Yahoo Finance Market Recap: Monday, April 19th
Stocks fell Monday, with the S&P 500 and Dow retreating from record levels. Invescoâs Matt Brill and Andrew Smith of Delos Capital Advisors joined Yahoo Finance Live to break down todayâs market action.
Video transcript
SEANA SMITH: We have three minutes to go until the closing bell. We want to bring in Matt Brill, Invesco's head of the North America Investment Grade and senior portfolio manager. We're also joined by Andrew Smith, chief investment strategist at Delos Capital Advisors. But first, let's get to Jared Blikre for a closer look at some of these movers into the bell. Jared.
JARED BLIKRE: Yeah, let's take a look at the YFi Interactive here because I want to show some charts here of the day's price action. And guess what? Not a lot has happened this afternoon. We've just been camped out near the lows for most of the day here, so not a lot of whole action in the afternoon, but still sitting on 1% losses for the NASDAQ. Here is the Dow. You can see that choppy sideways action at the bottom range of that chart as well. That was down 128 points.
But now we're going to take a look inside the NASDAQ 100, as we typically do heading into the bell. We had a mixed picture, Apple up 4/10 of a percent, Alphabet up about a quarter. But Microsoft, Amazon, and Facebook all mired decently in the red there. Tesla is another standout, that stock weak after that fatal collision over the weekend that killed two people.
And then the semiconductors, got to take a look at these. The Philly Chip Index is having its worst day in about a month. And the news overnight, Nvidia and that proposed merger with Arm facing some hurdles in the UK. Also Susquehanna downgrading Qualcomm. But we're seeing the biggest weakness in Lam Research and Broadcom. Those are each down more than 3% as well.
Well, checking in on the travel space, we're seeing a lot of red here. Royal Caribbean now down almost 2%. American Airlines also down 2%. Norwegian down about 1 and 1/2%. But we are seeing some positive action in trip.com. That stock is up 1%, kind of bucking the trend there, 5% over the last five days. Well, with 30 seconds to go, we're looking at the sector action. Only real estate is in the green. And then following that, we've got healthcare, energy, financials, staples, industrials-- I could go on, but not a whole lot of bullish news today or catalysts.
Discretionary, consumer discretionary is off the most. That's down 1.2%. That houses Amazon. And then tech, which, of course, has those chip stocks we were talking about in Apple. That's down about 9/10 of a percent. Here's the closing bell on Wall Street. And just rounding up the price action, I'm going to give you the price of Bitcoin here, 55,975.
[BELL]
ADAM SHAPIRO: All right, Houston, we have the condition. It's a space theme kind of day because of the Ingenuity Rover helicopter. But let's talk about where these markets are going to settle because this is a big day. The Dow is going to be off about 118 points, S&P 500 is going to be off about half a percent, roughly 20 points. NASDAQ will close down 137 points, almost one full percent.
As you heard Jared say, all of the sectors except real estate in the red today. Let's get to the guests and get their take on what's going on here. And let me start with you. Matt, I want to talk to you about the three re's-- and you pick it-- whether it's reflation, reopening, or rerating. Which is this market playing most attention to?
MATT BRILL: So, good afternoon. And the fixed income market, the rerating is really where it's at right now. That's the ability for companies to cross over from high yield and into investment grade. We think we're going to see about $100 billion get upgraded this year into investment grade. And with that, high yield's really been on fire lately.
SEANA SMITH: Andrew, what about today's action that we're looking at? We had the Dow, S&P, and NASDAQ all in the red. We saw a bit of a reversal, some of those tech trades and consumer discretionary trades that investors have been favoring over the last couple of weeks taking a bit of a breather today. What's your takeaway from that selling action today?
