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Market Recap: Tuesday, February 9

Read more at finance.yahoo.com

Stocks ended mixed on Tuesday, with the S&P 500 and Dow ending a six-session winning streak while the Nasdaq powered to a record high. The S&P 500 ticked just below the flat line, and the Dow ended a choppy session lower. The Nasdaq eked out record intraday and closing highs, closing above 14,000 for the first time ever. The small-cap Russell 2000 extended its winning streak to seven consecutive sessions and also closed at a record level. Invesco Chief Global Market Strategist Kristina Hooper and Portfolio Wealth Advisors Lee Munson joined Yahoo Finance Live to discuss.

Video Transcript

SEANA SMITH: Just around three minutes until the closing bell. We want to bring in Kristina Hooper. She’s Invesco’s chief global market strategist. We’re also joined by Lee Munson, Portfolio Wealth Advisors president and chief investment officer. Great to have you both on the program.

Kristina, let me start with you. In terms of the action that we’re seeing in the market today, we have the Dow, the NASDAQ, S&P, also the Russell 2000 all hitting record intraday highs. What do you think of the market at these levels?

KRISTINA HOOPER: Well, it’s clear that there’s a lot of optimism out there. But I would argue that there are good reasons to be optimistic. Keep in mind that just six or eight months ago, there was an expectation that it could take much longer, if at all, to be able to develop a vaccine that protects against COVID-19.

The track record with coronaviruses had been really poor. So the fact that we have effective vaccines, extremely effective vaccines, that are now being distributed means that there is a light at the end of this tunnel. And it is a bright light, hence a lot of optimism, especially given that we have a very accommodative Fed, and we also have a decent amount of fiscal stimulus and potentially more coming.

ADAM SHAPIRO: All right, Lee, I know you want to get in on this to talk about the reflation trade, but hold on one second because we want to get to the closing bell. Jared Blikre is going to take us there. Jared.

JARED BLIKRE: All right, we got some light shining on the Russell 2000. That is up half a percent here. The NASDAQ just barely holding on to some gains, and the Dow and S&P 500, those have sunk into the red. Looking into the NASDAQ 100, we can see a mixed picture with respect to the mega caps mainly in the red. Apple’s off 7/10 of a percent. Amazon and Alphabet each down a little bit less than that. And Tesla, it’s down 1.6%, but Facebook up 1%.

Now the big story of the day yesterday, and maybe today, of course, was Bitcoin and Tesla. Well, Bitcoin is up another double digit– return here at 10%. So if you take a look at what it’s done over the last five days, up 27%, 28% right there. Ether also at a record high, up 4 and 1/2%.

Now, looking at the sector action, we do see real estate, communication services, industrials, healthcare, utilities, financials all outperforming. Those happen to be the sectors in the green. Energy taking a breather here. It’s down 1%. But you look at those five-day gains, still up 9 and 1/2%, as we see crude oil WTI, and Brent at 13-month highs. Brent still holding right around $60 per barrel.

So let’s take a look at the travel sector here, also giving up some gains. Now we can see the airlines, which are maybe going to receive $14, $15 billion from the next stimulus package, Southwest is down 2%. Delta Airlines is down about 1.7%. United’s down just over 2%. And just taking a look at some of the other movers of the day– well, I guess we’re going to put it on hold here because we have the closing bell on Wall Street.

[BELL]

ADAM SHAPIRO: That is correct, Jared Blikre. And as they say on the airlines, fasten your seat belts, a little bit of a bumpy ride, but not drastic with the turbulence. OK, here’s where we’re going to settle. It looks like in the markets today the S&P 500 is going to settle down about four points. We’re going to have the Dow off about 10 points. The NASDAQ, however, is going to settle up about 20 points.

And as Jared was talking about in regards to the sectors, energy was down today. It has been gaining for the past couple of weeks, but it was off by about 1 and 1/2%. The big gainers today– and it’s not really the right adjective to say big. But you had communication services up a quarter of a percent and real estate up about half a percent. One final thing, the Dow components, McDonald’s. McDonald’s was up 2% today.

Let’s get back to our panel to discuss the closing bell and where markets are headed. Lee, I said that you’re all about the reflation trade. But you also have advice to investors, which is simply make your money in the sitting right now, not the trading. As they used to say on the old reruns, ‘splain that one, please.

LEE MUNSON: Hey, ever since September 1st, the reflation trade has been working, whether it’s small value or the Russell 2000, it’s done better than a lot of these large big cap growth names. And that’s just– it’s the rotation that everybody said was going to be short-lived. And it hasn’t been short-lived because you’re going to still have $2 trillion stimulus.

