S&P 500 and Nasdaq, Boeing, recession warnings: Market Domination Overtime

All three of the major US stock market indexes (^GSPC, ^DJI, ^IXIC) all closed Tuesday's session in the green in the middle of this holiday-shortened trading week. The S&P 500 and Nasdaq Composite continue to add to the growing list of record highs in 2024.

Outgoing Boeing CEO David Calhoun (BA) testified before a US Senate panel addressing safety concerns within the company. Calhoun stood before families of victims from previous incidents involving Boeing and apologized to them directly.

For more expert insight and the latest market action, click here.

This post was written by Nicholas Jacobino

Video transcript

That's the closing bell on Wall Street.

And now it is market domination over time.

We are joined by Jared to get you up to speed on the action from today's session.

Let's start with where the major averages ended on the session.

All three in the green.

Actually the dow finishing higher after you can see kind of bouncing between gains and losses throughout much of the session.

But up by about 57 points when all of a sudden down 1/10 of 1% the S and P 500 closing higher by a quarter of 1%.

That means another record close and the NASDAQ is it seven in a row now that we've got records of record closes for the NASDAQ composite, even though very barely making that today.

Let's look at a quick 10 year chart, 10 day chart, excuse me of the NASDAQ.

And you see that 6% move upward yesterday, we were talking about how broad the uh the gains were and even though the gains overall are not as big today, they're just about as broad as they were yesterday.

Both the S and P and the S and P equal weight index rising by about a quarter of 1% in the Russell 2000 right there as well.

Up about 1/5 of 1%.

Let's send it over to Jared for a closer look at today's action.

Thank you, Julie.

I think it is seven days and let's get to some heat maps here and we can plot the action of what happened just today.

Now, here's the financials in the lead spot there.

XL F up 6/10 of a percent industrials close behind it, but not seeing a lot of out performance to the upside or downside for what it's worth communication services, consumer discretionary materials, all of those closed in the red here.

But what we're looking at what everybody is looking for is to see the pecking order.

And guess what?

Nvidia is the biggest stock in the solar system again, actually, for the first time ever.

Not again, it is past Apple again because it did that last week.

And you can see it's up 3.5%.

Again, the market cap numbers $3.335 trillion for NVIDIA, a little bit less for Microsoft and a little bit less than that for Apple.

But those are the bao right there.

And if we take a look inside what's happening in the semiconductor cir uh cycle or I guess circle here, we got a bunch of record closes NVIDIA.

Um Also KL A Qualcomm and maybe one or two others.

But we've just seen this flurry of action and inside the semiconductor space and uh looking a little bit different in software, we are seeing some out performers oracle up 2%.

But uh for most, for the most part, you're seeing more downside action than upside.

And that's kind of what we've been seeing more out performance by the semis than just about anything else.

I'm gonna close with our leaders here.

You can see uh a lot more green than red.

Number one is the Sox, that's a semiconductor index which by the way closed at a record high.

The worst performer is Bitcoin down about 3.5% there.

All right.

Thank you, Jared a record day on Wall Street for the NASDAQ and S and P 500 just barely.

And it's official NVIDIA overtaking Microsoft as the world's largest company and joining us now is Ahmed Riego insignia, Chief Investment Officer.

Ahmed.

It is good to see you.

So, um you know, I mean, we, we were talking to Jim Bullard today on the show, former Federal Reserve Bank of Saint Louis president.

Now, now Jim still firmly in that soft landing camp, but um you actually see an eco economic downturn coming Ahmed.

How come?

That's right.

Listen, last year, uh I think when most analysts were expecting a recession, we were firmly in the camp, but we just didn't see recessionary conditions in the United States this year.

We think it's a different story.

We think just as everyone is coming over to the no recession side, the soft landing side, we think the chances of recession are much higher, not only than w expect but that it's currently being priced in by markets.

So, uh we don't think it's a done deal that a recession happens in late 2024 early 2025.

But we do have a lot of warning signs that things are deteriorating rather rapidly, especially in the labor market.

I know it's not being reflected in the employment data, but we're seeing it in other labor market data, especially on the demand side.

Strangely enough, the markets now pricing in no recession, which means that from, from a market perspective, we just don't think that this is an attractive place to deploy a new capital into the broader market given that it's almost perfectly priced for a soft landing scenario.

Ahmed.

