Dow Jones crosses 40,000, commodities demand rises: Market Domination Overtime

On today's episode of Market Domination Overtime, Yahoo Finance hosts Julie Hyman and Josh Lipton break down the market close and the day's biggest stories.

The Dow Jones (^DJI) closed higher for the fifth week straight, at a record 40,000. Meanwhile, the Nasdaq Composite (^IXIC) dipped 0.07% and the S&P 500 (^GSPC) held above its 5,300 benchmark. Hennessy Funds CIO and Portfolio Manager Ryan Kelley and RBC Capital Markets US Economist Michael Reid break down what the Dow Jones record could signal for the overall economy as interest rates remain relatively high.

Commodities like Copper (HG=F) and Silver (SI=F) have reached new heights as demand increases. Bloomberg Intelligence Senior Commodities Strategist Mike McGlone gives key insights into the surge of metals and how China plays a critical role.

Outgoing Boeing (BA) CEO Dave Calhoun will remain on the company’s board following a shareholder vote. Boeing will seek a new CEO to help the company recover from the two fatal 737 MAX crashes and the detached fuselage on an Alaska Airlines flight. The company is also facing potential prosecution from the Justice Department for violating an agreement reached to avoid criminal charges over the 737 MAX crashes.

Finally, Julie Hyman and Josh Lipton break down what investors should watch next week, from Nvidia (NVDA) earnings to the Federal Reserve's May FOMC minutes.

This post was written by Melanie Riehl

Video Transcript

Well, you just heard the closing bell on Wall Street.

Now it's market domination over time.

Jerry is with us now to get up to speed on the action from today's session sponsored by Tasty Trade.

Before we get to, let's take a quick check on where the majors ended up here because we did have the Dow closing above 40,000 up just about a third of 1%.

The S and P up marginally the NASDAQ down marginally.

Jared's got a close look now for us.

Yes, Julie, that should have been a record close for the Dow and we're looking at gains for the week.

If we can go to the Wi Fi Interactive, I will show you here's the NASDAQ down fractionally today.

So no record close there, but up 2% for the week and we'll take a look at the Dow as well.

There you go.

Finally got a close over 40,000 as you were saying, and we are pretty close to the highs of the week which were also the highs of day.

Now, let's take a look.

I want to take a look at the V first and then we'll get into some heat maps.

The VX now trade with an 11 handle.

You can see this is the lowest point in the year.

So that is a tail wind for equities.

But this is also the time to be buying protection.

You need to buy protection when you don't need it.

But here is the sector action for today.

Energy in the top spot up 1.4% followed by materials and also financials, discretionary health care communication services.

Round out the top row tech and Staples took a back seat today.

But for the week, here we go.

We got tech in the poll position up 3.1%.

In fact, the only losing place in the week, at least in the large cap sectors is industrials.

If we take a quick look there, we can see Boeing up 3.6% freeport up 5%.

That's a gold play.

But ge down to Raytheon down RT X down two and a couple others CM I down 4.4 also want to cover meme stocks because that has been, that has captured the imagination of traders and investors.

This week here is the five day look, but I'm going to leave you with the one day look.

We gave some back today in the last two days.

So gamestop looks like it's going to end in green for the week, but not today down 20%.

All right.

Thank you, Jared.

So the dow closing higher for the fifth week in a row.

And today closing above 40,000 for the first time ever here with more on the path ahead for investors is Ryan Kelly Hennessy funds Cio and portfolio manager along with RB capital markets, us economist Michael Reed.

Welcome by both of you to show.

Uh So Ryan maybe we'll start there dow closing record high above 40,000.

A big round number.

It's gonna get attention and headlines what's been driving this Ryan this market rally and do you see that momentum continuing?

You know, thanks for having me on.

I think that uh obviously there's a lot of exuberance in the market right now.

Um 40,000 huge number.

We've never seen it before as far as a closing level.