I have positioned the portfolios where the majority of the stock exposure has that economic sensitive stuff. It’s your value names. It’s your materials, commodities. I mean, we’re talking about WTI at 60 a barrel at this point. We’re talking about Lyft being worth $2 billion more than it was pre-COVID. It’s– and they’re down 40% what the revenues are.

So I think that now is the time to get it settled because we’re going into February. We’re in February. This is historically a weak time, right? So you want to get away from the GameStop. You want to get away from and think, over the next year, do you really think that this pent-up demand is going to be a flash in the pan, like the Wall Street consensus is right now? Or do you think that this reflation that’s pent-up demand is going to flow into 2022 with continued low rates?

That’s what I see it as, because we have interest rates subsidized. We’ve never had lower debt load, debt versus cash flow, in corporate America or in households since before I was born. And so I think there’s a great story here. There’s a great growth story in what is economically sensitive. I mean, just look at lumber and corn and oil. That’s where you want to be and those things that are doing well. And I think you trade less. I think you’re going to make more.

SEANA SMITH: [INAUDIBLE] what’s doing while we have the NASDAQ and Russell 2000 today closing at new records. Kristina, let me flip it over to you. We know what Lee likes. What are you favoring in this type of environment, as we’ve seen such a run-up in so many of these sectors?

KRISTINA HOOPER: Well, I would recommend a barbell approach. Certainly, I would favor cyclicals. So I think Lee is absolutely right on that. We are going to see a very strong rebound. And it’s going to be sustained. It’s not going to be a flash in the pan because we have so much pent-up demand and because household savings is just higher because as a result of the pandemic.

So I would certainly favor cyclicals– in particular, consumer discretionary. I think that’s really where we’re going to see some of the greatest beneficiaries of this recovery. Because I do think in a very different recovery than what we saw in the global financial crisis, that was a jobless recovery. I think this will be a jobfull recovery.

But I would also favor technology in this environment. I know that’s counterintuitive. It is not– a very small portion of tech is really cyclical. But I do believe tech has staying power. A lot of the trends that emerged during the pandemic are very, very sustainable. I don’t think we’re going to go back in terms of e-commerce sales, for example. So I think tech is a place to be, and I think it will benefit from higher capex spending this year.

ADAM SHAPIRO: Lee, I want to get back to, in this discussion, about what’s going to happen with these markets, everyone always talks about inflation, inflation. And you’ve pointed out that where we talk about with monetary situations and what’s happening at the banks, people get somewhat muddled. Explain that to us.

LEE MUNSON: OK, 12 years ago, all that money that was printed just went in to increase the capital reserves of banks. It didn’t go out into the system. And so we had five or six years where economists just couldn’t figure out where inflation was because all the cash was hiding in the banks, right? Because we almost fell off the Earth. This time around, all the money is going into our pockets, as evidenced by the Robinhood trading phenomenon. And it’s going out and it’s starting to move around. It’s sloshing around. That’s what’s causing inflation.

But then ironically, consensus Wall Street is short-lived inflation. Consensus Wall Street is, no, it’s going to be like 12 years ago where we’re not going to get this movement or velocity and money. But we have a tremendous amount of liquidity when you look at M2 money supply, and you look at how much has flowed into mutual funds and ETFs versus what we need to kind of run the economy. And so I think it’s very important that people understand, this is just absolutely the opposite of what happened 12 years ago because of money sloshing around.

Also, did we see copper and oil and lumber and corn prices jump like they did 12 years ago at this stage? No. So I think that you look at prices to inform what the hell is going on. And what they’re saying is, this isn’t different. This is actual inflation. And if people understand that, then we don’t have to have silly conversations of, well, why is a small cap value up? It’s supposed to be dead for the past 10 years. It’s like, it’s dead until we start heating it up.

And the Fed is clear, they’re going to heat this thing up until we get well over 2% core inflation. They don’t care about lumber. They don’t care about copper. They care about this very narrow gauge of inflation that’s sitting at 1.5, and they’re going to have to heat, heat, heat and cook that thing until we can see it get close to 3. And they’re going to let it happen.

SEANA SMITH: Kristina, looking at what’s going on in the bond markets here, yields under a bit of pressure today, but we’ve seen this massive run-up. What do you think, from your perspective, what does this mean for the equity markets?

KRISTINA HOOPER: So I don’t think it means a lot for the equity markets. What we’ve seen in terms of the rise in the 10-year yield is very much what we should expect, given anticipation of stronger economic growth. Yields are still low relative to history and I think create an environment in which risk assets look very, very attractive. So I expect equities to continue to perform well, given the kind of monetary policy environment we’re in and certainly given the kind of economic recovery we expect.

