Market check: S&P 500, Dow notch record highs at open

Yahoo Finance's Jared Blikre breaks down how markets are moving just after the opening bell.

Video transcript

JULIE HYMAN: A lot of analyst calls out this morning that are moving stocks. So we wanted to hit some of them for you. One of them is on Coca-Cola, Guggenheim Securities is upgrading the stock to a buy. They were at a neutral for about a year on Coca-Cola and saying that last year was sort of a transition year and now is the time to go higher.

Laurent Grandet, who we've had here on the show, says the company is now leaner, it's more agile, that the portfolio is more focused on larger and more profitable brands. The shares were up almost 1% coming into the session, Jared, now they've pared some of those gains. So we'll see if they can manage to gain a little momentum here.

JARED BLIKRE: That's right. And let's go to the YFi Interactive. I am looking at a two-year chart of Coca-Cola, and you can see, this was a big dramatic COVID sell-off that we had in March of 2020 but we are right back up to those highs. Interestingly, haven't been able to clear them. Let me just take a five-year look and you can see just kind of a stumbling block right there, but I would expect the stock to be able to punch through.

Interesting how a lot of staples went through a transition year. Typically consumer staples benefit from a flight to quality, a little bit of a defensiveness when there's some kind of you know, catastrophe as we had with COVID, and they had to go through restructuring because so many of their fundamental dynamics changed. So they're-- a lot of them had margin compression, margin issues, facing rising labor costs and they've been able to restructure and shed some of their brands. So I think Coca-Cola is lighter by about 200 brands. That's significant, there's going to be--

JULIE HYMAN: Wow.

JARED BLIKRE: --a lot of headwind that is reduced because of that, Julie.

JULIE HYMAN: Have you ever been to the Coca-Cola Museum in Atlanta, Georgia?

JARED BLIKRE: No. But that sounds interesting. I'd be up for that.

JULIE HYMAN: They-- you can sample all of the many different or some of the many different flavors of Coca-Cola and all its other sodas in various countries.

JARED BLIKRE: The original formulation? I'm just asking. I would probably doubt it.

JULIE HYMAN: That I don't think so. One of the other interesting calls this morning comes to us from Matt Boss over at J.P. Morgan, he downgraded Foot Locker to an underweight. Really interesting note here because he's talking about multiple pressure as well because of rising costs, including rising occupancy costs. So not here just talking about things like wages, but also things like rents. But to me, what's really fascinating about this note is that market share pressure from Foot Locker-- for Foot Locker from one of its main clients, that is Nike because Nike has been increasing its direct to consumer channel so much, according to Boss, this is proving to be somewhat problematic to Foot Locker.

Now we're coming up on the opening bell in just a second.

[MUSIC PLAYING]

So we're going to come back to the Interactive and to Nike--

[OPENING BELL]

--Foot Locker in just a sec. All right, there's the opening bell on this Tuesday morning. And we're going to look at the opening price in just a sec but I do want to resume our discussion of Foot Locker and Nike for just a moment as well because again, I think this was a really interesting point. You know, we just heard, Jared, from Nike towards the end of the year, and there was that really impressive expansion of its direct-to-consumer channel. So it makes sense that one of the casualties of that might be Foot Locker to some extent. And in this note, Boss really put some numbers around the effect of that.

JARED BLIKRE: Yeah. And the disparity between some of these retailers is really growing. There's a chasm and you have the haves and the have-nots and just in general, not-- I'm not even going to limit this discussion to apparel, but a lot of analysts are saying this is going to be a stock picker's market. So you can enjoy the passive returns, most people-- most of the analysts saying 8% to 10% as they do every year. But I'm looking at this heat map right here, let me put a two-month view, and you can see a lot of these stocks peaked in the middle of last year, you can see this to a higher degree on a six-month basis. Some of these were meme stocks like Express, so I'll try to avoid that, but you look-- take a look at Gap, OK, Gap peaked last May, and so it's considerably off of its highs right there.

And we were talking about Foot Locker, let me just pull up a one-year view. So the one-year view looks pretty good but if you were buying within the last six months you're probably underwater or at least experiencing some significant downgrades-- or excuse me, a significant downdraft in your portfolio because of this. So I'm not getting the words out quite straight but this is an interesting market. And I think the effects of China are also important because China accounts for a lot of business for Nike and some of these other retailers, and we're going to be talking about China and Walmart in a little bit here. But just kind of a foreshadowing of that, Julie.

