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Market Recap: Friday, April 23

Stocks rose Friday, steadying after selling off sharply on Thursday following a report that President Joe Biden was eyeing a proposal to increase the capital gains tax rate on wealthy individuals. U.S. Bank Wealth Management Lisa Erickson and Commerce Street Holdings President and CEO, Dory Wiley, joined Yahoo Finance Live to discuss.

Video transcript

SEANA SMITH: Under three minutes to go until we wrap up the trading week. We want to bring in Dory Wiley, Commerce Street Holdings President and CEO. We're also joined by Lisa Erickson, US Bank Wealth Management. Let's first, though, get over to Jared Blikre because, Jared, we have just a couple of minutes to go until the bell and a total reversal from the selling action that we saw yesterday afternoon.

JARED BLIKRE: Yeah, that's right. S&P 500 record high within the last 30 minutes of trading. You don't often see that, especially on a Friday. But just goes to show you that traders are comfortable holding on to some risk over the weekend.

So we've got the NASDAQ up to 1 and 1/2% now. It just briefly went positive for the week, looks like it's down a little bit. We'll call that close to break even. Russell 2000 the biggest winner of the day. That's up 2%. And we'll take a look at the NASDAQ 100 and see the [INAUDIBLE] whoa, we got earnings. We're going to get to that in a second maybe if we got time.

But the mega caps here really benefiting from the price action. Apple up nearly 2%. Alphabet over 2%. And then Microsoft, Amazon, and Facebook, and Tesla all up more than 1%. So that's really giving the S&P 500 and the NASDAQ the power to make those-- excuse me-- outsized gains.

Well, we're going to take a look at the sector action, and this is a pretty healthy mix that I'm looking at here. Financials, materials, tech-- excuse me-- consumer-- not consumer-- communication services, that's what I'm looking for, industrials all up more than 1%, all outperforming. So we got value, we got growth, some momentum, all of those are outperforming.

And then a reversal from the rest of the week, utilities and staples down there in the red, those are the only ones. They were leading for most of the week. And if we take a look at the five-day price action, indeed those-- those defensive sectors like real estate and health care, those are still the biggest leaders there. Notably, energy also had a bit of a down week as well.

Well, we got to check out some meme stocks, haven't talked a lot about them this week. But there's one in particular that is catching investors' attention-- that is Ocugen. And let's go to the five-day look. It's up 4% today, had been up over 40%, still holding on to massive gains for the week.

But it's a meme stock, and they use the opportunity to say they're going to dilute their shareholders and raise some capital to the tune of, I think it's going to dilute 5%. So guess what? They gave back about 30% from the highs. Interesting story as we wrap the week here on Wall Street. And now, now we have the closing bell, guys.

[BELL RINGING]

ADAM SHAPIRO: All right, let's call it a wrap. "Luca Brasi sleeps with the fishes" and so do investors who sold earlier this week. Let's see where things are going to settle. We're going to be up on the Dow 227 points.

The S&P 500 going to settle up more than 1%, up about 45 points. NASDAQ is going to be up almost 1 and 1/2%, up 198 points. And just want to let you know we've been following Bitcoin all day. Bitcoin is, once again, trading above $50,000, off right now about 5%. Remember, Bitcoin sleeps for nobody. It continues to trade.

Let's go back to our guests, bring them into this discussion. Want to start with Lisa. We see these big swings. We have a lot of volatility in these markets. We're going to have this volatility, don't you think, for the rest of the summer as they debate infrastructure, they debate tax increases? What's an investor to do?

LISA ERICKSON: Absolutely, Adam. We do think we are going to see some volatility through year end. But overall, our base case is even though we're going to have some price up and down movement, we're seeing the case for equities generally to move up over the year. And really the reason why is when you look at the economic data, what you see is a situation where we continue to see some nice momentum.

We had some great PMIs come out today. Last week, we had some good consumer numbers. And so on the back of really that reopening, it's really spurring both the macro activity, as well as corporate earnings.

SEANA SMITH: Dory, where do you stand? Do you see more opportunity here to the upside for the markets?

DORY WILEY: You know, I do. There was a lot of pressure on the market over the last week or two, particularly on financials and in banking, to outperform the expected earnings from-- from analysts. It was all priced into the market. And the banks did really well, and it was there.

And there's still some upside, the economy's kind of bouncing back. It is a risk-on market, so I think we're going to continue to see volatility. We're going to see continued cyclical trades to go on here. And then we're going to have some scares, Bitcoin being one of them.

You know, Bitcoin, everyone makes an argument for fundamental investing for Bitcoin. Half the people don't understand it out there. But everyone should probably agree when you can finance Bitcoin trades at 125 to 1 overseas, as talked about in "The Wall Street Journal," that's not going to be a good recipe. We saw that-- what happened with [? sieves ?] and-- and leverage in 2008, and that's not going to end well.

