Market Recap: Friday, June 11

Stocks ended a choppy session higher, eking out a fresh record high. Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott and Jimmy Lee, The Wealth Consulting Group CEO joined Yahoo Finance Live to discuss.

Video transcript

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SEANA SMITH: We've got just around a minute here until the closing bell. We have Mark Luschini, the chief investment strategist at Janney Montgomery Scott. We also have Jimmy Lee, the Wealth Consulting Group's CEO.

And Jared, taking a look at the market moves, you just had the Dow slipping back into positive territory here in the final couple of minutes.

JARED BLIKRE: Yeah, 6 points, 5 points. You can see it on your screen, not a whole lot of action in the markets this week. But let's review the majors, down 82 basis, points that's 8/10 of a percent, for the Dow. And S&P 500 up a little bit today, up a little bit, even more over the week, about 4/10 of a percent. And then the NASDAQ, that has been the biggest gainer this week, up 1.8%. And we'll also throw in the Russell 2000, which is up the most today, up 1.93% itself but off those highs.

And the week's price action driven, in large part, by the 10-year T note yield. This is a six-month look at the 10-year T note yield. And you can see that we dropped through this support line, 1.5%. And I'll tell you what. If it goes down much further, you're going to see more rotation into those growth stocks instead of the value and cyclical trade, guys.

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SEANA SMITH: All right, that wraps up the trading week here. Again, looks like the Dow might hold on to slight gains. S&P closing up at a new record. The NASDAQ up just around 3/10 of a percent. You can see the NASDAQ adding 49 points as we shake out the final trade.

Sector action here, financials, consumer discretionary, technology among the leaders. On the flip side, real estate and health care are the laggards.

We want to bring in Jimmy Lee and Mark Luschini standing by here to help us break down the action that we've seen. And Jimmy, let's just start not only today but this week. We certainly saw a lot of action in some of those meme plays that have become the favorite here amongst retail investors. More broadly speaking, we got that stronger than expected CPI number yesterday. How are you looking at the week's movements?

JIMMY LEE: Well, I think most people on Wall Street are a little surprised, first on the meme stocks, how long this phenomenon has gone on. At some point, I think that we'll see this, end as we have throughout history. But for now, people are still chasing these hot stocks on the bulletin boards of social media.

As far as inflation numbers, I think most investors that are watching this closely understand that it's probably a result of a combination of some shortages in both the labor supply as well as just supplies in general for certain industries, such as auto. If you looked inside the inflation number, I think a third of that number came from just the automobile industry. So I think that's a temporary thing.

And so most investors, I believe, are probably bullish in the sense that, as we've seen this 10-year come back, people are starting to rotate back into the mega-cap growth names that have led the market until the last nine to 12 months or so.

But I don't think the trade is over yet. I know there's a lot of dialogue on, is the value trade over. I don't think so. And I think that, while the phenomenon of lower interest rates means FANG stocks could go up or growth stocks can go up, I think that might decouple later on. But I don't think value is done.

JARED BLIKRE: Mark, we did see-- I was talking about the 10-year T note yield dropping this week. One of the big catalysts was the breakdown in infrastructure talks. And we saw an immediate 5 to 6 basis point drop that day, I believe, if memory serves. How important is infrastructure to the bond market and expectations, just talking about maybe another surge in the value cyclical trade in the future, even though it's flagged a little bit here?

MARK LUSCHINI: Well, it's pretty interesting actually because I wouldn't think it would be wildly important. I mean, if we get some kind of bipartisan agreement, which is a number on the scale of $700 billion or so as opposed to several trillion. And of course, it's spent over some period of time, like a couple of years, then it's unlikely to matter much as it relates to any given year's total spending.

On the other hand, the total amount of issuance that we already have at the moment you would think would be enough to pressure yields higher as we go forward. So I think what we're seeing in the bond market right now is basically a tremendous amount of buy-in on the part of market participants who have been told repeatedly by the Federal Reserve that they are going to act very slowly and that this inflationary boom that we've seen in the last couple of reads we've gotten on headline CPI and even among the Fed's favorite gauge, known as the personal consumption expenditure index, is going to pass in time.

And I think that there's some risk in that trade. I think the asymmetrical risk, in fact, is that inflation ends up being far stickier than perhaps market participants believe. And therefore, the setup might be for those yields to break back up into that upward bias channel we haven't seen for quite some time, which is kind of on the low end, that 1.50 mark that you mentioned had been breached earlier in the last week or so, up to the high end of that channel, which is around 1.77.

SEANA SMITH: So Mark, taking all of that, then, how are you advising investors to be positioned right now in this environment?

MARK LUSCHINI: Well, I think, like the other guest had mentioned, I don't think we've seen the exhaustion of that value cyclical trade. I mean, certainly, we would expect that we're going to see moderation and growth here in the second half of this year from the very heady pace of growth we've had over the last couple of quarters. However, I still think we're going to see well above trend economic activity as a consequence of the more uniform reopening of the services industries at large that accompany that, which we've already seen in the manufacturing side of the business, lead to some emergence of inflation that is likely to percolate at an above-trend level over that which we've seen in the last, at least, decade or so, which had a 1 handle in front of it.

And in addition to that, we're seeing this synchronized global backdrop that's improving as a consequence of more successful campaigns around the vaccination rollouts. And that's a setup, I think, for cyclicals. And in so many cases, perhaps with the exception of financials, materials, energy, and industrials in particular I'm speaking of, tend to be dominated by multinationals that would see their earnings benefit from the tailwind of not only a weaker dollar as a consequence of this counter-cyclicality but also the improvement in profits that they would generate in overseas markets.

JARED BLIKRE: Jimmy, we've seen the Citi Economic Surprise Index come down into negative territory within in recent weeks. Haven't been getting those huge positive surprises. And in fact, that hot inflation print counts against it, actually lowers the score. I'm just wondering what economic reports in the coming week or weeks you're going to be focused on. And what are they going to tell you about the current market?

JIMMY LEE: Well, of course, we're going to be looking at the labor statistics. As we know, the unemployment checks are going to stop coming here in the few months that we have ahead of us. And so if we continue to see some labor problems once there's more supply out there with jobs-- we certainly know that there are record numbers in terms of job openings. And so if we don't see that balancing itself out, then I would be more concerned about growth not being sustained.

But I would suspect that consumers are going to spend maybe even greater than what we have been and particularly here in the US and in the travel and leisure sectors. Just in anecdotal evidence, I've talked to many people that are already scheduling their trips abroad outside of the United States. And the activity within the United States this summer, I think, is going to be very, very heavy.

We'll see how businesses deal with service in terms of keeping up with the expectations of consumers from the past. But I think that spending is going to be there. And so I'm going to be really looking at the jobs numbers and seeing if that gets better. And I think we will. My expectation is that we will get that number to look better.

I'll also be focused on manufacturing and industrial and material sectors that we're bullish on continue to perform well. And as the other guest was just mentioning, I think we've got, potentially, a longer bull market ahead of us with recession way out there, possibly, because of this laddering effect of the vaccine rollout and how effective countries are at opening.

So here in the United States, as you know, we're pretty much back almost to normal in most states. But in Europe and in Asia, we know that they're far from that. So I think this recovery can last a lot longer on the global scale. And I would also expect that international securities might do better than they have been relative to the US because of that.