ADAM SHAPIRO: Can I just follow up very quickly with you? Don’t we get these kind of– you know what? I got to hold on. We have Lyft earnings are out, and we’re going to Ines Ferre for the latest on this. Ines.

INES FERRE: Yeah, that’s right, Adam. Taking a look at the top line revenue for Lyft coming in at $570 million. That was a beat. Revenue expectations were for $561 million. Revenue decreased 44% year over year. But it does show a 14% improvement from the previous quarter. Also the company said it saw recovery trends from Q3 to Q4 over the last year, but that latter part of Q4 was negatively affected by a surge of COVID-19 cases.

Taking a look at adjusted EBITDA loss, that came in at $150 million. That’s narrower than what the Street had been expecting. Also an improvement from the previous quarter where losses came in north of $230 million. Brian Roberts, CFO for Lyft, in written commentary, said, in the fourth quarter, the company exceeded its target cost reduction by 20%. Remember, they announced layoffs last year.

Also talking about recovery trends for 2021, while the first quarter of 2021 continues to be uncertain because of COVID headwinds, the company should experience a growth inflection beginning in the second quarter and strengthening in the second half of the year. Adam.

SEANA SMITH: All right, Ines, we’ll take it from here. We’re going to talk more about Lyft earnings in just a minute. But first, we want to get over to Jared Blikre, who has Twitter’s earnings for us. Jared.

JARED BLIKRE: That’s right. We got the stock down about 2% now in after hours trading. And that’s because of a miss on a key metric here. Now on both the top and bottom lines, those were beats. But average monetizeable daily average users, that came in at 192 million. Estimate was for higher at 193.5 million.

And also their guidance was a little bit light. They’re saying first quarter revenue of $940 million to $1.04 billion– excuse me. You take the midpoint of that, about $971 million, that is lower than the Street’s estimate of $983.4 million. So just those top line numbers of revenue coming in at $1.29 billion. That is up 28% year over year. Estimate was for lower at $1.19 billion.

Also looking like their Capex, they’re increasing their capital expenditures to $900 million to $950 million in 2021. That is higher than the Street estimated, investing for future growth. But it could limit some of their profitability and margins this year.

So really, it’s that key headline number here. Fourth quarter average monetizeable daily average users– wow, that’s a mouthful– 192 million. That was lower than the Street expected, and also that guidance being a little bit light, probably explaining why there has been a little bit of a tepid reception here, although we can see their shares climbing into the green right now.

One final note– they do have an investor day on February 25th. And they might be holding a little bit back for that particular day. So we’ll have to see what happens in the coming weeks. But paying attention to this into the open tomorrow. Guys.

ADAM SHAPIRO: All right, I want to bring Lee and Kristina back into this. I’m going to start with you, Lee, and I apologize for putting you on the spot because I don’t know if you had a chance to see the Lyft earnings. But what– that headline, slight miss there, is this a post-Trump base Twitter rebellion, or is this pretty much in the rearview mirror, we don’t care, Twitter will recover?

LEE MUNSON: I expected Twitter to really burn this barn down and beat earnings in a more significant way, considering we’re looking at a time during the election. OK? It’s not what happened last month.

So the fact that they couldn’t bring it– you know, I’m just looking at my number. I had the 1.19, but I was thinking 1.3, 1.35 would have let us know that Trump really did make a– you know, they really made it. Because now they got their golden goose cooked, and now they kicked out the main guy who was giving those marginal engagements. So the fact that they couldn’t blow it away last quarter, and they just came in basically where we thought it was going to be, I’m disappointed.

Remember, in trade land, Twitter is always the catch-up trade in social media. It’s been on fire now, right? So I think you’ve got to be careful with that. You want to buy Twitter when it’s beat up. And I think it’s going to get beat up because, again, if they couldn’t bring it last quarter, now without Trump, now without all that election stuff, how are they going to really sustain that? I think that we could see some erosion this year. And you might be able to pick up this stock cheap, have it underperform against the other social media companies, and have a great trade.

You know, you look at somebody like a Doug Kass. You know, he’s so awesome at that. He’s made more money on Twitter than the stock is even worth, using that kind of general philosophy. And I think that’s how you play Twitter. I think you copy what he does and try to make some change.

SEANA SMITH: All right, Lee Munson, Portfolio Wealth Advisors president and chief investment officer, and also our thanks to Kristina Hooper, Invesco’s chief global market strategist. Thanks to you both for joining us today.

Read more at finance.yahoo.com

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