Market Recap: Thursday, January 6

U.S. stocks were down at close after choppy trading on Thursday. Louis Navellier, Navellier & Associates Founder & Chief Investment Officer and Rob Haworth, U.S. Bank Wealth Mgmt Sr. Investment Strategist joined Yahoo Finance to discuss.

Video transcript

EMILY MCCORMICK: We're just under 5 minutes from the closing bell, and our market panel joins us now to break down today's trading action. Louis Navellier is Navellier and Associates Founder and Chief Investment Officer, and Rob Haworth is US Bank Wealth Management Senior Investment Strategist.

Louis, we'll start with you, because in your notes to us earlier, you said you expect a spectacular melt-up on higher trading volume this month. Do the Fed minutes from yesterday and the market reaction that we've seen over the past two sessions now change your view on this at all?

LOUIS NAVELLIER: No, not at all. We're going to have great fourth quarter results. And I think the main problem the market had is it just had a mean reversion rally. Basically, the laggers took off and the winners got hit. But there's a lot of bargain hunting going on right now. I'm very pleased with how the semiconductors are performing today.

And you just can't ignore the good earnings. Now, as far as the Fed minutes yesterday impacting the market, that was a gross overreaction, OK? Clearly, some FOMC members are upset with inflation, but they still want to wind down the quantitative easing before they raise short-term rates. And it's not going to affect growth stocks. So it's a big fuss over nothing. And I just can't wait for earnings to commence and reality to come back.

ADAM SHAPIRO: Rob, real quick, because we want to save time to get ready for that bell-- but, you know, your emphasis on US large cap equities over fixed income, does it go in line with what we just heard?

ROB HAWORTH: I think so. I mean, we're generally seeing interest rates as being under pressure. And we think that makes it tough for bond holders. Within the US, I mean, we're hopeful for fourth quarter earnings. We think it should be fairly good.

That said, the market does have to adjust to what is a surprise in terms of how aggressive the Federal Reserve may be in managing the economy around inflation.

EMILY MCCORMICK: All right. We'll check back in with our panel in just a moment. But let's get one final check of the market here before the closing bell. Taking a look at the major stock indexes, we do have the Dow down about half of a percentage point, down more than 150 points as we speak.

The NASDAQ down about 0.1% and the S&P 500 down about 0.2% as we head into this closing bell. Now, taking a look under the hood here at the sector action, the outperformers in the S&P 500, again, those cyclical sectors-- energy, financials, industrials-- all moving to the upside, not enough to move the broader index into the green, however, as it stands right now. And then the laggards during today's session, we do have materials, health care, and utilities here.

And then if we take a look at what is going on in the bond market, of course, we did have Treasury yields moving up across the yield curve yesterday, extending some of those gains today as well. That 10-year up over 1.7%, and we do have the closing bell on the New York Stock Exchange here now.

[BELL RINGING]

ADAM SHAPIRO: All right, there's the bell. Can we please get a gavel? Yeah, oh, man, he's angry. Yeah, we got the gavel. All right, let's take a look at where these markets are going to settle.

The Dow is off, but it was down a little bit more earlier. We'll settle down about half a percent today. The S&P 500 is going to be off-- essentially flat, but it's down about 4 points. NASDAQ fell again, not a lot, just about 20 points.

When we take a look at some of the laggards in the Dow today, among the top five at the bottom, 3M, Apple, IBM, Walgreens, Boots Alliance, and the UnitedHealth Group. Let's go back to the panel.

And you know, when we talk about where all of these markets are headed in 2022, Rob, the other thing you pointed out is that you kind of like non-agency mortgage-backed securities within nontaxable strategy. How does an average person like me take advantage of that?

ROB HAWORTH: Yeah, no, there are funds that are targeted to that. There are managers like Angel Oak that focus entirely on those strategies. But it's a fairly niche strategy. And we see it across a number of active bond managers who are trying to capture extra income in an environment where you don't get much from high quality bonds. So yeah, we look towards active managers in that fixed income space to really capture those ideas.

EMILY MCCORMICK: Louis, for investors, you mentioned that equities are still the only game in town right now. But is that attractive enough for now to get investors with cash on the sidelines back into the market at valuations where they are right now?

LOUIS NAVELLIER: Well, first of all, the stock market hasn't gone up as much as earnings have gone up. So price to earnings ratios are being compressed. I just did my small cap research-- despite 60% forecasted earnings growth, I'm at 21 times current earnings. I'll probably be at 17 times earnings after my surprises.

So there are a lot of places in the market where you can get good valuation. You saw Russell exhibit real strength today. But by far, the stocks that have done the best this year are dividend growth stocks. So we like to buy dividend growth stocks that yield about 3.4%. Those dividends double every six to seven years. They've been an oasis.

You know, I know financials and energy have also done very well. But they would start to get hit when the market got hit. The dividend stocks didn't. So it's important that everybody realizes that money isn't leaving the market just sloshing around.

And we're always looking for the alphas, the relative strength. And the dividend growth is a great place for a lot of conservative investors to go.

ADAM SHAPIRO: Some investors, Louis, might want to take your advice if they have some cash sloshing around doing nothing in a bank account. And look at semiconductors, especially with the shortage, but we keep hearing that that's going to be alleviated in the next couple of months-- which of the chip-makers and those kinds of companies do you like?

LOUIS NAVELLIER: Well, I like Nvidia, of course, which are AI chips, and help with self-driving, and gaming, and all the graphics. They're essentially a monopoly. KLA Corp. looks very good. KLIC is going to really help with the micro LEDs. They're already on computers. They're on very fancy TVs at CES right now.

And then we love United Microelectronics. That's the Taiwan company that makes the chips for all the flat panel screens in the cars, and tablets, and things like that. There is a very short supply right now of those chips, and that's why the automotive industry is still struggling, as is the computer industry. When I order something from Apple, it takes time to get-- takes like five or six weeks.

EMILY MCCORMICK: Rob, we have the next monthly jobs report coming out from the Labor Department tomorrow morning. Of course, we got a much stronger than expected private payrolls report out from ADP just earlier this week. What do you think investors should be watching in tomorrow's print?

ROB HAWORTH: Well, the headline number will always be important, but we're actually watching more closely the labor force participation rate and we're watching the average hourly earnings. Labor force participation, because we're just trying to understand our people returning to work. And while we won't get a big sign from the Omicron variant in the December report, we'll look more for that in the January report, I think it's important that the trend of improving labor force participation that we saw in November is carried forward.

Secondarily, average hourly earnings, the key for the consumer is, can they keep up with inflation? Can they continue to buy the goods they were buying before? And average hourly earnings will be a great indication of that.

EMILY MCCORMICK: All right, we'll leave it there for now. Rob Haworth is US Bank Wealth Management Senior Investment Strategist and Louis Navellier is Navellier and Associates Founder and Chief Investment Officer.