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Market Recap: Thursday, April 29

Stocks pared some gains after hitting record levels as investors considered a batch of stronger-than-expected earnings results from major companies and a sweeping set of proposals from President Joe Biden aimed at revamping the country's infrastructure and supporting families, children and students. JP Morgan Asset Management Global Market Strategist Jack Manley and Comerica Asset Management CIO John Lynch joined Yahoo Finance Live to break down the details.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: The S&P hitting an intraday record with gains across the board right now. We want to bring in Jack Manley. He's JP Morgan Asset Management Global Market Strategist. We're also joined by John Lynch, Comerica's Asset Management Chief Investment Officer. Let's first, though, get to Jared Blikre for a closer look at some of these movers into the close. Jared.

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JARED BLIKRE: [AUDIO OUT] in the green. Russell 2000 bucking the trend in the red. But let's check out the YFI interactive here for some charts. Dow now up about 2/3 of a percent. That's greater than 230 points. You see right there, S&P 500 a little bit less. And the NASDAQ just barely positive.

But I'll tell you what, communication services is a leader today, and that's thanks to Facebook. Alphabet also in this sector, but Facebook up 7 and 1/2%, just knocking it out of the park on earnings. We've been talking about Apple all day. That's down 2/10 of a percent after gapping up nicely.

And then we got Amazon. That's up a quarter percent, and they're going to be reporting earnings right after the bell. We're going to be bringing that to you. And let me just turn on our earnings heat map here. These are all the issues that are going to be coming to you after the bell.

I'm not going to cover all of them, but look at that. That's a 400-pound gorilla right there. If we sort on an equal weighted basis, we're also going to see that we're going to get earnings from NIO, US Steel. Remember, US Steel, they used to kick off earnings season quite a few years ago.

We also have Vertex Pharmaceuticals, Skyworks Solutions, Western Digital. And this TACO ticker up here, Del Taco Restaurants up 4% today. So nice to see that. Anyway, we got Twitter earnings, and we're going to be bringing those to light after the bell as well.

Well, it was a mixed day in travel. We saw some of the airlines up nicely, but also we got to take a look at the cruise lines, because they started out the day in positive territory. That's after Royal Caribbean announced they were finally, finally getting some guidance from the CDC about reopening. There was a lot of frustration on that front.

But you can see, they sunk into the red after that. Maybe investors just realizing those earnings were absolutely terrible and while they tried to provide an outlook, really nothing's certain here until we get at least a couple quarters into the actual reopening. And everybody's looking forward to July 1 in New York City, because that's when all those regulations go by the wayside.

Well, I said communication services was in the lead before, still is. That's up almost 3%. But then we got financials, staples, energy, and utilities, and real estate, and industrials, those are all outperforming. Financials number two here.

Let's take a look at those bank stocks, haven't really focused on them since they largely completed their earnings about a week ago. But JP Morgan up nearly 2%. Bank of America up more than that, Wells Fargo too. And Goldman Sachs up 1 and 1/2%.

Well, also want to take a look inside the pharmaceutical space. We got Merck earnings earlier today, and that was kind of a sore spot. Same thing with Thermo Scientific here. You can see each of those stocks at the bottom are off about 4% or 5%.

And then we also got Bristol-Myers Squibb. And true to form, I guess, that's off 4% to 5% as well. But J&J up 1%, no incremental news on that stock. But I am hearing that there are spies all over the world that are just waiting to find people. Well, we got the earnings-- we got the closing bell here. It looks like it's a little bit late, but nevertheless, there it is.

ADAM SHAPIRO: Someone goofed, it looks like. OK, we're not going to address that. Let's see where things are going to settle. The Dow is going to be up 242 points. The S&P 500 up about 28 points. NASDAQ up about 31 points.

Jared was talking about the sectors and communication sector, that was up almost 3% today, 2 and 3/4 of a percent. Other gainers consumer staples, energy, financials, all up over 1%. The one big loser, and it's not really that big a drop, was health care down about half a percent.

Let's go to our guests and get their take on what's happening with these markets, even though the-- that closing bell, they didn't ring it. I mean, isn't that supposed to be bad luck? We got Jack Manley and John Lynch.

