Market Recap: Tuesday, November 30

Stocks dropped on Tuesday as volatility resumed after a brief rebound earlier this week. Shawn Cruz, TD Ameritrade Senior Market Strategist and Andy Kapyrin, Co-Head of Investments, Regent Atlantic joined Yahoo Finance Live to discuss.

Video transcript

JARED BLIKRE: Well, we got 90 seconds to the bell. And I want to introduce our panel. Shawn Cruz, TD Ameritrade senior market strategist, as well as Andy Kapyrin, co-head of investments at Region Atlantic. And we're going to get to you after the bell. But I just want to get a quick check of the markets. Because we have stocks at their session lows. Here's the Dow. It's off 1.78% as you can see on your screen. Down 625 points, worst day in two days. So I'm being a little flip here. We're going to get to all the market action here.

But I want to get a chart of the S&P 500. Because we got some fireworks earlier today when Jay Powell kind of disrupted markets a little bit. He's saying we're going to taper a little bit early, probably. Not necessarily. Still being fluid with respect to omicron, but we're going to dig into that as well after the bell. Seeing Russell 2000 now, it was the actual laggard most of the day, climbing back a little bit it appears. We can see it's off of its lows here. And we also want to get a check of the NASDAQ 100 heatmap, where, as Ines Ferre was pointing out, Apple-- thank goodness for Apple-- it's up 3%.

Forget crude oil in a bear market. But we do have Facebook, that is down 4%. And I'm going to sort by performance so we can really see some of the damage. At the bottom of the list here is Pinduoduo. That is down 7 and 1/2% followed by Intuit down 6%. And here's a sector action as you can see going into the final moments into the bell. There we go.

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ADAM SHAPIRO: Ooh, do not get in a fight with her. We have got a closing bell. And there it is. We're going to settle down about 650 points on the Dow, about 88 points off on the S&P 500, almost 2% down. NASDAQ is going to be off a little more than 1 and 1/2. We'll settle around 245 points off. I want to bring our guests back in. And let's start with you, Andy, because some of us can recall, I think, it was the Bernanke taper tantrum a while back. And now we've got, as Jared was just saying, the market's reacting clearly to what they heard from Jay Powell.

Is this another tantrum that might be overplayed by investors do you think?

ANDY KAPYRIN: So I don't think this is another tantrum. Of course, the market responded to Jay Powell's comments today. But there's so much more going on, particularly with omicron. I think this is going to be a very different kind of taper, one that will avoid a tantrum. I should know. I have a two-year-old at home. The way that I manage bedtime or any other difficult activity is I manage expectations. Jay Powell did this very well over the course of this year. First, they talked about talking about the taper. Then they talked about it. Now they're implementing it.

JARED BLIKRE: Well let me just follow up on that. We look at the price action today. I'm looking at the bond market. And there's been a lot of volatility recently, kind of portended some of the volatility we're seeing in stocks. But what are you seeing in bonds right now? And what are they saying about what the fed might do next year?

ANDY KAPYRIN: Sure. I think the bonds are caught between two very powerful forces. On the one hand, the taper is going to deliberately reduce some of the stimulus out there. But at the same time, the fed's been one of the biggest buyers of treasuries over the course of the past few years. By withdrawing from the market, that market's going to have to start to stand on its own two feet. And a yield of only 1.44% on the 10 year is simply not attractive enough to attract a lot of institutional participants.

I think the path of least resistance for rates is higher in the face of volatility. Treasuries will always have a bid though.

ADAM SHAPIRO: Shawn, let's switch gears a little bit. Because oil was on quite a bit of a tear. I'm looking at WTI. It's trading now below $67 a barrel. We're still waiting to see what OPEC's really going to do. What is this telling us that we're seeing oil futures fall?

SHAWN CRUZ: Yeah, I mean, I think this is telling you that there is going to be a pretty big impact here it looks like on the cyclical side of the markets. And if you look at some of the other commodities that are out there, you're looking at something like copper, it hasn't gotten hit quite as bad as you've seen crude oil get hit. And I think that is really about mobility and this is where, if you're asking me, I think it's where the concerns around the new variant, or any variant that may come after that, what that may do to people's willingness to travel, and even if it's not in the hands of the people who are making the decision, if it gets into countries starting to put in more restrictive rules around travel.

I think that to me is the big story that's going on here around crude oil. Because if you look out across some of the other commodities, they're still hanging in there pretty strong. So I don't think this is about demand across the board getting wiped out in and of itself. But certainly, we're going to have to hear from OPEC this week and see what their response is to the new variant that's going around and if that changes any of their plans as far as production.

JARED BLIKRE: And energy, one of the worst performing sectors of the day. But I want to talk about sectors with you, Shawn, more generally. And I have a sector heat map on the YFi interactive that shows the month to date performance. And it is the month of November's performance now that November is done. You see two green squares in the upper left. That's XLK, the tech sector, that's up 4%. XLY is consumer discretionary, up about 1 and 1/2% or so. But to the downside, communication services, financials, energy, all down 5%.

Kind of a nasty month because financials and energy had been leaders coming into this. So what does a portfolio manager do with this month? Because there has been a lot of pain. And what do they do to prepare themselves for the end of the year?

SHAWN CRUZ: So I think a lot of portfolio managers have already been preparing themselves for the end of the year, started it earlier on this month. Because you start to notice some of the internals in the market. There was some minor corrections. And I don't mean a correction in the technical sense of term. But just there was a lot of softness in some areas within the market that were really starting to sell off a little bit. And there wasn't any clear cut catalyst. I think a lot of that was portfolio managers realizing, look, we've had an incredible year if you look at where we started out and where we're ending up here. We started topping out.

But early on in the start of November, you actually saw the market start to soften up a little bit. You started to see people start asking themselves, should I be making portfolio adjustments? Should I be taking some profits? So I think what you're seeing now is just the excuse. And I think there's two big excuses that I don't, not necessarily that anyone could have seen coming with the new variant, and then a more hawkish fed than what was initially expected, at least the possibility of that. That to me is what really sparked the sell off. But it was already starting to show up throughout November.

ADAM SHAPIRO: In fact, Andy, you kind of allude to that. And everyone loves an excuse, especially when you could take profits when the S&P 500's up over 24% year to date. You point out that successive waves of the COVID-19 virus have a smaller impact on the economy and on markets. So with that in mind, is this a buying opportunity right now? Should we be jumping in? And if so, which sectors?

ANDY KAPYRIN: Only selectively. And the reason why it's been successively lower impact is we're learning to live with it. We're learning to live with it primarily in the English speaking world. If you look at the US and the UK, we haven't quite adopted the policy of let her rip but we're much closer to normal. Whereas parts of Asia, Australia in particular, have become victims of their own success. They're simply not willing to tolerate anything other than COVID zero.

That's tough on their economies because it's not the virus that impacts economic activity. It's the responses to the virus imposed by governments. Where does that lead me? It leads me to tech. Technology in particular stands out as a sector that's going to do well in an environment where we have some relapse back into work from home, back into shop from home.

JARED BLIKRE: And we're going to have to leave it there. But we thank you both for joining us, Andy Kapyrin, co-head of investments at Region Atlantic, as well as Shawn Cruz, TD Ameritrade senior market strategist.