ANDREW SMITH: Yeah, so it's really been an amazing tug of war between growth and value cyclicals, defensives. Tech has outperformed phenomenally well over the last three to four weeks. But what we're seeing today is a little bit of a move underneath the surface. So while the headline sectors really kind of underperform from a technology, consumer discretionary perspective, we have looked at industry groups, and we've seen tech hardware do well. We've seen software services continue to do well. And we think that really is an economic function that the momentum that we've seen in a V-shaped reflationary recovery is now set to pull back and wane a bit. And we're going a little bit more growthy/defensive within the markets.
ADAM SHAPIRO: Hey, Andrew, when we look, being defensive in the markets, a lot of people a year and a half ago might have said, look at emerging markets. But you would caution people right now to look at emerging markets. Why?
ANDREW SMITH: Yeah, that's exactly right. So, you know, the monetary policy that was injected really began in China with their credit impulse really moving to all-time highs. But we've seen them really start to pull back the reins a bit. And with commodities doing so phenomenally well because of emerging markets really leading the pack on this COVID recovery, we now are at the point where we think the United States versus, at least, emerging markets is going to have a growth differential that really dictates a higher US dollar, that really puts a little bit of pressure on commodity prices, thus, in turn, hurting EM assets.
We've seen India, right? India, if we add back in the COVID situation that's happening there, has not been a great place to be. So while it's done well from a reflation and recovery perspective, we think taking some money off the table is the right thing to do.
SEANA SMITH: Matt, it was a rough start to the year when it comes to US investment grade bonds. When you take a look at the landscape right now, are there any signs of stabilization, do you think?
MATT BRILL: Yeah, it was certainly a tough quarter. The US IG market was down about 4 and 1/2% to start the year. But we've seen stabilization. We've seen about a recovery in prices since then-- or total return since then. Most of that has really been driven by institutional buying, though. The retail investor hasn't really stepped in yet.
But Japan and Europe, the yield differentials between the US and the rest of the globe is still so large that once you sell any sort of stabilization, investors have been looking for higher yields. Once they got a little stabilization, they've really piled in. So we think we're in a new range now between 150 and 175. Today, rates were off a little bit, but we think we've really settled in here.
ADAM SHAPIRO: Has the individual investor possibly missed the investment grade bond action? I think you pointed out, Matt, that we had had something like-- it was 400 plus billion issued year to date, but then just so far, we're only at about $90 billion for the month.
MATT BRILL: Yeah, so the supply is starting to slow down, just because corporations no longer really need anymore money. They borrowed so much last year. They borrowed $1.8 trillion. They borrowed a lot to start this year, just because they were afraid that rates are going to go higher. Now they're sitting on a lot of cash. And they're saying, well, what are we going to do with all this? Maybe we need to start doing something from a capital expenditure standpoint. They're seeing the M&A pick up, though, as well. So, you know, mergers and acquisitions would be one way for corporations to spend the money.
Yeah, I think retail investors, though, they certainly still have an opportunity here. Again, I stated they wanted higher yields. They have them, but they don't like to look at negative total returns. We don't like the path to get higher yields. But now that we're here, it's certainly making a better entry point.
SEANA SMITH: Andrew, some of the recent data that we've gotten out recently certainly has been pretty encouraging. We got that retail sales number jumping just around 10%. When we get a print like that, does that make some of these consumer discretionary stocks, although the fact that they were under pressure today, does that make some of those names look a little bit more attractive to you?
ANDREW SMITH: Well, it does, you know, obviously, with the fiscal payment that went out for our stimulus checks, but we have to incorporate the savings rate that is truly at a very high level. And now that the reopening is occurring, people are going back to work, we do think this pent-up demand, even though that's been a story that has been used quite a bit, is going to be alive and well. So while consumer discretionary stocks are taking it in the chin a little bit today, which might be a function of higher costs or inflation, we do still think the American consumer has a propensity to spend, especially given where savings rates have been and how low debt service ratios have gone.
SEANA SMITH: Andrew Smith, chief investment strategist at Delos Capital Advisors, and Matt Brill, Invesco's head of North America Investment Grade and senior portfolio manager, our thanks to both of you for joining us today.