Let me start with you, Jack. I am curious, we've had a lot of our previous guests set a target for year-end on the S&P of 4,200. We're already there. The other guests have said time for a correction. What do you think?

JACK MANLEY: I don't know if I would say that it's time for a correction just yet. I think the economic backdrop is still very encouraging. I think there's a lot of really strong tailwinds behind this recovery, whether it's the vaccination story, the fiscal stimulus story, very clearly an earnings season that's done very well.

But it wouldn't necessarily surprise me if markets move more or less sideways moving forward. I think what we're going to see, as we've seen throughout the course of this year, is a continued story of winners versus losers. So we still have to be careful about security selection, about sector selection moving forward. And to me, I think a lot of that has to do with this continued rotation into some of the more cyclical parts of the market.

SEANA SMITH: John, what do you think? Do you think that there's enough momentum here and enough reason for the market to keep trending higher?

JOHN LYNCH: Well, the last couple of days, Seana, have been helpful, right. We have a backdrop of a supportive Fed. We have still really good earnings. And we got good indication on GDP this morning. So if you think about rates, profits, and-- and demand, it's still there.

But Jack makes a good point when you think about can the market move sideways. I mean, we've had a decided move cyclically from the election up until about a month ago, and we're kind of-- even though we're at new record levels, the market is struggling to get leadership, whether it be growth or value, large or small, cyclicals or defensive. And it would appear defensives, growth, and large have taken-- have taken control most recently, which is uncharacteristic of what we've seen since the election.

ADAM SHAPIRO: John, the-- the yield on the 10-year went up a little over 1 and 1/4% today. And we had other guests talk about this will come in waves, this trend up. Especially with the spending Washington is predicting, liquidity is going to get tighter. So when you talk about us going sideways, if that's in play as we're going sideways, won't that put downward pressure on investments I hold today come the fall?

JOHN LYNCH: Well, that's just it. That's why, you know, these markets can be so confusing, right. Twos have been moving higher literally since Jerome Powell was on "60 Minutes" a couple of weeks ago, right. So it's fascinating to me how-- what rates have done in the face of extraordinary data, whether we look at home prices, retail sales, the blowout employment numbers.

So I just think, you know, to some degree, you had the Japanese start buying again. You had some short covering going on. More ominously, there might be concerns about variants of the virus. So I do think you're going to see gradually higher rates, but we just had that surge in rates in the first quarter.

And I think investors, if you look at the 10-year now, call it mid-1.60s, we're about halfway between the low we achieved a couple of weeks ago and the high we achieved at the end of-- at the end of the first quarter. So I suspect what's going to happen is you'll have bidders internationally in that 1.75% to 2% range, and certainly economic data is not supportive of anything low-- of the low end of this range.

SEANA SMITH: We have some breaking news. We have Amazon earnings coming out. Jared Blikre has that for us. Jared.

JARED BLIKRE: Yeah, another mega-cap earnings announcement, and they knocked it out of the park as well. So let's go through the numbers for the quarter. Now we're seeing net sales for Amazon, those came in at $108.5 billion, much higher than the estimate by about $3 billion, and the estimate of $104 and 1/2 billion.

AWS, that's their cloud computing division, net sales of $13 and 1/2 billion, slightly topping estimates of $13.09 billion. It's their online stores, those net sales really killed it, $52.9 billion in revenue. The estimate was for lower, $50.6 billion. And then EPS, that just knocked it out of the park, $15.79 per share, 50% higher, about, than the estimate of $9.69.

And operating income also a big beat, $8.87 billion. Estimate was for $6 billion, so they beat that by about a third. And then Amazon Web Services net sales were up 32%. Estimate was for 22 and 1/2%. Now when we get into their guidance, it's a little bit soft right here.

Second quarter net sales $110 to $116 billion. That is higher than the range of $108.3 billion that the Street was expecting. But it's operating income for the second quarter that may prove to be a stumbling point if investors start focusing on this, $4 and 1/2 to $8 billion, and that's-- the estimate was for about $7 billion, so not quite really in the midpoint of that range. Nevertheless, a really great report.