Can you, can you be a little more specific here about what signs that you're seeing both within the labor market and elsewhere?

That would point you, you know that we're getting closer to a recession.

Yeah, so it's mostly coming from two different, let's say uh uh types of data, one is labor demand.

Uh And what we're seeing there is that um the demand for new hires for new jobs is falling quite rapidly.

And in fact, if you extrapolate current trends for labor demand, we think that the unemployment rate will probably start shooting much higher sometime by the end of this year.

That's if things continue on their current course, the other area where we're seeing a lot of weakness is in the US consumer and we're seeing the US consumer becoming a lot more, uh, discerning as to where they want to deploy new dollars.

We're seeing it being reported by retailers such as Walmart and target that uh consumers are for the first time in a very long time.

Uh opting not for a higher price goods and instead are are focusing more on staples and lower price goods.

So we see that the consumer is starting to behave as their wallet is getting pinched.

This is something that many people expected to happen last year.

It didn't happen because those us excess savings were quite large, but we're finally starting to see it come in.

And if you couple that with deteriorating labor demand, which eventually will lead to layoffs, it doesn't look good.

Uh As far as a uh uh us recession is concerned.

And alan, when you talk about a recession, economic downturn, can you quantify that for us?

You know, how significant are you looking for here?

So we don't think it's gonna be a very significant one.

That's a definitely a big difference uh versus the last two recessions.

The last two recessions we've had in the United States have been uh strong exogenous shocks to the system.

We don't think that's gonna happen this time around.

This is gonna be a very mild recession in some parts.

It might not even feel like one.

basically this is a recession where we expect the unemployment rate to, uh, uh, go higher than where it is right now.

So to take above 4% but not tick above higher than 6%.

So very mild recession, especially compared to the two most previous recessions in the United States that have been quite significant shocks to the system.

And obviously there, I'm talking about the GFC back in eight and then COVID in 2020.

Well, given that it's going to be more mild and given that the rally has been led by large Cap tech, is there a scenario in which they could just keep going up even if there is a mild recession here, if spending holds up in areas like a I, for example, we actually think you're exactly right, which is actually what we're telling investors to do is to kind of adopt a sort of Barbell strategy where you still have on the one side, uh uh exposure to what we like to call now defenses because that's what's happening with mega cap tech.

They're actually defensive and growth.

They're this hybrid sort of new hybrid uh sector that's popped up.

These are companies that are doing well under every scenario, if, if there's economic boom times, they're, they're making money.

If things are going bad.

Uh, they're still making money because they're almost trading like utilities.

Think about this right now, if you're a company in the United States or even elsewhere, and let's say we do head into recession and you need to cut spending, you are more likely to cut head count than you are your cloud service.

Right.

Because these things are really becoming a utility.

They're necessary.

They're exactly like paying the electricity bill was, you know, 2030 years ago.

So we think they're actually gonna do well in both types of environments, both booming growth and uh recessionary conditions and scenarios.

What about materials specifically?

Ahmed.

How, how come you believe that that's an area to commit capital to?

Right.

So we actually think that that's a good hedge in case we're wrong and in case we're still uh uh uh gonna continue along in economic expansion, what we're seeing is that there's a whole, there's a series of cyclical sectors out there that have not participated in this rally and that have a lot of space for catch up.

And so if we're wrong and the US economy, as let's say, does not delve into recession, we think that those sectors will uh uh start to catch up to the other sectors that have been performing very well.

And I'm talking about uh uh things like uh materials, things like industrials, uh financial, some of these other sectors that have so far lagged the, you know, the the the the more dominant parts of the market this year like uh uh tech utilities and some of the more other defensive ones.

Ahmed.

Thank you so much.

Appreciate your time.

Thank you.

Let's talk home builders now, Lenar sliding today after announcing second quarter earnings, the home builder setting the choppy mortgage rate environment as a headwind as you might expect here with more Yahoo finance his own Danny Romero.

Um So talk to us about not just one but what it tells us about the housing market, there was actually some very interesting commentary from Lenar that talked about what the current consumer is feeling right now.

And they said first, the one number one thing was consumers are feeling a bit distressed and so that is creating some credit challenges um who are trying to some way jump into the housing market.

They said that that is similar to last quarter.

Another key thought that that I thought was very interesting from this earnings was that consumers are very sensitive to interest rate, interest rate movement.