Uh This is um for a few different reasons, obviously, uh the expected next move for the fed, even though it might be quite a ways out is to lower rates.

Also, we have um the idea and the worry of a slowdown in the economy or recession, that's all kind of behind us as well.

So you put those together and I think that we're setting ourselves up for still a pretty good year.

Uh From here forward Michael.

Um You're here with the sunset is the idea of a recession put to bed.

I mean, we talked to Bob Dole of Crossmark at the top of the show.

He's still worried about one before the end of the year.

What do you think?

Sure, thanks for having me.

Uh We don't see a recession ahead for the US economy.

Um We do see a lot of tail winds, especially in the consumer space.

Uh One thing we've talked a lot about is uh the rise in retirement assets, uh both uh portfolios um that are increasing in value and, and the sheer size of the baby boomer generation that's retiring and starting to draw down those assets, um that's showing up in the economy in terms of consumer spending.

So that's a really strong tail wind and Ryan back to you.

So you say you're looking for a pretty good year uh for the rest of 2024 here, Ryan, how do you wanna put money to work in this environment?

What, what are you screening for?

Well, I think we stick to what we always do here.

Um You know, one of the spaces that we really like, um which has um lagged the rest of the market.

It's a little bit better valuation metrics than the broader market right now is the mid cap space.

Um We have always liked midcaps uh here at Hennessy.

Um But in this particular time, I think that um first of all these, this market move we've seen really since last October is more broad based.

So that's really good to see.

It's not just large cap tech or working from home stocks that we had three years ago.

Um it's much more broad based and in fact, this year already, uh while the overall market, the S and P is about 12% a lot of the sectors are about that same amount as well.

There's not really one major sector pushing the rest.

So the mid caps, we like them because they're big enough to matter.

They've gotten to a certain size already.

Uh They can still grow a lot organically because they uh they can still take market share or maybe move into other industries.

Uh And yet they are still important enough that a larger cap company could acquire them.

So you put those together along with a little bit better valuation right now than our overall market.

And I think mid caps are a pretty good place to look going forward, Michael kind of switching back to the economy here and talking about the different sort of parts of the economy, I guess if you're talking about corporate size, right?

Although you probably think more about about consumer income tranches, right?

And, and how they're doing kind of walk us through your thinking on where the consumer is in those different tranches right now.

Sure.

And I think where some of the recession talk is coming in is when you look at the the lower income spectrum.

Um we are seeing things like credit card delinquencies, rising auto loan delinquencies are on the rise.

And those folks that do rely more on credit for their spending um are feeling that pinch of higher rates.

Um on the other hand, when we think about those higher income earners and especially retirees, um a lot of their income is being boosted by higher interest rates.

So, um interest income is something that is a bit of a tailwind um at the higher end of the spectrum.

But in neither case, I think what's important for the economy getting back to this concept of retirees, that's going to put downward pressure on the unemployment rate.

So even those folks who are feeling that pinch from inflation can be pretty confident that they're going to have a job over the course of the next year.

We don't really see the unemployment rate rising meaningfully above 4% through the end of this year.

You know, since you have talked a little bit about the retirees, I want to bring a sort of a provocative idea that Rick Rieder of Blackrock um talked about in an interview with Bloomberg recently where he said the answer is actually to bring interest rates down in order to bring inflation down.

And he reasoned that because so many people not just retirees, but lots of people are putting more money in fixed income because they're getting a high yield on that, then they have that money to spend.

And he argued if you cut the rate, then that money will come out of fixed income, people won't be earning as much on it does that if I'm, if I'm explaining it correctly, does that make sense to you?

Yeah.

You know, I think, I think you have the right idea there.

Um, and that in a sense does make uh some sense in terms of where the, the pressure is uh for services spending.

Um where we look at the strength, we see it in categories where uh the 55 plus cohort tends to be overrepresented.

So things like dining out um you know, uh hotels, travels, uh and, and medical care uh is, is another big one for that particular uh segment.

