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Market Recap: Thursday, July 1

Stocks gained on Thursday to reach new record levels, adding to advances after the major indexes closed out a strong second quarter and first half of the year. Scott Crowe, CIO at CenterSquare Investment Management and Luke Tilley, Chief Economist at Wilmington Trust joined Yahoo Finance Live to discuss.

Video transcript

[MUSIC PLAYING]

ADAM SHAPIRO: OK, just a little more than a minute to the closing bell. Helping us get there are Scott Crowe, CIO at CenterSquare Investment Management. Also, Luke Tilley, Chief Economist at Wilmington Trust. And as we head to the closing bell, let's see where we stand right now in the markets, because we've been enjoying everything to the upside today. Dow is going to be up over 100 points. It looks like the S&P 500 is going to close up almost 0.5%. And the NASDAQ's going to be up almost 14 points.

We had the Krispy Kreme debut today, the IPO. It opened below its IPO price but then it surged. And those shares right now are trading higher. So as Homer Simpson used to say, mm, donuts.

Just checking a few of the Dow industrials, the components in there, some of the gainers today include Nike, up about 2.25%, Travelers up about 1.5%. And then Chevron is going to be up as well, about 1.5%.

We're going to take you to that closing bell, because we are standing by. We've also got Jared Blikre on the floor of the New York Stock Exchange to bring us up to speed. And of course, we're going to have to discuss the news today that Robinhood is going to bring its $40 billion valuation to the public market, hoping those retail investors who loved pushing GameStop stock, as well as AMC, hoping they're going to take a bite out of this one.

But right now, we're going to say, that's a wrap. And here is where we're going to finish. It's going to be the Dow up 127 points, the S&P 500 up about 22 points, NASDAQ up about 18 points.

[KNOCKING]

There's your bell. Not sure why we're not hearing the ring, but I'm going to give you a knock

Scott, let me start with you. We're starting the third quarter. We're going to have earnings coming out pretty soon. And you know, there's been this whole transition of millennials forming households and moving to suburbs, and to the Sunbelt. Where is their money going to go when it comes to stock? Is it going to drive this market higher?

SCOTT CROWE: Well, it already has to a large degree. I mean, you talk about Robinhood and its valuation, I mean, that's a new phenomenon in the equity markets. It's really about the democratization that investment, the disintermediation of Wall Street. So you know, as they move to these new houses, if they have money left over once they relocate and then buy a new place, particularly with house prices where they are today, millennials are just going to become a bigger and bigger factor in the market. And it's going to change the dynamic of the market, including what gets valued, including aspects of ESG, for instance. That's going to become a more important factor in the market going forward.

ADAM SHAPIRO: Luke, we're also going to get the jobs numbers tomorrow. And there's been jobs growth. But there are a lot of people who say, look 500,000 per month, on average, not really what you would expect in the kind of recovery we're witnessing, especially when you look at some of these stock valuations. What do you think we should expect for tomorrow?

LUKE TILLEY: Yeah, tomorrow, we think a lot of the high frequency data is pointing to a little bit over consensus, about 825,000 jobs. We're looking at daily data from Homebase, and then also the people who remain on unemployment insurance. And it's really pointing to a little bit stronger than average, but stronger than, sorry consensus.

But to tell you the truth, we kind of joke, anything between 250,000 and 1.5 million, I wouldn't be surprised by it. Because it almost feels like a parlor game more than it does real estimates at this point. There are so many challenges with the number of people who are not yet returning to the workforce, either because they have those generous unemployment benefits or because they've made job changes or decided that they were going to stay out because of high savings. So it's really challenging. And it's really the labor market supply that's putting the brake on hiring right now.

But we're pretty optimistic. Looks like the market is pretty optimistic, too. We think that's a big part of driving these indexes higher.

ADAM SHAPIRO: All right. Scott, I want to ask you something. When we talk about some of the sectors here, I mean, the only sector today that was in the red, consumer staples. And you know, it's off about 0.3%. But when you look at the gainers, I mean, energy was up 1.7%. You got financials up a little more than 0.5%. If I'm an investor who's been sitting out because I thought that this market was already too rich, and it just got more expensive today, should I get off my tush and jump in?

