Market check: Stocks pull back, bitcoin steadies, oil futures rebound ahead of trading

Yahoo Finance Live hosts Brian Cheung, Julie Hyman, and Brian Sozzi discuss the market pullback, bitcoin's recovery after a weekend sell-off, oil trading, and the factors potentially influencing assets currently.

Video transcript

JULIE HYMAN: If we take a look at the Yahoo Finance Interactive and do a little bit of a market tour here-- here's the S&P 500 over the past five sessions. And of course, we have seen this downturn. The S&P 500 and the NASDAQ are now down for two weeks in a row. The Dow and Dow Jones Industrial average is actually down for four weeks in a row.

We have been really seeing-- there's a longer slump there for the Dow. And if you look at the NASDAQ as well over the past month or so, the NASDAQ reached its record high back on November 19-- right around here. Since then, the index is down by about 6%. So we have seen a pullback. It's not yet a correction, but it is something to keep an eye on here as we see things rolling over in this market. And talk about volatility in this market as well-- because we've been watching volatility very closely.

Take a look at the VIX over the past month. And of course, that huge uptick that it has had. And still around 29 going into today's session. At the same time, that the 10-year yield has really gone down. And what's remarkable about this, of course, is the idea that we still have an outlook-- or now have an outlook, I should say, for next year, for perhaps getting two interest rate increases. A 1.38% 10-year yield doesn't necessarily reflect that, although we have been seeing some more movement on the shorter end of the curve.

I want to talk about crude oil futures as well here this morning-- slumping on the month by nearly 17% and, of course, in a bare market as well. But up about 2% here this morning. And that's been an interesting move. Saudi Arabia actually boosting crude prices this morning. And we've had a lot of back and forth among the OPEC Plus nations about whether we're going to see increases in production.

Oil was down for a sixth consecutive week last week. So a lot to mull over in this market. And that's not even talking of Bitcoin, which is down more than 20% over the past month and had a very rocky weekend-- that you guys talked about up at the top of the show. But guys, you know, it's just fascinating here, this sort of process [? and ?] moves that we're seeing, that you were talking about just a few moments ago with [? Alessio. ?]

And the idea-- it definitely feels like there has been a sentiment turn in this market. But it's tough to put a handle on kind of what happens now. There's not a lot of clarity here, Soz.

BRIAN SOZZI: No, but there are-- and you're right, there has been a very clear change in tone here and change just in leadership throughout the market areas, which really-- seeing these growth stocks continue to be under pressure on rate hike fears. And now, you're also seeing, I think, a new level of bearishness by some strategists on the Street. You had Mike Wilson over at Morgan Stanley came out bearish on the markets this morning.

Right now, I'm rereading my newsletter, trying to remember what I wrote about last night-- but it's on the website right now, YahooFinance.com. Michael Hartnett over at B of A saying-- and Brian, you can appreciate this-- he's calling for a rate shock next year, in large part because of the potential moves out of the Federal Reserve. And that wouldn't necessarily be good for a lot of these high-growth areas of the market here. I don't even want to hear rate shock. I mean, that's just major red flag.

BRIAN CHEUNG: Well, I mean, when I hear rate shock, I think of the Volcker-induced recession that was put in place by dramatic rate increases to kind of tamp down the stagflation that we had seen in the 1970s. Now, there's a lot of reasons to suspect that the dynamics that we're seeing at play are not quite the same, but the reaction function essentially might be the same type of mechanism, to try to get ahead of what could be more persistent inflation by raising interest rates.

But look, we've been talking at length about risk assets, about equities, about bonds, but I want to call a focus, specifically, also to credit. An interesting note from Bank of America coming out this morning noting that inflows into certain types of credit funds, especially the more investment-grade, also high-yield, funds have actually slowed a lot. There are still inflows, not necessarily outflows. But you have a lot of corporate issuers trying to pull forward the issuance of new corporate debt to try to get ahead of the Federal Reserve's possible rate hikes next year.

Again, if you're a company, you're trying to think about whether or not 25 basis points more in 2022 might incentivize you to pull forward some of your fundraising plans if you need more capital right now, especially if you're trying to kind of get more padding, get more cash on your balance sheet ahead of what might be a rocky winter few months because of the Omicron variant. That's impacting credit supply as well.

JULIE HYMAN: Yeah, that's really interesting, and a good point about how companies position themselves for this. As for rate shock, I don't know. When rates are near zero--

BRIAN SOZZI: It just sounds good.

JULIE HYMAN: And when the Fed has telegraphed as clearly as it can possibly telegraph-- this is a very different Fed than the Volcker Fed for sure, in terms-- I mean, you didn't get press conferences in the [INAUDIBLE] [? Fed. ?]

BRIAN SOZZI: I can't wait to cover it with you, Julie. I can't wait to cover it. 2022, bring it on.

JULIE HYMAN: Yeah, I think he means argue. I think that's a euphemism. All right, let's--