Market Recap: Tuesday, September 7

Gold & Silver

Stocks fell on Tuesday, with Wall Street indices retreating from last week’s record highs. Lisa Erickson, U.S. Bank Wealth Managemen and Victoria Fernandez, Crossmark Global Investments Chief Market Strategist joined Yahoo Finance Live to discuss.

Video Transcript

SEANA SMITH: Welcome back to Yahoo Finance. We have about a minute to go here until the bell, and we have our panel to break down today’s action. We have Lisa Erickson, US Bank Wealth Management Senior Vice President. We’re also joined by Victoria Fernandez, Crossmark Global Investments Chief Market Strategist. And let’s take a look at how things are shaping up here in the final minute of trading.

We’ve been tracking the Dow– the Dow off just around 266 points, not far from its lows of the day– the S&P also under pressure, off just around a third of a percent. The NASDAQ bucking the downward trend, although just barely, off its highs of the day, now up just around a 10 points. We’ve got some news out over the weekend– Goldman Sachs downgrading its economic outlook, citing the Delta variant as one of the factors as a reason for its downgrade– now expects 5.7% annual growth in 2021.

And we know that the Delta variant has been one of the concerns here for investors. It has been weighing on investor sentiment over the last couple of weeks. In terms of the laggards today within the Dow, 3M– that stock off more than 4%, also seeing losses in Honeywell and Amgen.


And there we go as we kick off a new trading week as many people return to work following a Labor Day weekend. Again, the Dow and S&P under pressure today– the Dow closing off 267 points, and NASDAQ holding onto gains, closing up at just around 10 points as we shake out the final trades of the day. Lisa Erickson of US Bank Wealth Management, also Victoria Fernandez of Crossmark Global Investments are here to help us break down the action that we’re seeing today.

And, Lisa, I guess first to you– we’re seeing some investors at least a little bit nervous about the developments that we’re getting when it comes to the Delta variant. What do you think that this potentially means for the markets here in the short-term?

LISA ERICKSON: Well, to your point, Seana, we do think tracking what’s going on with Delta is very important. And the base case really is just that there could either be slowdowns because of restrictions that are officially imposed, and it certainly could also affect business activity and consumer activity. So we do see that as one of the key risks going forward. Overall, our base case, however, is really more moderately optimistic.

And if we just look at what’s going on both from a top-down and a bottom-up basis, we see that fundamentals still remain fairly strong, both in terms of macro indicators as well as corporate earnings. So again, we’ll want to keep an eye on where COVID heads. But base case for us is moderately optimistic on the economy and the markets.

SEANA SMITH: Victoria, what’s your reading on the fundamentals? I guess from your view, are they still strong?

VICTORIA FERNANDEZ: They are, Seana. They’re still strong, but we do have this kind of push and pull going on in the markets right now. So you look at some of the things that are strong and that are serving as tailwinds, we had really strong earnings in this past quarter. Margins were, like, at 13%– some great number for a majority of companies. You look at the JOLTS number– we have all of these job openings for people that do want to go out there and get a job.

And you look at the ISM numbers that came at the end of last week, and even though they came down a little bit, I mean, we still got a 60 handle on that ISM number. So they’re still really strong fundamentals that are out there helping the economy and serving as a foundation. But on the flip side of that, we have the worries with Delta that Lisa just mentioned. We obviously have inflation concerns that are out there that are growing.

We still have the debate on transitory or permanent components within inflation. And I think we’ve hit that peak kind of everything– peak earnings, peak growth. And the markets are starting to get a little bit concerned about where we go from there. So that’s probably why we saw a little bit of a pullback today. It wasn’t huge. We wouldn’t be surprised to see even a larger pullback at some point in the near future. But the markets are kind of in this limited space right here. And I think it’s because we do have both tailwinds, and headwinds, and the uncertainty there is really what’s causing the market to gyrate where it is.

SEANA SMITH: Victoria, you mentioned a pullback there, I guess how big of a pullback do you think we could potentially see?

