Market Recap: Monday, March 22

Stock traded higher on Monday as technology stocks rose to recover some of last week's declines.The Dow turned positive even as shares of component companies JPMorgan Chase and Goldman Sachs lagged. Bank stocks, industrials and other cyclical shares including small caps underperformed, giving back some recent gains. Technology shares outperformed after another week of declines last week, and the Nasdaq added more than 1%. Steven Blitz, US Economist at TS Lombard and Scott Crowe, Chief Investment Strategist at CenterSquare Investment Management, joined Yahoo Finance Live to break down the details.

Video transcript

SEANA SMITH: Got a minute to go here until the closing bell. Jared Blikre has a closer look at some of the movers into the close. Jared.

JARED BLIKRE: Let's get straight to the charts here because we have the NASDAQ leading everything higher, tech stocks in the forefront today. We are off our session highs, but still sitting on gains of over 1%. That was also up. It's been the laggard all day. Started off the day in the red, but now in the green. Also off its highs, up over 100 points.

We've got to take a look inside the bond market. We do have the 10-year T-note yield down about five basis points. That has given technology stocks an edge over the value and cyclical trade. So here is those mega caps. Worth noting that Apple is up over 2%. So is Microsoft and Tesla and Nvidia.

But we take a look at the travel sector, and we're seeing some losses here. American Airlines down 4 and 1/2%, Carnival Cruise Lines down 5%. As we head into the closing bell, just want to take a quick look at the banking sector-- lots of red there. JP Morgan off more than 2%, Goldman Sachs more than 1%, but coming off record highs only last week. Here is that bell, guys.

[BELL]

ADAM SHAPIRO: All right, we got a closing bell. Here's where it looks like we're going to settle on the Dow. We're going to be up about 105 points, possibly a little bit more. On the S&P 500, we're going to be up roughly 27 points. The NASDAQ is going to finish up 162 points. And as Jared was just talking about, some of the sectors which saw big action today-- information technology, that sector up almost 2%.

Negative-- the sectors that were negative today, financials about 1 and 1/4% off. Energy was off by about 1%. We're going to take this to our guests. Steven Blitz is a US economist at TS Lombard. And Scott Crowe is chief investment strategist at CenterSquare Investment Management. Steven, let me start with you. When we take a look at all of this, there were no surprises, really, from Fed Chair Jay Powell last week. Might he say something tomorrow that would throw everybody into a tizzy in the markets?

STEVEN BLITZ: No, I mean, I think if he says anything tomorrow that's going to be of interest is probably about the management of the banks, the leverage ratio, and things like that. I don't think there's anything. You know, I think the big surprise that's going to come is that everyone assumes the timeline and has put this objective in second place. And I think if you really listen to him, what he's saying is the objective, in terms of unemployment and things like that, is in first place. The timeline is malleable.

And so if you're betting on the Fed timeline, you're betting that that is-- what you're betting is at, one, near term, COVID is going to remain an existential threat to growth in 2021 and, two, that the pace of recovery post-COVID is going to match what it was in the last 10 years. If you believe that, you bet with the Fed. If you don't, you bet against it.

SEANA SMITH: Well, scott, what are you betting right now? And I guess, how are you playing the market right now? Because there's still so much uncertainty as Steven was just talking about. There's so much uncertainty out there right now.

SCOTT CROWE: Yeah, well, one of the things that's apparent, we'd probably add peak stimulus. I mean, think about it. We're about to have I think was going to be the final round of stimulus checks go out. Now, to put that in context, stimulus is total about $44,000 a person since COVID began. And a lot of that has been monetized through Fed quantitative easing.

I think one of the things that was very interesting that came out of the Fed yesterday was the fact that they realize they've got to play a little bit catch-up with reality. They're a little bit behind the curve. And I there's one other thing that was causing the 10-year, really, to rip. And part of the reason for the transition from value to-- sorry, from growth to value was people played that reopening trade.

But, you know, we've probably seen maximum fiscal stimulus, maximum monetary policy stimulus. We're on the verge of having the economy opening up. So for the value sectors, things can't get really that much better. So within real estate, that basically makes me think that, oh, you were thinking about asset classes like retail-- perfect opening up trade, performed phenomenally well this year.

But it's time I think, again, to start looking at some of the secular growth winners out there, you know, including industrial warehouse distribution, cell towers, data centers, and then selectively looking at some of the areas where there's still value left in reopening, such as student accommodation. Because I think we're all going-- all the students are going to be going back in September. Whether they're all on campus or not, I'm not sure, but they're all going to be in the dorm room.