And if we can just go to-- yeah, we have the YFI interactive there. I want to pull up a one-year chart of Amazon. Now, this stock peaked out early on in the pandemic recovery last August, September. But we are probably going to surpass those levels if not tonight, then on the open tomorrow. So we might be seeing record for Amazon, finally.

SEANA SMITH: All right, thanks, Jared. We want to continue this conversation. Jack, let me toss it over to you first, because I know you mentioned earlier that cyclical value rotation. But when you take a look at these numbers that we're getting from a lot of these growth stocks, Amazon, like Jared was just saying, Apple and Facebook yesterday, any reason to still be bullish on some of these names?

JACK MANLEY: I think so. I mean, there is no reason to think that-- that the longer-term story behind technology and the tech adjacent names is going to go away any time soon. I think that the earnings that we've gotten today are very clearly indicative of continued strength in these sectors. And I don't think anybody can make a good faith argument that 10 years from now technology or e-commerce will be less important in our daily lives than it is at the moment.

I think it's only going to continue accelerating further. So I am continue to-- I do continue to be bullish on these stocks. But what I'm also looking for is some of those other opportunities that exist out there that may be lurking beneath the surface. And that, to me, is still some of those cyclical stories, because while the reopening has gone very well so far, we are not fully reopened just yet. There is more room to run on that front.

ADAM SHAPIRO: John, when I heard the AWS numbers, I'm looking at their report right now, $54 billion annual sales, the run rate is the business competing gets the world's largest technology companies, that's a direct stab at what we heard from Microsoft earlier this week, which had, I think it was almost 17 point-- I forget the actual point number, but $17 billion in their cloud-- general cloud sales. All of this-- I realize Amazon is retail, but you got to look at the cloud component for these companies. When you're choosing investment companies, is that now a key component?

JOHN LYNCH: Absolutely. It's-- it's really transitioned, right, from-- you know, to the cloud and the software and the services aspect of big tech. It's no longer a hardware game, certainly. And to Jack's point, if you think about big tech, investors clearly had a lot of confidence in big tech, but now big tech is delivering, certainly, on a profitability standpoint.

But I think that-- the more important point for the market is to still get that broadening of participation. We still are fine with big tech delivering good earnings, but we don't want to see-- if we want to see more sustainability and really confirmation that we are still mid-cycle, we need to see the breadth of participation. We need to see S&P 500 equal weighted outperform the market cap weighted, for example, that had been doing that since Election Day. But again, over the past two or three weeks, we've seen that pause. So the breadth has been good, but we need a broadening of participation beyond big tech, I think, to really confirm mid-cycle and continued gains.

SEANA SMITH: Well, earnings results keep coming in. Now we have Twitter out, although it looks like shares under pressure here after hours. Jared, what can you tell us?

JARED BLIKRE: [AUDIO OUT]

ADAM SHAPIRO: Jared, are you muted?

JARED BLIKRE: Sorry about that, guys. We have revenue for the first quarter of Twitter coming in at $1.04 billion. That's up 28% year-over-year, but the estimate was for just lower at $1.03 billion. And I think all the numbers in this report are looking pretty good. They just slightly beat expectations, but it's been something of an expectations creep that has been leaking into the market overall.

Adjusted EPS $0.16, estimate was for $0.02 lower at $0.14. Adjusted EBITDA coming in at $294.1 million. That's up 39% and is a pretty big beat over the estimate of $276.1 million. The outlook for the current quarter, second quarter, not so great there.

And if I can just get to these numbers, it looks like the low point-- this is from the earnings report, the low point in monthly, daily active user growth rate likely to be in the second quarter, so troughing right now. And that growth rate may be low double digits for the rest of the year, so maybe not the best outlook. That could be what investors are focusing on.

Just a couple of other numbers here. I want to get to the key metrics for the current quarter. Average monetizable daily active users 199 million. Average international monetizable daily active users 162 million. Just taking a look at the one-year chart that we have up there, you can see it's been-- Twitter has been consolidating in this pennant formation, looking for a catalyst. And we probably found it right now, probably going to break to the downside in early trading after the bell tomorrow. Guys.

SEANA SMITH: All right, Jared Blikre, thanks so much. And of course, our thanks to Jack Manley, JP Morgan Asset Management Global Market Strategist, and John Lynch, Comerica's Asset Management Chief Investment Officer.