Market Recap: Wednesday, April 21

Stocks rose on Wednesday and looked to rise for the first time in three sessions. The S&P 500 and Dow each reversed earlier losses to trade higher. The Nasdaq also rose even as shares of Netflix weighed on the index. Netflix sank 8% after the company reported first-quarter subscriber growth that sharply missed expectations, suggesting the boost the tech company received while people were at home during the pandemic was rapidly unwinding. Anastasia Amoroso, Head of Cross-Asset Thematic Strategy at J.P. Morgan Private Bank and Riverfront Investment Head of Global Strategy, Doug Sandler, joined Yahoo Finance Live to discuss.

Video transcript

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SEANA SMITH: Around 2 and 1/2 minutes until the closing bell. We want to bring in our panel. We have Anastasia Amoroso, Head of Cross-Asset Thematic Strategy at JP Morgan Private Bank. We're also joined by Doug Sandler, Head of Global Strategy at RiverFront Investment. But first, let's go over to Emily McCormick for a closer look at some of these movers here into the close. Emily.

EMILY MCCORMICK: Well, Seana, the three major stock indexes are just moments away from closing higher for the first time in three days, and that is coming after the S&P 500 and Dow fell from record highs that they logged last week on Monday and Tuesday this week. Now taking a look at the stock indexes, we have gains today being led by the NASDAQ. That's now up more than 1%, extending those gains from afternoon trading.

And then taking a look at the S&P 500, actually seeing a bit of a rotation back into cyclicals there. We have materials, energy, and industrials all outperforming. So again, that rotation back to cyclicals, although with the NASDAQ still seeing some tech strength there as well.

Now specifically for energy, I do want to highlight that both Chevron and Exxon Mobil, the oil majors, are up more than 1% today, even after crude oil futures fell for a second straight session. And that was after the Energy Information Administration reported that US commercial crude oil inventories unexpectedly rose last week by about 600,000 barrels, whereas a slight decline had been expected. So a bit of a supply and demand mismatch concerns driving oil prices down. But again, still seeing those energy stocks on the rise.

And then similarly, we are seeing cyclical travel names also on the rise today. That includes cruise lines and airlines. We did have both JetBlue and American Airlines this morning announcing service expansions to additional cities today, so that's helping those travel-related names. And then also, we did get an upgrade from Goldman Sachs for shares of Norwegian Cruise Line holdings, and the firm also increased its price targets on shares of Carnival and Royal Caribbean, again, citing pent-up demand there. So another bit higher for those travel names.

And then diving a bit deeper into the NASDAQ, it is interesting that we are seeing that higher even as we are seeing shares of Netflix still off today. It's been down for the entirety of the session after that major subscriber miss for the first quarter. Those, of course, coming in at just 3.98 million, whereas Wall Street analysts had been looking for about 6.3 million. We also saw guidance come in light for the second quarter, the current quarter, that coming in at about 1 million versus the 4.44 million that had been expected. Now, we do want to take a look now at the closing bell on the New York Stock Exchange.

ADAM SHAPIRO: All right, we have a closing bell, and things are heating up in these markets. We're not talking climate change. We'll do that a little bit later this hour. But look at that. The Dow is going to finish up about 1%.

The S&P 500 also up about 1%, 38 points. And the NASDAQ will finish up, it'll settle around 1 and 1/4%, up 163 points. As you heard Emily say, the big sector winners today included industrials, materials, and energy, all in the green, up over 1%.

Let's go to our guests and get their take on what we're witnessing here. And let's start with you Anastasia, because you pointed out that the good times Wall Street has enjoyed during the year of the pandemic with the gains that we've witnessed, that's about to transition to Main Street. But does that mean Wall Street is going to miss out?

ANASTASIA AMOROSO: Well, I don't think Wall Street is going to miss out completely, but I do think the returns for equities is certainly going to be more subdued. I mean, we did have a very strong recovery from the bottom that we've seen, but now we are bumping up against price targets. We're probably about 5% away from off-- from our year-end price target.

It's possible that as long as the earnings revisions come through and they're higher, we'll revise that. But I think there's going to be not as big of a beta rally going forward. There's going to be more discerning investments is going to be needed in the markets. And there's going to be a couple of headwinds that we may need to be watching as we get later in the year.

I do think that this is going to be a boom quarter, for sure, in US GDP. In fact, this is going to be the era of US exceptionalism. But guess what that means most likely for the Fed? It means that come June, come July, they're going to look at the vaccination pace. And we're going to probably will have vaccinated 75% of Americans by that point.