So, um if you take away some of the spending power from kind of the higher end of the income spectrum, that would take some of the strength through DC in the the consumer Ryan back to you.

So, so you sound, you know, generally constructive on, on the market, Ryan and told us kind of how you're screening for names.

Can you give us some uh a couple of names Ryan that would be, you know, just kind of representative holdings in the fund right now.

Absolutely.

Um So in, in the Hennessy cornerstone midcap 30 fund, we look for companies that are um that, that uh are trading at a good valuation uh for companies that have some momentum behind them and companies that have earnings growth.

So the interesting part about this portfolio is that you'll find names that probably aren't talked about a lot and probably aren't in a whole lot of other portfolios.

Either we own.

Gap, Abercrombie and Fitch and guess uh we, we purchased all those last October, um Abercrombie for instance, is up 100 and 50% since that time.

Uh These are companies that were out of favor.

Uh They were trading at fine valuations when we look at them.

Uh but they had turned a corner and then they, because of various reasons.

Number one, the consumer stayed strong.

Uh The holiday season was excellent.

Uh They've done very well.

We've also owned or we own right now.

A couple of other names that um, they are HV AC system companies, they, they provide heating and cooling, uh Modine manufacturing as well as comfort systems.

Both those companies again fit our criteria.

We added them to the fund and they done pretty well.

So, you know, this fund is an interesting fund in that we're not buying the same kind of names that you might talk about or see a lot, but they're at good value as far as we see them.

And um, so far this year it's worked out pretty well and I, I'm curious, you know, because we talk about a lot of these names, maybe that are being affected by higher for longer interest rates.

Is that a, is that a risk when you're talking about?

Especially something like H VAC, which maybe people are financing in some cases, right?

I is that a risk.

It, it, it can be a risk for, for, in particular, for these H VAC companies.

Interestingly, I think they're actually a tertiary type play on the A I uh on what's going on in A I, we have the A I companies, we have the uh um uh you know, the, the hardware and the networking companies that are also benefiting from the A I boom.

And then you have interestingly building companies and H VAC systems that are benefiting as well.

So there's some that going on.

Um but as far as overall interest rate risk in the portfolio, we don't really have as much um of exposure to that.

We don't really have many financials.

Um you know, utilities that are more cyclical, we don't really own those as much.

So they don't really kind of make it into the portfolio in general.

So this is more of an idiosyncratic type portfolio and you're not gonna see a lot of those macro trends affecting the individual companies quite as much.

And as we're talking about interest rates, Michael, I want to close it out with you and ask what you think is going to happen this year with rates.

Sure.

So we are looking for the fed to cut this year.

Importantly, we don't see them really being able to do so until December partly that's because of the election.

But also thinking about what happened with the last CP I report while April was a step in the right direction.

It doesn't provide that confidence that we're on a sustainable path lower.

Um So we really need to see that trend continue and, and see prints that are closer to 2/10 or even 1/10 on a month, over month basis.

Um That would allow the fed then to start their cutting process.

All right, Michael Ryan.

Thank you guys both for joining the show today.

Appreciate it.

Thanks for having me.

Thank you for having me.

Still to come.

Silver and gold prices higher.

Today, we're going to speak to a strategist about the latest moves in the commodity based on the other side.

Stay tuned.

More market domination over time coming right up.

Welcome back to market domination over time.

Jared Blier is standing by to get you up to speed on the action from today's session sponsored by Tasty Trade Jared.

Thank you, Josh.

Uh a little bit of red today from the NASDAQ.

But for the week, we are looking at gains across the board and I'll hit the NASDAQ here over the last five days.

You can see a gain of over 2% there.

And the Dow which finally closed over 40,000 Friday, that's a 1.24%.

And it was kind of a week where we saw a lot of the fringe parts of the market, a lot of parts of the market that haven't been doing well recently over the last few years really come back in a lot of ways.