So there is a direct correlation when interest rates go up.

That means builders would most likely for some form of incentives like those mortgage rate buy downs, they'll probably boost those up.

That's when the builder upfronts the cost to lower the rate on the loan.

And third is that consumers in a way, are expecting a discount and incentive to afford a home.

And I thought that was really interesting that, that consumers are expecting some form of an incentive when buying.

And then in the second quarter, Leonard did cut homes uh home prices.

So we could see that in the next upcoming earnings with KB home.

Uh the average sales price for a home in for Lenar was about $426,000 and that was a 5% drop from last year, Julie.

So, um another thing that they did reveal in this is that the fed rate cuts, if that does materialize, will that be some form of competition for them or will, you know, it will also boost the housing market in general?

So they're not too worried about or concerned that that would, you know, um cause some form of extra competition, they're pretty bullish.

There would be good news for them also totally, but then there's more homes for sale, right?

So then you're competing with the resale marking market and then the new home market.

But there, I mean, Lenar was very bullish in saying we're not too concerned that if it does unlock more inventory that it would cause a problem for them.

It was, you know, Dan, I was talking to um, Jay mccanless over at Wed Bush who covers these names sector and he is, he is great and he, I sort of asked him the same question kinda what is, what is just a, as a financial analyst who just lives in this world, what is just the broader environment look like?

And he kind of painted a sort of a, a continued mixed picture because he said demand was still there, like the demographics still work because you have so many, I mean, just think Gen Z millennial Americans, they would love to buy a home.

But on the other hand, he said affordability is still such an issue.

I mean, 30 year fix 7.02% still according to mortgage News daily.

I mean, it just, it remains a challenge.

Well, and the other thing that we have to consider too, with the existing home market is that homes that are 40 years or older, um they're not, they don't have an entry level price point.

So that's why it really does make it attractive to jump into the new home market because you're gonna be offered some form of an incentive, whether it's the buy downs, whether it's the closing cost, whether it's the home price cut like there, it really makes it attractive when you are an entry level buyer.

And it, and you know, for KB home, who's, who's about to report earnings, they are specifically focused on first time home buyers.

And so that really does kind of signal across the board for all home builders, they've kind of changed their focus.

They're kind of like, you know what, let's try to help the entry level uh buyer right now.

Um But yes, I think that, you know, inventory still remains limited.

Uh, builders have been ramping up housing starts so that looks really attractive right now for the market, um to really fulfill the gap that's going on between both markets.

All right, let's get to KB home because the numbers are out here.

Second quarter results hitting the wire.

So second quarter earnings per share, $2.15 well above estimates, second quarter revenue falling year over year.

But coming in ahead of estimates of 1.71 billion, the same goes for deliveries which again fell on a year over year basis.

But we ahead of estimates at just over 3500.

The company is now bringing up the lower end of its full year revenue forecast.

Now expecting 6.7 billion to $6.9 billion in revenue for the full year.

Here.

The company's average selling price did increase year year to 483,000 from 4 79 500 again on a year over year basis.

And the CEO Jeffrey Mezger, the chairman and CEO saying in the statements, the key metrics are above the high, the guidance and buyers are resilient in their desire for home ownership despite the volatility in mortgage uh in mortgage interest rates that you just pointed out.

Josh, despite 7% you know, people still wanna buy houses.

Yeah, look at that nice pop in the after hours.

Um Yeah, it's interesting.

The CEO here going to a business generate substantial cash flows.

He knows we're putting our balanced approach to Aleck.

He and his capital focus on both expanding our scale and returning cash to our stockholders.

Danny.

Uh The other thing I thought was really interesting.

It says our pace of monthly net orders per community was one of our highest second quarter levels in many years.

So that really does show the appetite that there is for this new home market.

But if you compare lear's uh price tag of $426,000 to what uh KB home did, it was $483,000.

So you can definitely see a little bit of the range there when it comes to pricing.

But we also have to consider that KB Home.

They build homes in Arizona, California, Florida, Idaho, Nevada, uh North Carolina, South Carolina and Texas and Washington.

So some of those states are definitely uh higher home prices up in those ranges.

So we have to factor that into all of this.

But again, I mean, he just said it that it remains uh buyers remain resilient in their desires for homeownership and I think that nails it on.

Yeah, definitely.

And they expect the average selling prices for the full year to be 485,000 to 495,000.

