Market Recap: Thursday, May 28

Stocks ended near session lows amid new developments that could raise tensions between the U.S. and China, and a deluge of new economic data, much of which was still consistent with a contraction but at least signaled some stabilization after an initial slump in activity.

Video Transcript

[APPLAUSE]

[BELL RINGING]

[GAVEL BANGING]

SEANA SMITH: Our trading with all three of the major indices closing in the red today-- the Dow off over 100 points. We also have the S&P and NASDAQ in negative territory. The NASDAQ off just around 3/10 of a percent this afternoon on this huge reversal came. After President Trump announced plans for a China news conference on Friday.

Now this announcement came after China approved a national security bill for Hong Kong. Obviously, this is something that investors took note of, the fact that he does plan to hold this conference on Friday with the Dow closing off over 100 points this afternoon. The biggest decliners in the Dow today-- Disney, Goldman, and Chevron. Those are the biggest laggards in the Dow this afternoon.

And we also have the sectorwise, the biggest decliner is energy. That sector off over 2%. Financials, consumer discretionary, and communication services also underperformed today. Investors are also digesting a bunch of data that came out this morning. Jobless claims, another 2.1 million Americans filing for unemployment. GDP was down 5%-- one of the worst reports on record.

Then we also got a reading on US durable goods orders falling sharply for the second month in a row. Markets, though, do not seem to care that much. It was the news about the China news conference, again, that turned the markets lower in the last half hour trading. I want to bring in my cohost, Myles Udland, on this. And Myles, it's interesting that investors-- that it was the China news that really got investors' attention today. Yet, they were able to shrug off that GDP report, the US durable goods report, and then also that jobless claims number.

MYLES UDLAND: Yeah, I think it's kind of an example of old habits dying hard, right? I mean, certainly when you look at what the market traded on in '17, '18, 2019, it was all about US-China trade tensions. And here we are in 2020 in the midst of a global recession, a global pandemic-- as you mentioned, historic GDP declines, historic unemployment. And its China trade that seems, right now at least-- and this may be temporary-- but right now, it seems to be the marginal bid, as it were, kind of in the market.

And just looking at the way that the sectors traded just in that last 30 minutes when we had that news, we saw a huge spike in real estate right into the close, right? Utilities, the best-performing sector of today's session up 3%. So again, risk off there. And so we had the giveback from energy and financials, which isn't totally unexpected.

But, you know, discretionary, consumer discretionary and communication services moving sharply lower towards the end of today's session. And so, again, a pretty quick, even just intraday, intra-hour almost, move away from any kind of risk on positioning in today's market. And again, we'll see what the president announces tomorrow. Who knows how long the market stays super interested on that specific bit of news, but it seems like US-China trade tensions are a story that's, once again, kind of front and center for all investors.

SEANA SMITH: Yeah, I also want to bring in a Yahoo Finance editor-in-chief Andy Serwer. We also have Rick Newman joining the conversation. And Andy, it's interesting just how much weight it seems that the US and China escalating-- potentially the fact that we could see tensions escalate between the two countries, that that's carrying so much weight today when we have the economic data that continues to be grim. Yet, investors still able to shrug all this off.

ANDY SERWER: Yeah, I mean, the last thing we need here, Seana, is self-inflicted wounds. And I would argue we've got a couple of them courtesy of the White House today. The China situation, you mentioned. I'll get back to that in a second.

But let's not forget the president's incipient executive order with regard to social media companies, which beat up big text in a mixed way though. Because actually, the subject of his particular ire, Twitter, is down pretty sharply. And Facebook is down, whereas Google's not down and Apple's not down, to be fair. So he didn't sabotage all the things, but there is definitely some weakness there.

And you know, I say this is self-inflicted because I think it is a bit of a sideshow and a circus and I think it's a distraction that the president's engaging in here. And I think it actually speaks to the election. Same kind of stuff with China, I think. I mean, it's not a great thing for the world, perhaps, perhaps that the Chinese are curbing democracy in Hong Kong. OK, I'll say it's a bad thing.

But you know, you get back into the who are we to tell the Chinese what to do? Oh, we should stand up for democracy everywhere. OK, fair enough. But we don't always do that. You know, and President Trump in the Middle East is all about, we should let them decide, right? But when it comes to Hong Kong, oh, that's our business.

Well, the reason he's really doing that, to my mind, is not because he's so interested in democracy. He's interested in having a distraction and a piñata, which is to say, China. Look at the Chinese. Look how bad they are. Look, look, look. Look at the tech companies. Look how bad they are. Oh, meanwhile, over 100,000 people have died. I'll get off my soapbox now.

RICK NEWMAN: I'll make a prediction, Andy. I think markets will be reassured after we hear what Trump has to say tomorrow. I think he's going to rhetorically bash China all the way up until November 3. But I don't think he's going to do anything meaningful, whether it would be tariffs or some other kind of sanctions, because he can't. He can't afford it.

He could afford the tariffs when the economy was basically going strong and the market was doing fine, but we know how much Trump cares about the stock market. We know how much he cares about the economy, and he needs the economy. So I just don't think there's any way he can do anything that's going to spook markets more than they already are spooked.

I think you're 100% right. He needs China as a boogeyman to distract voters from what's going on here in the United States, and he's going to continue to bash China all the way to November and probably later. But I don't think there's-- I don't think much is going to materialize in the way of meaningful action.

SEANA SMITH: Yeah, and Rick, going off of that, we've seen this in this playbook before. He's always looking for almost a scapegoat, if you want to call that, somewhere just to defer everyone's attention to. And it seems like he is using China here, at least today or the past couple of days, in order to do this.

Myles, I want to bring the conversation and just kind of look at some of the earnings that we have gotten recently. One was on Toll Brothers. And when you talk about the fact that maybe Americans are feeling a little bit better about where they stand financially. Maybe they are able to look past the fact that over 40 million Americans remain out of work. Toll Brothers was out with results. And the fact that they beat on earnings, they also disclosed trends that suggest resilience in the housing market. That could actually spell some positive momentum here going into the second half of the year.

MYLES UDLAND: Well, I think, as Mark Zandi outlined for us yesterday, housing has held up because 40 million people have lost their job, yes. But for people who haven't lost their job, I think there's a lot of questioning about, you know, well, OK. So maybe things are going to be OK.

I mean, I think the weird thing about what's happened in the housing market is you still have a lack of supply that was pressuring the market five years ago. I mean, I was writing stories in 2015 about how at the lower end of the housing market, there wasn't enough supply for maturing Millennials like ourselves who want to get into starter homes but are getting priced out of certain neighborhoods. That hasn't changed at all.

Inventory has come down, and so I think there has been such a quick-- you know, maybe you call it a buy the dip mentality in the housing market. It certainly is more encouraging when you look at any kind of a V or a swoosh, like a U shape, right? Some of these better-looking shapes than a W or an M for what the recovery looks like. So housing is encouraging.

But I think, as with all economic data points, it's very early. And I think that believing that housing is going to just necessarily be fine through this recovery? Probably too early to say that. But very encouraging results when you look at the weekly mortgage application numbers, when you look at new home sales, pending home sales.

You know, all those things are trending in the right direction. So certainly Toll adds to that thesis. But as with all of these even initial bounces, how they play out in the months ahead, I think, is going to be significantly challenged, almost regardless of how strong their environment ends up being.

SEANA SMITH: Yeah, Myles, to that point, a lot of this also rides on whether or not we could potentially have a second wave and what economic impact that could have, not only on jobs but really just in the broader picture. And how housing fits into all that remains to be seen.