Now, tech, I'm not going to put tech in that basket here are sectors, but tech was the best performing sector of the week followed by real estate and health care.

Here's industrials down here.

But what I want to show you is what's happened with some of our leader, Bitcoin.

Bitcoin came back up about 6 7% G BT C. Up 10% we have Chinese stocks.

We can see Alibaba up 10% this week.

Some of these others up 7 to 15% depending on where you look.

If you look at unprofitable tech, the disruption trade in the US.

Those are the arc innovation components.

We saw a lot of that.

Those coming back led by Tesla, the biggest here of 5.3%.

And uh if we take a look inside our meme stocks, well, we see a lot of green here but you might be surprised to learn who the leader was for the week, not a MC, not cost, not gamestop.

It was Tupperware.

Tupperware up 70%.

And that's simply because Gamestop and A MC and the like a lot of those stocks gave, gave back some of their gains for Monday and Tuesday throughout the week.

I'm going to close here on Crypto, Bitcoin never sleeps.

So we're going to be geared up for the weekend of watching crypto prices here, as I said up 6% over the week.

But the leader here, Solana up over 14% and here's chain link up 21% guys.

Thanks, Jared.

Well, while stocks are up four weeks in a row, one area of the market that is really shining, get it is metals, gold is up 1% on the day.

But taking a look at the other metals, silver and copper in particular are surging as well.

Joining us now, Bloomberg Intelligence, Senior commodities analyst, Mike Mike mcglone, excuse me, Mike, it's good to see you.

Thanks for being here.

I want to start with copper which has just been such a fascinating story.

As of late, there have been all kinds of sort of odd supply disruptions just for people haven't been following it as close closely walk us through what's been going on.

Hi Julie.

Well, the significance this week is pretty, pretty profound short covering in futures.

The CME trading contract that trade in New York, there was some decent short covering those front contracts.

It really pumped up the front contracts into a decent like most significant backward nation in about 10 years and pulled back, which is oftentimes a sign of highs and so that contract closed at an all time new high and made new highs.

But the C the LME contract that trades in London did not make new high, but it's catching up.

So for me right now, what I see is more shenanigans and futures.

The futures contracts is a percentage of open interest, manage money net positions, ie hedge funds are very long, about 30% of open interest.

So they're already on top of this trade, which is a bit of a headwind.

Now, the more macro there is, you know, decarbonization digitalization electrification, but there's and some supply issues out of South America and Panama.

But overall, I'm more worried for copper that its auto correlation tendencies will, will vary through.

It usually has a tendency that spike to go down.

And basically it was it right now it's just catching up to gold.

Gold has been the star performer in medals.

Uh Mike, I also want to get your take on silver which has had such a move here.

Is this, you know, is it a story, Mike about industrial demand or is it financial demand or is it both?

Well, the macro for silver is it's industrial, basically gold is the has demonetized silver.

Um But it, it's known as the devil's metal for a reason because it has a tendency to spike and then go right back down.

So right now it's the same price as it was for, I guess it's about at the highest level since 2013.

So it's 11 year high.

It's right now the way I see silver, it's stuck between gold and copper and it's catching up the gold and it's got copper in its back.

And there's potential rumors that, you know, we know China has been the biggest buyer of gold, not just Chinese Central Bank, but citizens.

There may be some hoarding of silver.

But the key thing I'm more worried about silver is that it might follow that path, that auto correlation in Athens in copper where it spikes and then goes back down in the macro.

The big picture though I'm very favorable in terms of commodities, most favorable than metals versus most other commodities.

So give us a little bit more detail there, Mike about then what you expect to happen next?

Do you expect that spike and to come back down in a copper or do you think that there will be a more sort of sustained action here?

Well, we'll start with the most enduring trend in commodities and that is gold out before most commodities.

I think that's accelerated.

I think it's going to continue.

And to me it's just a matter of time gold gets at $3000 an ounce.

I don't know when.

Now it's got very good support now, below the market, around $2200 and ETF outflows have been significant at some point.

