Dow closes at a new record, how to view international markets: Market Domination Overtime

It was a mixed day for Wall Street, with the Dow Jones Industrial Average (^DJI) closing at another record high, while the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) both ended the day slightly lower.

On the latest Market Domination Overtime, Federated Hermes Head of International Equity Group Martin Schulz shares what he is watching from three major international markets: China, Japan, and Brazil. Anchors Julie Hyman and Josh Lipton are also joined by Kineo Capital Managing Partner Jim Strugger who explains how to play Nvidia (NVDA) and Core Scientific (CORZ) using options.

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

Video Transcript

There's the closing bell on Wall Street and now it is market domination over time.

And let's see where the major averages ended the day and the week for that matter, we have the dow up 138 points.

So that's about a third of 1% coming down from the highs of the session.

If you look at the five day here for the, do you have a little bit of a bump on a huge one but still and up week here.

And also if you look at the one month chart here, so we nearing the end of the month.

You got positive there as well.

The S and P 500 down on the day just about 1/10 of 1%.

Remember it had another record close yesterday before coming down and is still higher on the week.

And let's talk about the NASDAQ as well, also higher in the week, almost a percent lower on the day.

However, let's look at the one month there as well and we were, we've been talking about this a little bit that coming into September, there was a lot of talk about September is the weakest month of the year.

Well, we just have what, one trading session left of September unless it's really, really bad.

Knock on the interactive, um, it doesn't look like that.

We are going to get a negative month for uh the major averages.

So that's something notable here as we get closer to the end of the month.

Now, it was tech, that was the under performing group today.

So I wanted to take a little bit of a deeper dive there in video, which had a good week until today.

If you look at it five day chart here up almost 5%.

But wiping out some of those gains today with that 2% decline, maybe just backing off of it a little bit.

Remember, we've been talking this week about the A I trade coming back, a little bit of enthusiasm coming back there with that Bain and company report that we talked about over the past couple of days with big predictions for the A I market and micro earnings as well.

But that effect fading to some extent today, Amazon Microsoft and Meta also down Apple and Google up just about a little bit.

Going to also look at the leaders, which is one of Jared's favorites here and really interesting and important worth noting that K Web has continued its strength here.

This is the Chinese internet ETF up 4% today.

Let's look at the week here as well.

We saw a big gain for the week of 27% on these new stimulus measures that we have seen being rolled out in China year to date.

This group had been in the red really, you know, until the last few days.

So this helping salvage some of the returns there.

But there are still remaining a lot of questions about the sustainability and the effectiveness of some of those stimulus measures that they're taking there.

Josh Julie markets closed the session mix, but the dow not a all time high, the major averages finishing out their third straight winning week.

And what was supposed to be a sluggish September Corsa joining us now is Martin Schulz Federated Imi is head of International Equity Strategy.

Uh Martin, it's good to see you.

So maybe we'll start there.

Uh Martin because I thought as you go into September, you're supposed to batten down the hatches, the seasonals get spooky.

What happened, Martin?

Well, it's, it's always good.

Thanks, Josh.

I really appreciate you having me on.

Um I think, you know, not every September is the same.

Um And at the same time, I think what we're experiencing is particularly as it relates to the fed, being much more aggressive than anticipated.

Um And finally seeing some Bazooka action, which is something we've hoped for and waited for out of China for over two years.

Um You know, the third kind of leg out there is still the US election.

So that still has to be determined what's gonna happen there.

We don't know.

But at the end of the day, I think we are seeing reflation, come back to the global marketplace, you're seeing a weaker dollar, you're seeing stronger commodities.

And so we are seeing a bottoming if you will of the global economic landscape, which we believe is currently being helped by obviously some of this um monetary uh deflationary pressures that are brought to bear by the fed and by the uh TB OC.

So is that good for everybody, Martin?

I mean, if you look at, you know, we know you look at international equities, if you look at the US versus the rest of the world with that stimulus, mo at least monetary stimulus coming in here in the US, all kinds of stimulus coming in in China.

How does that position us returns versus international returns?

Well, I think um you know, the mag seven and the, the large cap growth companies that have done so well.

Uh I think um we have to, they have to take a breather.