SCOTT CROWE: Look, it's-- we're early, we're still early in the economic cycle. So you are going to get volatility. But it's too soon to bet the stock market is going to make a meaningful and permanent correction right now. So I would be invested. I think there's a number of really interesting areas. I think you've had a lot of the catch-up trade in a lot of areas.

But real estate and REITs, which is where we focus at CenterSquare, these stocks are still at about pre-COVID levels in the context of an equity market that's 30% higher than COVID. And it makes sense, because, you know, real estate was very hard hit by COVID. COVID hits where people congregate. And that's what COVID stopped people doing. And so it's been late to the party. But it's outperformed in the second quarter. And I think the outlook on the second half of this year, as we go into the growth phase of the recovery, is actually looking really good for real estate and REITs right now.

ADAM SHAPIRO: You know, when we talk about the outlook, Luke, a lot of people have been worried about the supply chain issues. You're expecting those to ease. Is that going to add some wind to the sails of the markets going even higher?

LUKE TILLEY: Yeah, we think the supply chain issues are going to be figured out over the course of the second half of this year. Whether it's lumber or semiconductors, there's a couple of forces. One, on the demand side, there's not going to be nearly as much demand for the purchasing of those goods. Consumers are really shifting over to services right now, with vaccines in hand, in their bodies, and the ability to go out. And that's really going to ease the demand side.

And on the supply side, we see suppliers being able to figure out those supply chains. And the way that really pushes the market higher is we expect inflation to start to slow. It's going to ease those inflation fears. And of course, that means the Fed will be backing off a little bit. In recent weeks, with it looking like the Fed might be hiking earlier and earlier, that's really given some pause in some parts of the market. And we think that when inflation slows down, the supply chains are mitigated, the problems are mitigated, that we're going to see inflation come down, that really puts the Fed on hold.

ADAM SHAPIRO: OK, let's go down to NYSE. Jared's got to get in on this. Jared?

JARED BLIKRE: I'll tell you what, I'm watching the US dollar like a hawk. And let's pull up the YFi Interactive, where I have a one-year chart. We are at a really big level, one that has affected us support and resistance before. If we clear this has incredibly important implications for the market, because this is a 10-year chart. Now, the post-COVID rally was concomitant with a declining or weakening US dollar. So if it were to reverse, that could provide a headwind to markets. And you can see, we just hit this important level a few months ago. We hit it actually several times here, the 2018 lows. And these levels have been in play for a while. So if we do bounce, and it looks like we are, that could be the next major pain trade for the markets.

ADAM SHAPIRO: Want to get back to the panel on this. And Scott, are you worried about-- I don't know if it's inflation? Is it labor participation? What is the thing that puts a pin-- I'm not going to call this equity surge a bubble-- but puts a pin into the good times going higher?

SCOTT CROWE: Well, look, the market doesn't tend to like the first rate hike, right? So we know that when that happens, the market is going to sell off. But at the moment, there's not that much to be worried about. We've got inflation expectations easing. We've got a Fed that is going to continue to be very, very loose. You got fiscal stimulus and you got quantitative easing, which is keeping the 10-year bond yield in check.

So everything's rosy right now, but I would say the thing that concerns us the most is where's all of this liquidity going to end up? Because we kind of have seen this story before in prior rate easing cycles and stimulus cycles that eventually it does create areas of speculation and bubbles within the economy, which, if left to grow, can actually sort of bring the whole thing down. I think that's something to worry about next year or 2023.

But you know, I think that is the big question is that we've responded to what was an external pandemic, a shock, not unlike 9/11. 9/11 eventually, and the reaction to that from policymakers led to the housing boom and then the GFC. So how this unfolds over the next few years, the consequences of all this stimulus, I think is something we've got to watch very closely.

ADAM SHAPIRO: We've got to say thank you to Scott Crowe, CIO at CenterSquare Investment Management, also, Luke Tilley, Chief Economist at Wilmington Trust.