Those are flip higher.

I think that's going to take a little bit of a peak in the stock market.

And to me that's the problem with more than industrial commodities.

Silver is an industrial commodity now, copper and industrial commodities.

At some point, we probably should see a little bit backup in the stock market.

It's pretty expensive here mentioned earlier.

The mix is running around 11% handle.

The S and P 500 is 22% above its 100.

We move on average.

That's pretty much oftentimes a headwind for industrial metals.

And then there's China.

The key thing I'm worried about in China is Chinese C GB tenure note yield at 2.3%.

It's the lowest in our database.

It's over 200 basis points below the US.

That's a sign of deflationary, recessionary um in claims in China.

So I'm worried about that macro for industrial metals.

And the thing, the key thing is beta beta can keep going up industrial metals to do fine.

But in both environments, I think go a little outperform Mike.

How about the Fed?

Um Ho how does that play into your thesis on the precious metals?

Well, there's, I think gold is figuring it out is I don't think the Fed is going to ease into the stock market goes down and tells them to, it's kind of silly for the Fed to ease with pretty massive speculation and inflation above its targets in most markets.

So that to me is the problem.

The issue right now we have in the stock market is the total capitalization of us.

Stocks sounds about two times GDP.

That's the most since the 19 thirties.

So it's basically all that matters.

Stock market goes up sticky, inflation, stock market goes down, inflation goes down and that to me is part of the problem.

And that, to me is what gold is figuring out on, on the year gold is up about 17%.

The polar return for the S and P 500 is around 11%.

So that A I driven stock market is actually being beat by the rock.

When the rock beat stocks, you should be aware and I think the rock is gonna continue to beat stocks.

Yeah, that's so fascinating to me and also that the, that even that they're correlated at all, right, that they're going in the same direction.

Um How historically unusual is that?

Well, typically the correlation is zero.

But, but the, the big, the big thing was around 2008.

Initially, the stock market went down, gold went down and found 30% and then took off as the fed started easing.

I think it's going to be similar.

The difference this time is stock market is so much more expensive now than it was then versus GDP.

There was almost 1 to 1 now.

It's 2 to 1 versus GDP.

So I, I think it's still, obviously I'm a commodity guy.

I mean that by bias, but there's more, I think commodity I think is going to continue going higher as gold.

And if we get the normal packet fill in the stock market and you haven't had a 10% correction since October, then that's gonna probably launch gold maybe with an initial pullback.

But the bottom line for gold is the deepest pockets on the planet.

Central banks led by China are buying the metal and that from, according to the World Gold Council looks like it's early days and enduring.

So wait, I just want to make sure I heard you correctly, Mike.

You said if you had to bet on any one commodity right now, it would be gold.

Oh, yes.

Well, I do.

I have to admit I've been saying that for a little too long.

I I admit that because you know, for the thing is that gold got to the point of maximum disdain.

How much, how long did it bump above 2000?

I mean, I was bullish gold in 2019 in 2020 it just made me lose more hair.

So, um I mean, it's just catching up now, but it's, it's that macroeconomic situation where relative to the stock market go is very cheap.

Stock market relevant to the GDP is very expensive.

And then we have this in this unlimited friendship between President Z and Putin.

It shifted the world order their most lot of worlds kind of trying to get away from the power and the first place to go is gold.

So Bitcoin in that space.

So to me, gold is still and go also has a history of beating most commodities in terms of performance, particularly in an environment where you see bond yields declining.

Now, we've seen that in the rest of the world ie Chinese yields are declining and I think it's a matter of time that stock market gives back a little bit allows us yields to go down.

That could accelerate this rally in gold Mike.

It was great having you on the show today.

Have a good weekend.

Thank you.

You too.

Outgoing Boeing Ceo Dave Calhoun will remain on the company's board.

It's following a shareholder vote earlier today, the move comes as the company tries to stabilize production and quality and joining us now with more is Alexis Keenan Alexis.