We've actually as part of our Macro Prison Committee Federated Hary, we've been focused on small caps as you had in your previous session.

We've all talked about more value oriented uh stocks and also emerging markets.

And I think from that perspective, um you are gonna see the cyclical parts of the economy really start to um do better relative to those growth oriented um parts of the economy that have done so well so far.

Um And we also see, you know, as we lap really strong earnings by some of these growth companies, we are expecting again, more emerging markets which are more value oriented.

Um And then obviously, small cap and value cyclical sectors are probably gonna do a lot better.

Martin, let's just drill drill into China a bit more because obviously it is a theme.

We hit a lot this week and for good reason, Chinese authorities taking steps trying to boost that struggling economy.

You saw investors rush in Martin.

Would you were you one of those investors, Martin?

Would you be urging clients?

Yes, by Chinese equities.

Well, there's been a lot of false daunts Josh the last several years and so you have to be careful.

Uh but at the same time, um you know, some of these Chinese stocks are very, very cheap.

Uh These are obviously the um if you will the the mag sevens of China, the 10 cents um and companies like that, that were invested in.

But at the end of the day, China still has a lot of issues to overcome.

Uh The property market is still in the doldrums.

Um You have yet to see some of this fiscal pump priming that we believe is necessary to get the economy on better footing.

Now, the the first steps have been taken here recently.

This is something we've been waiting for for quite some time.

So on the margin we've been adding to China over the course of the last 3 to 4 months, uh but not in large scale.

Um And we'll see, you know, this could be again a head fake, but a longer term policy prescriptions that may come out of uh China will determine um what we expect to see in the in the market going forward.

And our expectation is that uh we see stabilization and we do see further upside potential for some of these companies listed in China.

One of the other markets that has gotten a lot of attention has been, of course, Japan.

Japan has a new um Prime Minister incoming Prime Minister Shigeru Ishiba and he apparently is in favor of uh the Bank of Japan's plan that it's been on to start to raise interest rates.

More is Japan an area that still has some upside.

Yeah.

So we use a top down country allocation approach and some of our international groups within Federated Hermes.

And what that means is we're basically picking and choosing different regions of markets to overweight and underweight.

And Japan has been one of those markets where we have been overweight.

Um And that's primarily because the Yen has been obviously an accelerator to some degree.

But to your point now we are seeing a reversal.

Uh and, and, and at least as it relates to um the Bank of Japan's focus on raising rates.

They've already kind of telegraphed that October will not see a rise.

Um but we do expect them continue to normalize um their uh monetary policy in such a way that we do expect Japan to be one of the out performers over the course next few years.

And they've got some great companies um involved and everything obviously from uh technology uh as well as in um some of the more even local banks which are gonna be big, big beneficiaries of not just the uh TSC the Tokyo Tokyo stock exchange reforms, but also of obviously rising interest rates, rising inflation, something that Japan has literally not seen in over a generation.

So while it's gonna be a bumpy road, we do expect Japan to be one of those markets that will outperform near and long term.

And our top down country allocation approach right now continues to like Japan for that, for those exact same reason, Martin.

So we touched on a number of different countries regions, us China, Japan, you also flagged Brazil walk us through some of the movements you're seeing there by those policymakers.

But what's interesting is Brazil, unlike the fed uh where they're trying to catch up, right?

Um Brazil was actually the forefront of more conventional monetary policy.

They basically started to raise rates early in in the cycle when they saw the first, if you will inflationary pressures.

And now as as we've seen, they're actually raising rates um and, and you know, it, it's interesting to see within the um central banking community, some of the changes out there, you've got Russia and Brazil that are raising.

Um And then you've got obviously Japan also potentially in a raising mode, but then you have the rest of the world, the fed China, the ECB, the Bank of England, although they kept steady here recently, um we do expect them uh to start to continue to cut.

But in the case of Brazil, here's a market that we believe has a lot of potential.

It's got a little bit of a political um headwinds right now.

Elections are over and done with.

But uh we still think that there are some headwinds on the legislative front.

Uh We do believe that Brazil and companies like New Bank or Mercado Libre, which has a very large presence in, in, in, in Brazil are very big beneficiaries of a longer term consumption and obviously growth oriented uh progress that uh Brazil has been making.

