Why the stock market may be poised for a cooldown

Yahoo Finance Live anchors discuss how markets are performing and whether or not they are poised for a cooldown.

Video transcript

[AUDIO LOGO]

- Let's get to today's "Morning Brief," your daily update on what's making moves in the market. Markets continue to be unclear on just how hawkish the Fed could get in the weeks and months to come. The so-called dovish pivot was the talk of the town, and we'll get more clues on that with Jay Powell speaking this week.

The big worry? Markets are acting like rates are set for a cut this cycle, but are they really? That's the big question. But everything from earnings to economic data indicating a pivot push back until later this year. Here's what BlackRock Global Chief Investment Strategist, Wei Li, had to say on Friday. Take a listen.

WEI LI: Beyond FOMO and chasing momentum, it's hard to see a fundamental reason for stocks to keep pushing higher.

- Fear of missing out, or FOMO, could be fueling investor optimism. Don't be the last one holding the bag here. And so--

[LAUGHTER]

--we had this conversation. Yes. And Wei Li did bring the FOMO part of the equation back on the table here. I know you wrote up today's "Morning Brief" here. And so your biggest takeaway from Wei Li on that point?

- Yeah. I was fired up. I had a great 2 and 1/2 hour workout on Saturday. I went right home, and I was inspired by what Wei Li told me. I got right on my kitchen computer and to started writing this. And really, I was just angry. I mean, I just see this market continue to push higher, despite clear signs corporate America doesn't deserve this major push higher in stocks.

You look at the earnings season data here. 70% of S&P 500 companies report a positive EPS surprise for the fourth quarter. That's below the five-year average. Earnings for the S&P 500 tracking down about 5.5%. You have Starbucks coming out here with an ugly quarter. You have Amazon, Meta, ugly quarters, all household names. Even Apple, big earnings with all these household names reporting disappointing results, worrying earnings calls tones by the various executives leading the companies. It just doesn't seem to justify how far the market has come out of the gate here.

- But it's about the future, isn't it?

- Well the future, according to some of these tones and some of these raw numbers, ios not so bright.

- Some of them. I don't know. I think people are looking for a reason to be optimistic.

- You're just trying to fire me up even more.

- Yeah, sorry. I'm just it like I see it.

- When they're buying their $7 eggs, they're looking for something to be happy about.

- I mean, listen, after the past year that investors have had and after the wipeout that some of them have seen, I think, yes, there are definitely people who are cautious, but there are also people who want to get back in here and make money.

- But are they going about it the right way? And I think what Wei Li was saying was it's just FOMO, fear of missing out. Are you just buying that stock because you want to be left holding the bag? Or moving not getting into tech stocks on maybe one word from the Fed chief on that. He might pivot on rates, and really losing sight of the core fundamentals of some of these names.

- Should I remind you of one of the tenets here that we talked about all the time?

- Stocks usually go.

- Stocks go up.

[LAUGHTER]

- I know.

- Stocks usually go up. It depends on when you need your money.

- Right.

- But stocks, as a whole, tend to go up over time.

- Well, is that a prediction?

- No. It's just a truism. I don't know what it is.

- It's just a matter of whether investors at this level believe that we're actually going to retest some of the lows of late last year, fourth quarter of last year. And if they don't believe that, then now, relatively, still might be a good time.