in a volatile first day on the public markets. BMO Global Asset Management senior investment strategist Jon Adams and Director of Portfolio Strategy at Verdence Capital Advisors Megan Horneman joined Yahoo Finance Live to discuss.

Video Transcript

SEANA SMITH: At two and a half minutes until the closing bell, we want to bring in our panel. We have Jon Adams. He is at BMO as a Global Asset Management Senior Investment Strategist. We're also joined by Megan Horneman, Director of Portfolio Strategy at Verdence Capital Advisors. Let's first, though, go over to Jared Blikre with all three of the major averages in the green. The Dow about 34,000. Jared, what's on your radar here into the close?

JARED BILKRE: Bonds and tech. So let's take a look at the WiFi interactive because we have the NASDAQ pushing to new session highs as we speak, up 1-1/4% for the day. And I'm just going to review the 10-year T-note yields here real quickly because that is down 11 points, 11 basis points. There is a huge, huge short squeeze in bonds going out-- going on right now.

That's kind of fueling the COVID trade from last year, where we're seeing a lot of the big mega caps outperforming. And indeed, that is the case today with Apple up 1.8%. So is Alphabet, Facebook, and Microsoft, each up 1-1/2%, and Nvidia, viewing the chip sector higher, up 5%. So is AMD, by the way. Checking in on the Dow, it is the laggard of the day. But still we have a number of outperformers. UnitedHealth, that's up nearly 4% after a beating on earnings this morning.

And in that regard, we also have a number of earnings reports from the banks, not only today, but tomorrow. Not doing too well today, though. Bank of America, that is down 3%. Truest, that's down 4%. But some of the other stocks that announced yesterday are in the green. JP Morgan up 4/10 of a percent, and Goldman Sachs up 7/10 of a percent.

All right, pharmaceuticals have been one of the leading sectors for today, although real estate is really in the lead right now. But let's just check out some of the news. We got J&J earnings coming up in the next week. I believe it's Monday or Tuesday morning. We have Abbott Labs up 2%. Thermo Scientific, that's up 3% on some potential merger news. And Regeneron, that's up 3% as well.

I'd be remiss if I didn't look in on some of these game stocks-- excuse me-- meme stocks, where we have GameStop down 6%. We have Virgin Galactic down 13%. That's after Richard Branson sold about $150 million worth of shares. And AMC up 6% with the CEO giving some guidance on why they are doubling their authorized shares. But they're not going to issue too many in the near future.

All right, as we settle into the final seconds before the closing bell, just get a quick check on the sector action for today. I said real estate was in the lead. Tech, health care, and communication services, and materials rounding out the outperformers. Everything up more than 1%. There you go.

ADAM SHAPIRO: And we got a closing bell. As you just heard Jared say, the sectors in the lead. But let's talk about some who lost. Energy was off about 1% today. Financials they were down about a quarter of a percent. And it looks as if we're going to settle.

Oh, look at that, the Dow up 305 points. S&P 500 is going to be up about 45 points, more than 1%. The NASDAQ is going to be up more than 1%, up 180 points. As they used to say in the 1970s commercial, Kawasaki, let the good times roll, let's let the good times roll and go to our guests to figure out what is really going on with these markets.

Megan, I'm going to start with you. And the reason I referenced that old ad from the 1970s, which I remember, I'm not sure you do, but too much of a good thing here. The 1970s, we had that crazy inflation. And you even bring up in the points that you raised with us that margins could be squeezed tight because of input costs. Are investors driving these markets up regardless of what's going to happen with inflation?

MEGAN HORNEMAN: I think investors are driving the markets up because of the optimism that we're seeing in the economic data. I mean, there's been a pretty clear correlation with that today. The economic data today we saw was just really highlighting how strong the reopening is and really the big pent-up demand we have from the consumers.

And look where they were spending money, on clothing, on recreation, going out to restaurants. These retail sales numbers really highlight this pent-up demand we have consumers-- from consumers. So going forward, equity markets are going to reflect this positive economic environment as well as the accommodative fiscal and monetary environment as well.

SEANA SMITH: John, do you agree? Do you think we're still going to continue on this momentum to the upside?

