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Market Recap: Tuesday, June 22

The markets closed in the green after Federal Reserve Chair Jerome Powell testified before Congress on Tuesday, with Big Tech outperforming and hitting a record high. Jeffrey Kleintop, Charles Schwab chief global investment strategist, and Brad McMillan, Commonwealth Financial Network CIO, joins Yahoo Finance’s Adam Shapiro and Seana Smith to discuss the latest.

Video transcript

ADAM SHAPIRO: Welcome back to Yahoo Finance. We're about a minute and a half to the closing bell. To help us get there and to guide us through it, we welcome into the stream Jeffrey Kleintop, Charles Schwab chief global investment strategist, still with us, and Brad McMillan, Commonwealth Financial Network CIO. We're going to be checking in with Jared Blikre in just a bit, but let's take a look at where the markets stand right now, as we have one minute till the bell sounds.

And you can see that we are in positive territory. This is after Federal Reserve Chair Jay Powell testified today. No big headlines regarding inflation or easing of the $120 billion worth of bonds and mortgage-backed securities that they buy. But here's the deal. The Dow is going to settle, most likely, up about 70 plus points. The S&P 500 will be up about 21, 22 points. The NASDAQ is going to settle in positive territory, up about 100 points.

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And some of the big movers on the Dow today, at least the gainers, include Nike. Nike is up almost 2%. Home Depot is up almost 2%. Remember, Home Depot is off about 10% from its all-time high. It had a great first quarter earnings report, but the question now, as we emerge from the pandemic, will people continue to do as much home renovation? So people are keeping an eye on that. Apple is also up about 1%, 1.3%. Now some of the losers today, Boeing is down. It's off about 1%. Here is the closing bell.

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SEANA SMITH: And that does it for the market action today. Again, we are seeing gains across the board, although we are settling off the highs of the day. You can see the Dow closing up just around 68 points. We were up over 100 points just a few minutes ago. Again, Adam, going through some of the leadership that we're seeing in the Dow today, Nike, Home Depot, and Apple are the three outperformers inside the Dow. The S&P closing up just around a half of a percent.

The NASDAQ the outperformer today, up just around 8/10 of a percent, an 111-point gain. We saw big tech outperform. You can see it when you look at some of the Dow leaders, Apple and Microsoft in the mix there. We had Microsoft hitting a new record high today. Facebook, Amazon among some of those names closing in the green. Again, sector-wise, nine of the 11 sectors closing to the upside. A lot of that strength coming from technology, consumer discretionary, communication services there amongst the leaders.

We want to bring back in Jeffrey Kleintop. We also have Brad McMillan joining the discussion. And Brad, let me go first to you. The leadership that we're seeing today, big tech now back in favor, are you seeing some buying opportunity there?

BRAD MCMILLAN: I am seeing some buying opportunities. We saw tech take a hit for a couple of reasons. Growth stocks in general got hit because interest rates were going to go up. Of course, they haven't. And then there's consumer spending, which is going to be focused a lot on tech as we go forward, and companies that need to service where-- their new business. So I think there are some opportunities for that going forward.

ADAM SHAPIRO: Brad, when you talk about the opportunities going forward, when we talk about tech, it's always the big names. And you know, we're coming out of Amazon Prime days. What are we missing in the tech story when we just focus on FANG, on the big top tech leaders?

BRAD MCMILLAN: I think you need to look at some of the smaller companies, some of the companies that are attacking niches that the big companies can't get at. And there's two-- there's two exit opportunities there. Either they get acquired by the big companies, or they grow into something very substantial. And I think Zoom is a great example of that. You know, they got a chance to grow. So when we look at it, we're looking at companies that are kind of playing around the edges of those ecosystems and appealing to the customer, because we see consumer spending going up pretty strongly over the rest of the year.

SEANA SMITH: Jeffrey, we talked about some areas of opportunity inside the US. When it-- when you take a look overseas, does anything look attractive to you at this point in the recovery? Because many of those places are behind the US when it comes to recovering from the pandemic.

JEFFREY KLEINTOP: That's right. The first half of this year still saw tremendous lockdowns across much of Europe. And of course, Japan's been in a lockdown here ahead of the Olympics, as well. And that's where we've got a tremendous amount of pent-up demand. And that's what's most exciting to me.

I know consumer discretionary did very well today, but take a look at some of the consumer stocks in Europe, and particularly more on the service side of serving consumers in Europe. We have now got a massive reopening combining with, finally, that massive stimulus program that was approved last year only now is beginning to roll out. The bonds are being issued now. The money's beginning to hit next month. So you've got a combination of fiscal stimulus and the delayed reopening of the European economy.

When we take a look at consumers, their savings rates are at 20%, 7% or 8% above normal. That is very likely to be spent in the second half of this year. I think economists and analysts are underestimating the amount of pent-up demand in Europe. That could really be a game-changer here as we take a look at the relative earnings growth between Europe and the US.

