Market Recap: Thursday, July 22

Doug Astrop, Managing Director and CIO at Exponential Investment Partners and James Bruderman, 1879 Advisors Vice Chairman, joined Yahoo Finance Live to break down the latest market action.

Video Transcript

SEANA SMITH: Doug, let me start with you. Just in terms of-- I guess, what's your takeaway from the action that we've seen over the last couple of days? Because today we're looking at three days of gains, although we're not too far from the flat line, and all this coming after yet-- after Monday's sell-off.

DOUG ASTROP: Absolutely. Yeah, we kind of feel like there was this sell-off late last week and into Monday that was really kind of unfounded and really presented a good buying opportunity. You know, we think it was probably related to the Delta variant popping up and also the continuing reduction in interest rates.

But when we look out at the landscape, we feel like we're probably halfway through a bull market. And things look really good for equities. Growth is exploding in the US-- you know, GDP growth will probably be 6% to 8% this year, and earnings growth will probably be-- people are talking 60% second quarter and in the 20s for the rest of the year.

So everything looks great for equities. The PEs are a little elevated at 22 times forward earnings. But given the interest rate environment and the growth, that's not an unreasonable multiple. So we're quite bullish on equities. We think these dips should be buying opportunities for most investors. And they shouldn't be too concerned about a little volatility with the trend being upward for the coming years, we think.

- All right, well, let's take a look at where things stand. We only got about 15 seconds here until the bell. You're looking at gains still across the board, although we are well off the highs of the day. The Dow, up 19 points. Biggest gainers in the Dow today-- Salesforce, Microsoft, Microsoft hitting an all-time high today, and Nike. Those three stocks are leading the way here.

In terms of the sector action, health care, technology, consumer discretionary leading the way.

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- All right, we have a closing bell. There is the gavel. One more day in the workweek and another trading session to go. But look at this-- the Dow once again trading higher, up 24 points. S&P 500 will settle up about nine points, and the NASDAQ's going to settle up about 52 points. We heard Seana talking about the leaders in the Dow.

Some of the losers today in the Dow, the financials, traveler's insurance, they were off by almost 3%. JPMorgan Chase, down by 1 and 1/4 percent, and then American Express was off by 1%. Let's go back to our panel and talk about what we're witnessing in these markets because when we talk about being halfway through a bull market, if I could ask you, James, what is going on with the markets, between-- the swings between volatility between I got to get out, I got to get out, and then jumping back in. And yet, we see the 10-year, the yield is still low. So it seems like people are nervous and still looking for protection.

JAMES BRUDERMAN: Yeah, well, the yield is low on the 10-year. And I don't know that that's much of a concern. I think that-- I think that some of what impacted the market volatility last week, in addition to the Delta virus, was a little bit of fedspeak. Obviously, a very high comfort level with where we are in yields right now and with where we are in the economic recovery, obviously wanting to keep the foot on the gas and the punch bowl out.

And I think that's a little bit nervous to some investors who are looking at the inflation numbers and wondering if there's a risk of systemic inflation. And like we've talked about before, we really don't see that risk, you know? Inflate-- you know, prices are high more because of bottlenecks than anything else.

Yeah, wages are rising, but they're very well offset by productivity gains. And wages, really, from what we see aren't rising so much that we think there's a fear of more system inflation. So like Brad, we're very comfortable where we are in the market right now. We think we're about halfway through the economic cycle, and there's no reason why we can't continue to see solid growth, maybe not at 7% like GDP now says this morning, but-- and we'll probably fall back down to a 2%, 3% range, but there's no reason why we can't sustain that for a while.

SEANA SMITH: Doug, what do you think? Do you agree, when you take a look at the 10-year yield, the drop that we've seen recently, that it's not a big concern? Is that in line with what you're thinking?

DOUG ASTROP: Yeah, Seana, we do agree with that. We don't think it's signaling anything nefarious. It's probably just demand from investors in other countries that have negative yields or find the backing of our government to be safer. It's really, we think, a demand issue and not really a signal of anything ominous in the future.

You know, this growth is just beginning. And it should last for many more years to come. And so that's going to sustain a long bull market here for several years at least. So we don't think that momentum is going to be tripped up at all any time soon.

- Doug, we know there's going to be lots of spending, whether they do a deal on infrastructure or reconciliation. There's already so many billions coming into the pipeline. But the earnings that companies are going to be posting as we go forward, have we kind of peaked out there? Are we past the really sweet spot?

DOUG ASTROP: Well, I think-- you know, this may be peak growth rate right around here. But the growth is not going to stop. We're going to continue growing year over year. But yeah, this could be sort of the peak of rate of growth because we're looking at those COVID comps. So the 60% plus growth rate in the second quarter, that's heavily inflated by the nadir at the COVID March earnings were so suppressed.