ADAM SHAPIRO: Lisa, when we talk about things not ending well, one of the things you hear a lot is easy money out there is inflating asset prices. But as a retail investor, do I-- am I at risk because I may not be the one getting the benefit of the easy money? It's much bigger money managers, isn't it? What do I do to protect myself if that, indeed, is the case, Lisa?

LISA ERICKSON: Well, to your point, we do have some flows going on in the market, both from increased participation on the retail side, as well as the ongoing entry of the institutional investors in the market. But that being said, if you look at overall sentiment right now in the market, it is elevated, but it's not at extremes. And so generally what we're advising our clients here at US Bank Wealth Management to do is really just to stay the course. We believe that, again, a glass half full outlook makes sense, that we will continue to see equities rise, even with some price back and forth through the end of the year. And so being able to have a moderate over-- overweight position in that US equity market makes a lot of sense.

SEANA SMITH: Dory, when you take a look at the market today, what's priced in, from your point of view? Because I think we were hearing conflicting opinions yesterday once we got that sort of knee-jerk reaction in the markets on the heels of the report that Biden could potentially almost double the capital gains tax rate. Some people were saying, hey, the market should have already priced this in. And others were saying, no, but it was actually a pretty big surprise.

DORY WILEY: Yeah, it's amazing when we talk surprised, because I can't imagine anyone thinking that wasn't going to be-- wouldn't be on the agenda with a Biden presidency. So maybe there were traders or investors that had their head in the sand, I don't know, from a political perspective. But we can expect that capital gains tax to rise. You know, but to be honest with you, I don't think a 28% capital gains rate is going to really get in the way of what Lisa's talking about as well, which should be a pretty good year.

ADAM SHAPIRO: Dory, in fact, let's look at the fundamentals and the facts on the table right now. The 10-year yield down three weeks in a row. Mortgage rates fell below 3% again this week. This just doesn't seem like this juggernaut is going to come to an end.

DORY WILEY: Well, I think there's also a lot of investor sentiment that investors are ready to spend. They're ready to take their masks off. They're ready to make changes to their lifestyle. They're ready to buy houses. They're ready to go back to business as usual.

And I think that's what you're seeing out there in all aspects of the market from-- you know, there's no inventory here in Texas on any of the homes. Prices are jumping up at record numbers over 30 to 60 days. And that's-- that's going into meetings.

I'm seeing-- people are having in-person meetings. They're getting together. They're ready to do business. They're ready to be optimistic. And I think they're just tired of being negative, and a lot of that is manifesting itself in the stock market as well.

SEANA SMITH: Lisa, we're in the midst of earnings season right now. We're going to hear from a couple of the big tech companies over the next couple of weeks. We have Apple, we have Facebook, we have Microsoft all on deck next week. Are you finding any opportunity in some of those names, the outperformers at the start of the pandemic?

LISA ERICKSON: Well, we actually have a very balanced view on sectors right now. So while, again, as-- as we've been talking about, there's going to be some continued momentum in the economically sensitive sectors like energy, like industrials, like materials, we actually continue to like that technology and some of the secular growth names as well. And the reason why is really, if you look over the intermediate term, that general trend towards increasing use of technology, AI, machine learning, go anywhere kind of access will really continue on, and that just has been reinforced by what you saw going on with the pandemic as it continues to reshape our behaviors. So we really advocate a very balanced view between both the cyclical sectors, as well as some of the secular long-term growers.

ADAM SHAPIRO: But Lisa, when you tell clients, and I think it was in a recent note, that you see a higher error term in the second half of the year with respect to economic growth, what are you saying, for those of us who might not quite understand that sentence?

LISA ERICKSON: Absolutely. So while we're still positive overall on the stock market for the remainder of the year, we do see, again, some potential for bumps and some potential for an error term in the second half of the year. And the reason why is really twofold. So one is if you look at what happened in 2020, what you had was a situation where we got a big hit in economic activity in the first half of the year. But then as the second half went through, we actually had some bounce back in activity, as even last year we were be able to reopen, to some extent.

And so if you just look at what that means for this year, we're coming into the second half of the year against, again, harder numbers. We already started to see some pickup in growth next year. And so there's a greater error term. While we expect companies to continue to do well, they have to compete against harder numbers from the second half of the year.

SEANA SMITH: Lisa Erickson, US Bank Wealth Management Senior-- Senior Vice President and Head of Traditional Investment Group, thanks so much for coming on. And Dory Wiley, Commerce Street Holdings President and CEO, thanks to you as well.