ADAM SHAPIRO: When you say game-changer, though, aren't I safest as an investor if I keep it here with at least the next year of projected growth in the United States, Jeff?

JEFFREY KLEINTOP: One of the challenges of that is US valuations versus what we're seeing overseas. Certainly there are companies in the US that serve those markets where you can get European consumer exposure by staying with companies headquartered in the US. The challenge is the multiples on those companies are much higher, and we're moving into an environment where, you know, the Fed, with tapering and perhaps, eventually, concerns about raising rates, that may put a lid on US multiples, and even downward pressure on them, whereas we don't have that concern about Europe. Double-barreled fiscal stimulus and monetary stimulus might continue to support valuations.

SEANA SMITH: Brad, we heard from Fed Chair Jay Powell earlier today, reiterating the fact that he's not worried about the inflation that we're seeing right now. He still expects it to be transitory. Do you expect those inflationary pressures to be transitory here?

BRAD MCMILLAN: I do expect them to be transitory, for a couple of reasons. First of all, we're already seeing some of the worst components start to roll over. There's-- lumber is the poster child here. It's spiked, and now it's coming down. Copper, Dr. Copper. Every-- copper goes into everything, and it's spiked and it's going back down. We're seeing the supply chains start to normalize, and that's going to pull inflation down across the board.

As far as labor goes, yes, we have a disconnect here, and that's not surprising when you think about the disruption. But when you look at the number of people who are out of the labor force who are now looking for a job, that pretty much fills that gap. And we're starting to see that close. So this is transitory. You know, we've heard a lot about inflation going up over the past several years. We haven't actually seen it. I don't think this is going to be any different.

ADAM SHAPIRO: Let's go back to Jared Blikre. He's standing by at the New York Stock Exchange. And you know, talk about how quickly things change. At the end of last week, the Dow was off for the week 3.5%, and then you've got Bitcoin just today below 30,000, and then, you know, back above 32,000. So what do you make of this?

JARED BLIKRE: My big take is the worst may be over. And let's look at the Wi-Fi Interactive. First, this is a two-month chart of the NASDAQ record highs right here. S&P 500 right at its record highs. We could theoretically see 4250. Now, I was talking about the weakness in the markets and the bad, or the weak seasonality we have, especially this week and also next week. And then we did see a bit of a correction in the Dow. Didn't go very far, but I'll tell you what, we found support right here. And we still haven't cleared 3420. That's my line in the sand for the Dow. But the other markets looking very strong.

And then just let's take a look at Bitcoin here, because Bitcoin had a false break to the upside, as we know, when it got above 60,000. And guess what? We might have a false breakdown today. When we dip below 30,000, this is a classic signal. A lot of people are going to be punting this. I will say, if you're going to go long right here, have a short stop. It's really simple. We break back below 30,000, 29,000, get out. It's that simple.

ADAM SHAPIRO: Jared, what does it say about an asset, though, if a step like what we saw the Chinese do, which they had already done, by the way, this crackdown on mining, it was already at play, and yet we saw the selloff that it triggered. What does that say about the true value of the asset class?

JARED BLIKRE: I wouldn't look at it from a valuation perspective. I would just look at the technicals because we have a bear market in crypto right now and it takes a while to change that. And you're going to see more downward price movement on these headlines. But guess what? The price wanted to do that already. It was just looking for a catalyst. So I don't make too much about the noise that the Chinese are making. What I want to see is the market actually rally on bad news. So if we get another statement from the Chinese about that reining in crypto mining, and also payments for banks, and then Bitcoin rallies, guess what? That might be the start of a new bull market.

ADAM SHAPIRO: All right. Jared Blikre on the floor of the New York Stock Exchange. We're going to go back to the panel, I believe. And let me bring Brad back in this. I don't know, Brad, if you're comfortable talking about what we're witnessing with crypto, but that question that I asked Jared about when you see the volatility in an asset class based on an obvious that's already in play, the Chinese saying that they were going to crack down on Bitcoin mining, does that indicate there's something not right with the asset in which people are pouring lots of money?

BRAD MCMILLAN: Well, I think it certainly provokes some questions. You know, Bitcoin, the way I look at it, is a sentiment asset. It's worth something because people think it's worth something. Well, we've just had a billion people forcibly taken out of that pool of people who might be interested. We've got a billion people who face punishment for trying to transact in that asset. And we have one of the largest sectors of the mining community now having to deal with this. I don't see how that can not have an effect on an asset. I don't have a formal opinion, but certainly if I was holding Bitcoin, that would be something that would concern me.

ADAM SHAPIRO: All right. Gotta say thank you at this point to Brad McMillan, Commonwealth Financial Network CIO, Jeffrey Kleintop, Charles Schwab chief global investment strategist. Both of you, thank you for sticking with us, especially you doing double duty there, Jeffrey. We appreciate your helping us understand some of what Jay Powell had to say.