So a little bit of a tick up from this quarter.

Thanks a lot, Danny, appreciate it.

Well, still to come.

We're checking in on the latest from Boeing following today's comments from Ceo Dave Calhoun in front of Congress.

But before we go to break, Cygnet reported last week, we hit it on air.

I suggested the CFO had gone off script during the conference call and the company reached out to us to say that was not the case, more market domination overtime coming up outgoing Boeing Ceo Dave Calhoun testifying in front of a Senate subcomittee today.

But before he took questions, he apologized to the families of the victims of Ethiopian Airlines flight 302 and Lion Air flight 610.

I would like to apologize on behalf of all of our Boeing associates spread throughout the world, past and present for your losses.

They don't know you and I apologize for the grief that we have caused and I want you to know we are totally committed in their memory to work and focus on safety.

For as long as long as we're employed by both Yahoo Finance's Prize.

Submarine has been found in the hearing today.

Prize.

What do we here?

Yeah.

You know, that was a little surprising when Calvin stood up in the middle of his prepared remarks to address those families there and there in the beginning that before he even started, they were chanting and, and, and complaining and voicing their displeasure with Boeing and how they hadn't really kind of been punished yet for what had happened.

So that kicked off the, the hearings there and a number of senators kind of grilling Calhoun here about what happened here with regards to, you know, how can you reassure something that something has changed?

Safety culture has been improved?

Um, um Calhoun saying that something went wrong with regards to whistleblower intimidation, uh uh, acknowledging that that had happened and said that they had fired and disciplined some managers who had, who had sort of, uh, uh, intimidated whistleblower.

We say when last night talking about how uh, non conforming parts were used on some max planes and Boeing tried to hide that fact.

But, um, you know, beyond that, I think Calhoun was just there to sort of kind of take the, take his lumps, uh, from the senators.

He took some pretty big ones from Josh Hawley, uh, Senator from Indiana.

Talking about how maybe Calhoun was one who came out on top through all, all this.

You're getting paid a heck of a lot of money.

It's unbelievable if anybody's coming out of this deal.

Good.

It's you.

Why haven't you resigned?

Senator?

I'm, I'm sticking this through.

I am proud of having taken the job.

I'm proud of our safety record and I am of our Boeing people.

You're proud of this safety record.

I am proud of every action we have taken every action.

You Yes, sir.

Uh Hawley also brought up the fact that, um, Calhoun had said that he's a, he's proud of the safety record and things like that and processes.

And he said, well, are you proud of the fact that some uh uh suppliers were using Dawn dish soap and, and hotel credit cards to fit some parts in together, bringing that up those allegations of uh I think belief work that had happened at Spirit Area system.

So kind of some fireworks here and there, but really sort of Calvin is sort of absorbing a lot of heat.

Right.

Well, and you know, he was asking why hasn't he resigned?

But he is stepping down um at the end of the year and Boeing of course, is in the process of looking for his replacement pros.

Thanks very much, appreciate it.

Well, outgoing Boeing, the outgoing the Boeing Ceo testifying in front of lawmakers earlier today about the safety culture at the company Boeing is the number one holding in our next guests, commercial aerospace and defense ETF more on Boeing's path forward and what it means for investors.

We're bringing in Tony Bancroft portfolio manager at G Bey Funds.

Tony.

It's good to see you again.

So, you know, obviously whenever you get uh a congressional hearing like this, you get some political grandstanding, of course, but we also got new whistleblower um revelations today with regard to Boeing and about the quality of the materials that it has been using.

What's your level of concern about whether Boeing is getting back on track.

Uh Thanks Julie.

It's great to be back.

And, uh, and Josh, you know, I think Boeing coming to this uh meeting today, you know, Ceo Calhoun knew he was gonna take a, take a grilling shows, you know, they're committed to transparency and obviously what they have discussed with and so put out and uh which the fa is agreed upon.

Um, you know, they, they have, they have a lot of, they've got a lot of work to do.

They've got a long way to go.

Um, but I think they're committed to it and, you know, I, I think it's sort of more of a long term story.

I, I think right now, you know, Boeing is in the process of, of uh sort of rebuilding the, the culture and uh working on their Q A and safety practices and, and it's gonna take time, it's just, it's just not gonna happen overnight.