VICTORIA FERNANDEZ: Well, I think most of the time, we look for, you know, at least a 5% pullback a couple of times a year. We haven’t seen that at all since the fourth quarter of last year. So we’re due for around a 5% pullback. And for us, that would actually be a buying opportunity. Some of those names that have been on your shopping list, whether it’s growth names that have gone too far, whether you’re looking to get into some of those value or some cyclical names because of the reopening story– you know, that pullback would be your opportunity to go ahead and jump in the market.

We obviously can’t time when we’re going to see that pullback, but I think we’ll have a pretty choppy end of this year. And so you’ll have some opportunities to do that over the next few months.

SEANA SMITH: Lisa, what’s your view just in terms of where we are in inflation? Because, obviously, the big debate’s out there about whether or not it’s transitory or if some of the inflationary pressures are proving to be a bit stickier than we initially anticipated. What’s your reading?

LISA ERICKSON: To your point, inflation– and as Victoria mentioned– is another key watch point that we have going forward. We do believe that inflation will moderate over some time. We’ve basically had a situation with the pandemic where supply chains have been disrupted along with the labor market. But again, as activity continues to normalize, and hopefully as we see Delta continue to come down, we should see some of those pressures moderate.

And with that, that will help bring back some of the inflation pressure. However, we will want to continue to monitor that. Obviously, some of this behavior has been a little bit more sticky than the market has expected. So we’ll want to continue to watch that. But we do believe, again, over time, we’ll see some moderation of those price pressures.

SEANA SMITH: Lisa, in your note, I also think it’s important to point out one thing that you mentioned, and that’s the fact that fiscal stimulus is declining. We have enhanced unemployment. They expired over the weekend– millions of Americans who were getting assistance are no longer getting assistance. How big of a challenge or how big of a potential risk is the market viewing this going forward?

LISA ERICKSON: So to your point, we’ve got, actually, a critical next few weeks and months as we see the fiscal stimulus begin to come off. And that’s from a number of different places, both in terms of actually fiscal policy packages. It’s uncertain, again, and we’ll need to see how those infrastructure bills potentially come forward. But even if they do, they’re at a different level than the stimulus we certainly saw in the wake of the initial pandemic. And to your point on the employment side, we just recently had the expiration of many benefits for unemployed workers.

And so overall, what we see is on the one hand, potentially that could put some dampening on the economic activity. However, it could also continue to spur some normalization of those supply pressures, hopefully as the labor market continues to re-enter the market. So again, we do have this moderately optimistic view on the economic direction over the intermediate term, thinking six to 18 months out. But again, we’ll want to continue to watch those numbers as they come through to see how things continue to even out.

SEANA SMITH: And, Victoria, when it comes to the consumer, we were talking about this last hour, but there’s been some conflicting reports just in terms of the strength of it– when you compare what we heard in many of the larger retailers’ earnings reports, what we heard from a number of their executives versus some of the sentiment data that we’ve gotten out over the last week or so. What’s your reading just in terms of how strong the consumer is at this point in the recovery?

VICTORIA FERNANDEZ: Yeah, so we really think the consumer is the backbone of this recovery. And you’re right– we have retail sales that disappointed a little bit a couple of weeks ago, but yet we had some retail companies come out and really give some strong earnings. And consumer confidence came down a little bit. But at the same time out of the ISM reports, we’re seeing new orders continue to be strong.

So there is this discrepancy between the numbers. We have to look at where the consumer sits financially. And their household balance sheets are strong. They are still flush with cash. Does a lot of that pent-up demand, has that probably already passed?

I think it probably has, but they still have a solid foundation that they’re sitting there and waiting to spend. So I think the consumer is in good shape. Obviously, we thought that at this point in time, people would be heading back to work at close to pre-pandemic levels as kids went back to school. But the Delta variant has obviously pushed that timeline out a little bit. So I think as we continue through the rest of the year, we’ll continue to see the consumer be strong, we’re going into a holiday season, and they will be there to continue to spend– maybe not at the same levels that we’ve seen over the past six months or so, but still a strong component for the economy.

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