But this growth, you know, growth continues for a long time. It doesn't just stop on a dime all of a sudden. And so this should flow into the economy for many years to come. And you know, I've seen estimates of GDP growth for next year of 4%, which is higher than average. So I think we've got a number of years here of above average growth. So stocks should do very well in that environment.

SEANA SMITH: We want to get to some breaking news. Intel is out with its earnings report. We're seeing a bit of a pop here in shares after hours. Dan Howley, what can you tell us?

DAN HOWLEY: That's right, Seana. Intel beat on the top and bottom line here, 19.6 billion in revenue versus 17.8 billion expected there. Adjusted EPS, $1.28 versus $1.07 expected, impressing with the data center. They had $6.5 billion versus $5.9 billion expected. And Client Computing, which is when you purchase a computer with an Intel chip at 10.1 billion versus an expected 9.95 billion.

But they also adjusted up their full year of revenue. And for Q3 they're guiding for 19.1 billion in revenue versus what was expected of 18.3 billion, an EPS of $1.10 versus $1.08. They're also looking at, for the data center, 6.4 billion next quarter and 9.68 billion for the Client Computing. So obviously a very good quarter for Intel. The Street was kind of down on it going into this, especially with the chip shortages that are ongoing, Intel trying to become more of a fab than it is now. But good numbers out of the company today.

SEANA SMITH: I'm certainly seeing their stock here move just a little bit higher, up just around 1 and 1/2 percent. Doug, I noticed that you mentioned Intel in the notes that you sent over. When you take a look at those numbers, investors seem to be happy with it. What do you make of these results?

DOUG ASTROP: Those are solid results, and Intel is a great company. You know, it's a slower growing mature business, has a decent yield on it, and is a steady, steady grower, but very modest growth. So, you know, it's not an exciting stock, per se, but it's a solid choice-- very safe, very dependable. And you know, there's companies like Nvidia that are a little bit more exciting and higher growth names.

- James, I want to talk about some other potential-- I don't know if I'd call it growth. I was going to say retail. Of course, Amazon, there's growth. But we got a back-to-school surge that's about to unleash billions of in spending. Would you advise people take a look at some of the old-fashioned, out-of-popularity retailers, or would that be a mistake?

JAMES BRUDERMAN: I'm not convinced that the old-line retailers, that the shopping malls are poised for a hit. Certainly they're going to do better with the reopening trade, but I think too many people have gotten too accustomed to the ease of ordering from Amazon and a lot of the direct-to-consumer channels, that while, you know, while there's opportunity for recovery from their pandemic lows, the sector doesn't really excite us as a long-term, sustainable, and viable or worthwhile investment.

SEANA SMITH: James, what does excite you? Where are you seeing some opportunity right now?

JAMES BRUDERMAN: We love the idea of productivity right now. Look, we've always loved companies that are solid growers, great margins, great leadership-- you know, companies like S&P Global, you know, there's trillions and trillions of dollars added to bank balance sheets. A lot of that-- not balance sheets, but bank deposits.

A lot of that money slowly finding its way into the market. We've got a demographic that are savers. We've got a demographic that's investing more in markets, investing for their retirement. We think S&P Global is a great franchise and doing fantastic. We think some of the-- Lululemon, if you want a retailer that we feel strongly about. We think that as people are going more outside-- your previous guest feels the same way.

As people are getting outside more, Lululemon is-- you know, they were great when we were hanging out at home in our pajamas or in our casual clothes, and then I think they're great for the reopening. We also love Microsoft.

- I got to ask, because you brought up Lululemon, hanging out, a lot of people hanging out but working on Peloton. But now, with the reopening, people going back to gyms, is Peloton yesterday's news?

DOUG ASTROP: We don't think so. We think they're gravitating more towards a subscription ecosystem model. Right now, they're in the very low margin fitness equipment business. But they have 5.4 million subscribers, and we think they can navigate that very similarly to the way Apple has, where they've mined their ecosystem to broaden out into services and selling an array of add-ons to their clients.

And the customers are very passionate about the product and the brand, and they have great consumer loyalty. And now a lot of companies are even underwriting Peloton subscriptions and equipment to encourage their employees to get into better shape and embrace wellness because that helps productivity, of course. And that's really the way society is headed.

And I think Peloton's well-positioned to ride those trends and tremendous growth ahead of the company. The valuation is a little tricky. It's not a cheap stock. And we like to ease into a name like that selling puts, actually. So that's one way you can kind of ease into it and not be as scared of the valuation. But they have a tremendous growth runway ahead of them.