Um And, uh you know, the stocks probably just not going to uh react uh until we see, uh you know, a new CEO um the, the Sphere deal closed and you start seeing production rates in the 737 increasing, but we continue to like the stock.

It's our, it's a, it's a number one holding in our Gabelli Commercial Aerospace and Defense uh GT A ETF and um I think the long term secular uh you know, uh thesis um the tailwinds for, for Boeing uh remain intact and you're gonna continue to see them improving their, uh, their quality, their operations and, and production rates and you're gonna probably see a year or two from now of a better, a better company.

And Tony, you mentioned, you know, a new CEO, um, who do you think that New Co should be Tony?

Do you, do you have, you know, names of candidates you'd like to see, take that big seat or, or at least, you know, more generally Tony, the, the kind of background experience, skill set, you, you think that next CEO needs to have?

Yeah, I think, uh, you know, I'm sort of in line.

I, I've, I've spoken with Boeing and they sort of have what they call their wish list.

You know, someone that can essentially usher in the next, the next plane.

The 737 max won't be around forever and they're gonna need to, uh, design a new aircraft that's more efficient and, you know, has worse safety features, uh, you know, esg friendly, you name it.

And, and so they're gonna need someone that has the, the engineering files to do that.

Uh They're gonna need someone who can, uh, you know, sort of work with the, with Boeing's culture and sort of their, their employees hearts and minds uh to sort of improve, uh improve that aspect of the business and, and they need someone with a technical, you know, sort of engineering operational uh background that can, you know that it understands production uh supply chains for production, um uh you know, production lines and can improve the efficiency there.

And I think the logical, you know, the logical person would be someone like Pat Shanahan, you know, the CEO of Spirit aerosystems.

I think when they get this deal done, um there could be an announcement that, you know, he, he takes over as CEO former CEO uh a former Boeing employee as co experience engineering background.

He worked in government.

I think he sort of, um, you know, hits all the hits, all that we get Tony.

I know that you are confident in the company's sort of transparency that we have seen.

Right.

But I have to wonder were there problems in past years that we just didn't know about and now we know about them or are there more problems now?

I maybe that's difficult to know.

It just seems like there, there are issues here.

It's not just that they, you know, that they're being more transparent.

It's if, if we're people flying on a plane that is a Boeing seems like there are some areas of concern.

Yeah.

You know, I listen, I think Boeing is just like any other large corporation.

Um And obviously, you know, no, nobody's perfect and no corporation is perfect.

I'm sure if you went to any Fortune 500 company in America and put the spotlight on in the microscope that Boeing has on them right now, you're gonna find, find issues.

And I don't think, you know, Boeing itself admittedly no different than that.

But if you will look at the big picture, the safety record that the, you know, the FAA has, um, has upheld for the last 15 years, not a crash related.

Um uh uh uh mi mishap, that's, uh, you know, in turn related, you know, had a death um on an FA on an fa aircraft that, you know, it's just Boeing is essentially a victim of its own success.

I mean, you know, they're 51% of the FAA fleet, so they're the mass majority of, of what is flying safely every second or so, someone's flying in a Boeing aircraft.

Um And, and I just think that, you know, Boeing is getting a lot of heat right now, but the reality is, is that the safest way by far still to fly or to travel, you know, of any, any mode of transportation.

Tony.

Good to have you on the show.

I appreciate you making time for us.

Thanks Josh and time now for what to watch the stock and bond markets.

Remember we're going to be closed for the June 10th holiday, but we will be seeing a bit of economic data tomorrow.

The monthly Home Builder Confidence Index is coming out in the morning, kind of is expecting that number to tick up a point to 46 and looking ahead to Thursday more data on the housing market.

Housing starts and building permits are out ahead of the opening Bell Wall Street estimating both numbers to rise after declines in April will also get the weekly look at mortgage rates from Freddie Mac which fell to 6.95% last week.

And finally on the earnings front, more reporting from accenture Kroger and garden restaurants, among others, Kroger announcing first quarter earnings on Thursday morning and I was expecting the same store sales growth to be muted.

Facing inflation related headwinds from price sensitive consumers.

That'll do it for today's market domination over time.

Be sure to come back Thursday at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.

But don't go anywhere on the other side of the break.

It's asking for a trend.

I got you covered for the next half hour with the latest greatest market moving stories, including an exclusive interview with Federal Reserve Bank of Boston.

President Susan Collins.

Stay tuned.