And they've sort of alluded to that being the threshold for when they'll think about tapering. At the same time, the economy is going to be booming, 9% and 8% GDP growth. So I think the talk about higher rates, more tapering is going to pick up over the summer time. And that most likely is going to be the catalyst that's going to pause this market a little bit.

SEANA SMITH: Doug, what do you think? Do you anticipate that most of the good news that's coming here over-- that's expected to come over the next several months, has that already been priced into the market?

DOUG SANDLER: Probably has somewhat. So I think Wall Street has seen this-- you know, these good times that are coming, which is a wonderful summer with pent-up demand, high savings rate, and with a lot of government checks both in stimulus and in refunds. So there's a ton of spending. You saw it in the retail sales number. You see it in the housing start numbers.

But one of the things that Wall Street does is it looks, you know, 6 to 18 months ahead. And if I were to do that, I would start to see maybe a couple of bogeymen on the horizon. And those would include higher rates, but also things like the mid-term elections are coming up. And if the economy's humming, you have to expect that maybe the Republicans lose some of their, you know, slim-- or the Democrats get a greater majority, which I know sometimes the market gets worried about if you have too progressive an agenda. So yeah, I mean, our title this week was that Wall Street and Main Street will both be smiling, but I think Main Street's smile may be a little broader in 2021, where Wall Street's was in 2020.

ADAM SHAPIRO: Doug, I want to dig down a little bit deeper into something you just said about the savings rate at a 45-year high. The expectation is people will spend money as we continue to go into the reopening trade. What if that doesn't happen? What if people got burned and said I'm keeping it in savings?

DOUG SANDLER: I think there'll be some of that. I think we're going into a world where people keep a little extra on the sidelines for things like this. But we're at about a 14% savings rate, and that is significantly above where even the high rates were before, sort of 8%, 9%. So I think it's going to get spent.

It's actually already starting to get spent a little bit, so we're off the highs we had just a month ago. And more money's coming. And when there's more opportunities to spend it, I think it'll get spent. I mean, you probably in the studio or have had guests that have talked about wonderful vacations they plan on taking in the next couple of months. And you know, I think people are going to go out this summer with a bang.

ADAM SHAPIRO: Seana, I think you're muted.

SEANA SMITH: Here we go. Sorry about that. I was muted. Anastasia, what do you think about tech, because I think that's something that's on a lot of investors' minds right now, trying to make sense of the recent action?

We saw a pullback. Then we saw tech come back into favor today. It's a bit of a mixed picture when you look at some of those larger-cap names. Any risk out there on the horizon for some of these stocks?

ANASTASIA AMOROSO: Yeah, Seana, it's interesting that you mentioned that tech went through this pullback. I mean, the NASDAQ was down almost 10%, and then it snapped right back. And of course, the reason why that keeps happening is because tech is where the growth is. And it's really difficult to stay away from the sector for too long. So I think the reason why the reopening trade sort of stalled out here is because people have been busy buying back into technology.

Now going forward, I do want to have a differentiated view on technology versus just buying the broad sector. First of all, I think there is now growth at a reasonable price that have emerged in the technology space, and that is focused in the big tech-- in the big tech companies that are growing earnings, 20% plus, and at the same time, they're trading at a multiple that is below market. So I think that's something to be excited about.

Now on the other side of the spectrum, there's still high, multiple high valuation software names that are pricing in pretty aggressive earnings [INAUDIBLE], earnings growth rates. So I think you have to think twice about some of those names, especially as we head into the summertime and the potential for higher yields as the tapering talk picks up. And by the way, investors probably have had great runs on some of these high multiple software names, so I think it is prudent to trim a little bit of that.

And then the last area I would point to in tech is semiconductors. If you looked at semiconductor performance, it was just fine even throughout the tech pullback that we had earlier in February and March. And the reason for that is semiconductors is this perfect combination of what we like in the market from a secular perspective, exposure to EVs, and robotics, and artificial intelligence, and more, and it's a combination of the cyclical trade. Because clearly, you've got CapEx recovering. And in this day and age, CapEx tends to be very semiconductor intensive. So those are the three pockets of tech I would point to, and I would treat them a little bit differentiated [? ways. ?]

SEANA SMITH: Anastasia Amoroso, Head of Cross-Asset Thematic Strategy at JP Morgan Private Bank. And our thanks to Doug Sandler, Head of Global Strategy at RiverFront Investment.