Hey, yeah.

So there were two really closely watched issues in the shareholder vote.

One was that you mentioned there, Calhoun stay on the board, don't stay on the board despite that he's stepping down as CEO at the end of this year and it was against the advice of proxy advisor Glass Lewis.

So the other issue was whether to approve Calhoun's 2023 executive compensation at $32.8 million.

Uh He's been CEO of Boeing since January of 20 20.

Now, both of those votes coming in.

Yes.

So the new board will have Calhoun, he'll be the only the only non independent director there and then he'll be among the 11 member board.

Now, meanwhile, Boeing also looking for its new CEO and also trying to recover from the two fatal max.

Uh 737 crashes also that one non fatal accident in January back with that Alaska Airlines fuselage that detached at 16,000 ft.

So Boeing really having this sky of really red tape also including a pending decision from the justice department that has already said that the company violated deferred prosecution order that was attached to those two fatal crashes in 2018 and 2019.

And so the DOJ they're deciding whether or not it will criminally prosecute the company.

We should know that by July, uh also lawsuits tied to that Alaska Air incident.

You've got government investigations ongoing.

You also have more oversight of frost.

The company and its production also really just its tarnished reputation from all of these aircraft failures.

Now, during the shareholder meeting, Calhoun was asked about the company's financials.

Uh wanting to know one question was wanting to know if the company would go back to restoring its dividend.

It was just ended back in 2020.

But to respond to that, Calhoun said, well, the job number one is first returning to a steady cash flow.

Uh and they said that the objective was to do that by 2025 2026.

He said he was hopeful about that so far this year stopped down uh since January about 30%.

And also coming up for this company, Boeing is scheduled to meet with the FAA in two weeks and at that time, they're going to have to present a plan to get their house in order.

This is something that they've been working on and what they're presenting to the regulator is a way to many ways to enhance quality across the company, across production, across manufacturing guys, Alexis just quickly here.

I mean, listening to this litany and everything that's going on, one could be forgiven for saying why the heck did they approve him remaining on the board and on the pay package?

Do we have any insight into the thinking on the part of shareholders?

Yeah, I wish I could tell you Julie.

Uh it was a real quick brush.

Yes, it's approved, there was very little talk uh about it at the meeting.

Um But uh it was absolutely against the advice of Glass Lewis and certainly a lot of people skeptical about the fact that Calhoun was at the helm at the time when this Alaska Air door came off of the aircraft in flight back in January.

So he's stepping down, but he's going to remain a member of the board.

I guess the positive news for some critical shareholders is that he will be the only non independent board member at this point since 2019.

The company has kind of done an overhaul of its board and they have a lot of new board members and they did mention during the call that a lot of those members have engineering experience, something that critics have wanted to come back to the company for quite some time.

All right, Alexis, thanks so much.

Appreciate the update time now for to watch next week, starting off on the earnings from we're going to get see another big batch of earnings next week.

But all eyes of course are going to be on in via the tech giant is the last of the magnificent seven to report this season.

Company announcing first quarter earnings for fiscal year 2024 after the bell on Wednesday.

Analysts expecting video to report strong beat and raise from rapidly growing A I investments and sticking with earnings will also get reports from target synopsis and beauty among others.

Target announcing first quarter earnings ahead of the open on Wednesday.

That company hampered by tight consumer spending according to analysts and revenue could remain under pressure as consumers continue to focus on essential goods over discretionary.

And finally, the fed is releasing its minutes from the FA fo MC meeting on Wednesday afternoon.

We're going to get more insight into fed officials thinking around monetary policy as we wait for the next meeting in June.

This coming after some commentary today from fed Governor Michelle Bowman reiterating that she's willing to hike rates if needed and that will do it for today's market domination over time.

Be sure to come back Monday at 3 p.m. Eastern for all of your coverage leading up to.

And after the closing bell, there's more Yahoo finance coming on the other side