ADAM SHAPIRO: Perhaps, but look, I had a discussion with [INAUDIBLE], who owns a plumbing supply company up in Buffalo. He made a point to me that the price of everything is going up. PVC because there's a shortage of the resins that make the plastics. And if you think it's just going to be housing where prices go up, think about all the plastic containers in which your food goes into.

So the Fed dismisses this inflationary pressure. Did I hear you, Scott, dismissing the inflationary pressure, housing shortage, shortage of supplies to build new housing? When does that end? Why would we discount inflation?

SCOTT CROWE: I think that you are going to see inflation. In fact, the other thing to pay attention to is that the year on year effect is going to see inflation move up a lot because going to have to come up with some very sort of low comps on inflation.

But I think the market was worried that the Fed wasn't, you know, in tune with the pace of the recovery and inflation. And hence, that's why when they upgraded their forecast yesterday, some of the-- you know, a couple of the members actually forecasted or increased their forecast for interest rates by 2023. So I think the fact that the Fed is getting more real with things that you just described is why we've seen the action in the markets over the last 48 hours.

SEANA SMITH: Steven, I'm curious just to get your thoughts on as we talk about the economic recovery, the fact that it is gaining a little bit of momentum, the fact that overall, the data is pretty positive, but one area that has remained relatively weak is the labor market. Time and time again, a lot of these-- the latest numbers that we're getting were either retreating or were plateauing. I mean, how big of a risk, how big of a factor is that right now in terms of the overall economic recovery going forward?

STEVEN BLITZ: Well, I think first of all, you got to wait for the March numbers. Actually, if you look at the February numbers, they were actually extraordinarily strong when you consider Texas was shut down. And that was confirmed by what we saw in all the other numbers for February industrial production retail sales. I think you're going to have a tremendous high number in March. Now look, the labor is always a lagging indicator on the way back up.

And there's two cycles, right? There's a COVID cycle, which is people getting rehired because of things are opening up again. You have to have everybody back in the hotel, in the restaurant, et cetera, to be open. And then there's an underlying recession. And I look at that in the permanent job loss group, not on temporary layoff. And that job, that unemployment number actually peaked in November. And it's slowly coming down.

And I would argue that while we don't have an official end to the recession, what I call the real recession, I think it probably ended in the fall. And so employment is going to ratchet up very quickly this year. And then next year, the rate of improvement is going to slow as we get something that looks more like a normal cycle. But I think it's a little too soon to be worried about employment and who gets reemployed. Look, we shut down services and employ minorities, lower skilled workers, employs women.

As they reopen, that's where most of the gains in employment are going to be in the coming six to nine months, assuming that COVID doesn't shut things down. And if I could just get one quick word here about inflation, look, those price changes in there's inflation. What the Fed has done is not inflationary. It's distortionary. It's distortionary because it's created a structure of interest rates that is a fantasy because it's financing most of the new Treasury debt.

It's not inflationary because the price it is charging in effect to do that is that it's holding, when you add everything up, about 20% of bank assets on its balance sheet. That's not the 70s. You just do not-- the banks do not have the wherewithal to create the loans like it did in the past. So when you look at reserves and say, oh, look at this loan, this money is held at the Fed on the Fed balance sheet.

So if there's going to be financing-- and I'd like the other guest to speak to this-- if there's going to be financing of inflation, it's going to come from the non-bank financial institutions, not from the banks.

SEANA SMITH: Steven Blitz, unfortunately, we have to leave it there. So Scott, we're going to have to have you back on to weigh in on that, but Steven Blitz, US economist at TS Lombard, and Scott Crow, chief investment strategist at CenterSquare Investment Management.

We want to get over to Jared Blikre for his final word here. And Jared, I know you're taking a closer look at the NASDAQ's outperformance today with the NASDAQ up just around 1%, with the VIX below 20. Yet you're finding still a little bit of reason to be concerned. What's going on?

JARED BLIKRE: Yeah, we still haven't crossed a critical threshold. I'm just going to say one quick word about this on our charts here. We do have this 13,600 level from which it recently sold off. It needs to clear that. But as I was pointing out an hour ago, we do have this inverse head and shoulders pattern, which could see continuation all the way up to 14,800, if we get through this level.

I want to show you the VIX chart because as you noted, Seana, it is below 20 once again. We've seen these bottoms sometimes take a month to play out, so not in the clear just yet. 10-year yield on the way down a few basis points in the right direction at least for tech stocks. It has implication for others. Finally, the US dollar index not doing much today, but if we head higher to these multi-year highs, it could spell trouble for asset markets.