JULIE HYMAN: Yes. Or a deep tease as we could say as well. Since we've got stocks open, just wanted to mention here we've got the NASDAQ very little change, the Dow leading the pack today with 0.5% gain and the S&P up a third of 1%. You know, one of the other retail trends that we have been watching over the past couple of years is the resale trend. And on that front, there's another stock on the heat map that stood out to me in terms of today's session and that's The RealReal which is one of these consignment resale sites, although its resale implies that it's secondhand clothing, whereas in many cases, people buy this stuff to then turn around and sell it. And the stock got upgraded today at Wedbush. So I believe that was the best performing stock in that retail heatmap that you had with the 7% gain, Jared.

JARED BLIKRE: Yes, it is. And we can see that on the YFi Interactive right now. Up in the upper left, that is The RealReal, but the history on this stock, that's impressive, up 10% over the last two days but let me put a max chart on and you can see a whole lot of sideways to nothing. In fact, down 55% from its IPO price. Now it is off of the lows that we saw in COVID but this is another brand that has struggled to really retain any-- or not retain, to gain any kind of leadership in the industry. And it's also benefiting from a lot of potential tailwinds that other-- some of its competitors have been able to benefit from. So it's really just a matter of execution here.

And I should mention-- I'm just going to switch over to our indices here because the Dow and the S&P 500 have notched yet another record high. This is some pretty strong price action. I'm going to put a two-month candlestick chart of the S&P 500. Well, this is Dow futures, but pretty similar chart for the actual Dow. You can see really nicely climbing above those highs that had been kind of a headwind for it.

Same thing with S&P 500 futures, finally starting to clear the 4,800 level. This is important because there are a lot of options activity at that particular strike level. Closing above would set the stage for a potential melt-up in stock prices, at least in the indices over the coming weeks potentially. And because of the option set up here, something called gamma, dealers are long gamma, it limits the volatility as long as prices go up. So unless we take out 4,740, 4,750 to the downside, there is that tailwind to the markets that we're benefiting from right now. But record highs for the S&P 500 and Dow once again, Julie.

JULIE HYMAN: You know, what is so interesting to me, if you look at the average forecast from strategists who track the major averages, 4,950 is where they are for year-end S&P 500 and we're at 4,800 right now. So the wind is at their backs. We'll see though obviously, there can be a lot of turmoil between now and then. Jared, talk to us about what is driving the movement upward that we're seeing in stocks today, what are some of the early indications here?

JARED BLIKRE: Well, let me just take a look at the bond market. I think it's instructive just to go over it one more time briefly, not going to belabor this, but to see the incredible moves that we're seeing in the yield curve. So the five-year T-note yield has now taken out its November high. And let me put a one-year char so, we can see where we are. Yeah, that's definitely the highest in over a year, and we're getting back to those pandemic-- those early pandemic levels in the five-year. Here's the 10-year T-note yield, we can see it's creeping up to its 2021 highs as well. And then here's the 30-year hovering-- actually not hovering, steadily reclaiming that 2% level up to 2.07%, and it looks like it's maybe potentially breaking or about to break out of this negative trend line here.

But the yield curve is advancing and when that happens, we usually see the value stocks like financials and energy outperform and we can see that in today's sector action. Financials, energy, there you go. Those are the two leading sectors followed by industrials, that's a cyclical sector, real estate, discretionary, communication services, and materials, all of those outperforming. So we're seeing some nice breadth to the market and that was something that was lacking late last year. So if we can maintain this breadth, in other words, we can have multiple sectors marching higher, it doesn't have to be all of them on a day-to-day basis, then I think we have the makings for a January rally. What happens in February? Well, a lot of times we give back some of those gains but we'll worry about that at that time.

And not to get too ahead of ourselves, I do want to check out the travel sector and the airlines because those have been jumping. American Airlines here, I'm going to pull up a one-year chart, it is at multi-week highs as are most of the other airlines. You can see what a mess it's been over the last year but over the last month, let me pull up a one-month chart, you can see we got lift off from December from those lows. And so we'll see if we can actually build on those. But for the most part, a lot of these names have been flying over the last month, which might be a little bit of a surprise given the fact that this was concurrent with the rise of Omicron, which fortunately is now fading a little bit into the background, Julie.

JULIE HYMAN: Yeah. And those stocks also recovering even as there have been a lot of cancellations and a lot more problems for the cruise industry as well.