JON ADAMS: Yeah, for us it's really fiscal economy and earnings. And we already heard about the economic data coming out today with retail sales and claims better than expected, but economic surprises really continue. There's strong momentum in the US. We all know that the fiscal stimulus is coming through in a very large way. And we have the reopening going on with the vaccine rollout happening in a very positive way.

And if you add to that the earnings season that we're currently in the midst of, it's really going to be a blowout earnings season, perhaps the best in 10 years, off to a very good start there from that perspective. So you could argue a lot is priced into equities right now. But for us, we're still very constructive on the outlook moving forward for the rest of the year based on that fiscal economy and earnings momentum.

- Megan, how do the managers at BMO deal with clients who may be, like me, droopy dogs who worry too much of a good thing. How do you advise people in a market as strong as this, as expensive as this, how do you advise them on the next step?

MEGAN HORNEMAN: So the one thing that we advise our clients here is patience. And then also, there's nothing wrong, even with interest rates as low as they are, is holding some cash. Cash is there for opportunity. It's also there to hedge in the event that the economic data disappoints or the market turns around, which is likely to see-- we will likely see volatility this year given the fact that the equity markets are near record highs.

But you want to have that cash. You want to have that cash to hedge your portfolios. You also want to have that cash to put to work. So there's nothing wrong with having a healthy cash position.

SEANA SMITH: Jon, we've run some concerning headlines in regards to COVID this week. Yet, the markets seem to be shrugging that off. Is that because it's priced in? And I guess, how do you view this as potentially, or does it potentially change the reopening timeline?

JON ADAMS: Well, I think the US vaccine experience relative to the rest of the world has been positive. We're obviously looking at a pause temporarily with the Johnson & Johnson vaccine, but by all measures the rollout has been very positive in the US. Yes, there is a possibility that variants will pick up, as has happened in Michigan, for example.

That could be a risk, as is happening in a lot of other countries around the world. But I think by and large, the rollout's been positive. It could be a potential risk to upsetting where equities are right now. But we think it's more likely that a corporate tax increase or an inflation scare are more likely risks that could upset the market at this point.

ADAM SHAPIRO: Jon, I want to continue with my 1970s theme. And I promise no bellbottom jeans. But for instance, small caps, the bottom was a while ago. Isn't it a little bit late? Because you're advising increased equity overweight in small cap stocks, but haven't you missed that boat already?

JON ADAMS: You know, we've been overweight small caps for a few months now in portfolios. We're also overweight large caps. So we have an equal overweight to large cap and a small cap. But we think that with reflation, with the vaccine rollout, with strong economic momentum, small cap should do well in that scenario.

I think a risk for large multinationals could be this corporate tax increase, tax on foreign income, in particular. It could be a bit more of a headwind for large cap stocks vis-a-vis small caps. So, yes, they have run a long way. But we think that really there's a lot of momentum behind the economy heading into the rest of the year.

SEANA SMITH: And Megan, we were talking about this last hour, but I want to get your perspective on this activity that we're seeing in the bond market today. We had the 10-year yield pulling back, yet we had this much better than expected retail sales number. The jobless claims number also coming in ahead of expectations. Are you surprised to see this reaction that we saw today in the 10-year?

MEGAN HORNEMAN: I think the reaction is really driven by some exogenous factors, not necessarily any fundamental change in the view for the economy or the view for fiscal or monetary policy. I just think that there's been some factors today, particularly, that drove interest rates, whether it was some surprise buying from Japan, so international buying.

There is some geopolitical risks right now. We have some tensions heating up again between the US and Russia. And then there's been some bank hedging taking place today. So I don't think that we should read too much into one day in the bond market. I think you can clearly see what it can do to the equity market because you're seeing that sector leadership shift.

You're seeing energy and financials lag, while you're seeing technology, for example, lead. But I don't think this is sustainable. I do think that over the course of the next 12-18 months that interest rates will continue to rise from here.

SEANA SMITH: Megan Horneman of Verdence Capital Advisors, always great to speak with you. And of course, thank you to Jon Adams, BMO Global Asset Management Senior Investment Strategist.