Martin.

Thank you so much.

Have a great weekend.

Bye Julian.

Before we go to break.

Here's a preview of Monday's episode of the Yahoo Finance Po podcast opening bid.

Executive editor Brian Sazi caught up with the paypal CEO Alex Chris as he marks one year on the job.

Do you see paypal going toe to toe with a Coinbase?

And some of the even I would even say Robin Hood, you, you know crypto to me is, is a, is a really important future element of commerce.

But it's a how right, really what it is is enabling commerce at faster speeds, uh high scale globally and at lower cost and any time that you can move money faster at lower cost, that's better for consumers.

And so we've taken the right steps in, we again, are, are uh doing it in the right way to be regulated so that we can move money safely and securely for our consumers and make sure that their money is protected.

But I think again, we're just scratching the service and really making it available from a payments perspective on a global scale to allow people to be able to transact anywhere in the world.

Uh and do it fast securely and at low cost.

So you don't see, it doesn't sound like you see paypal morphing into some form of exchange where, hey, if I want to trade Bitcoin, I, I use paypal.

You know, I think we, we could dabble in that.

I don't think that's the big long term uh win for us.

I think for us, the real transformation is, you know, where am I in the world where I can create the right payment to any merchant, anywhere else in the world, connect the dots between consumers and merchants and do it at much faster speeds very securely and at lower cost for consumers.

Consumers right now are paying a ton in fees, anytime they want to purchase cross border, anytime they want to purchase from a merchant around the world, uh, with inflation working in different ways and in different geographies, it's just hard to manage money as a merchant.

Um, and understand what you're paying for as a consumer.

I think we have an opportunity to, to really play a hand in that.

So it's a rare interview.

You, I mean, for the past year you're, you've been head down like really working hard to re invent this company, hiring product, you name it.

Who's Alex Chris?

After hours?

Well, first, just because, because you mentioned it, uh it was one of the biggest surprises stepping into this role was how many invitations I got to conferences and interviews and all sorts.

I could have spent every, every waking moment.

Uh I haven't email time.

I have an email time for my, for my next invite for you, Alex.

It's, it's unbelievable.

But uh you're right, I've said no to everything uh getting execution uh done getting the team around us and really starting to innovate for customers was my number one priority uh coming in uh into this year.

So I've said note about everything.

It's exciting to be with you today, but after hours, um you know, look, spending time with family uh trying to get a good workout in uh just to make sure that uh you know, you keep your head clean and, and uh and get the stress out.

But, you know, it's been a really fun year.

Both of our muscles are bulging off the screens.

And for me, you know, I think that's a good thing for both of us.

It's a good, yeah, it, it's, it's a really good thing.

You can, you can check out that full interview on the Yahoo Finance home page or wherever you get your podcasts on Monday.

If you dare more bargain domination over time is straight ahead.

It was a tough day for Invidia.

The chip maker closing down just over 2% but shares have soared.

Of course, still this year, about 145% for those who are looking for alternative ways to take advantage of the stocks run.

Options might be a possibility here for the options playbook sponsored by Tasty Trade.

We've got Jim Stroger, Kino Capital managing partner.

Um Nvidia's trading has been interesting indeed.

Right.

We mentioned it was down today.

It was up on the week, however, um and it's been like this interesting trade with A I where it runs up and people say, well, maybe it ran up too much and then it comes down, then it runs up again.

Um So how are you thinking about it?

Well, the way we're thinking about it is we have investors coming to us saying I've got too much NVIDIA.

It's been a wonderful stock for a long time now, up 10 times in the last two years as you set up 100 and 40 plus percent in the last year.

What that means is investors are enormously long NVIDIA relative to everything else in their portfolio.

So we've had some, I think relatively intelligent investors raise a hand and say I love NVIDIA.

I wanna a long NVIDIA, but there's a much bigger A I theme here to be playing and I'd love to, I'd love to dial back my NVIDIA exposure a little bit.

I just wanna linger on this for a minute because sometimes we talk about like rebalancing your portfolio.

Right.

Oh, I, you know, because stocks have gone up so much, I'm too long stocks, I'm not long enough bonds.

We don't talk about it often enough with individual stocks like this.

So it's so that's effectively what you have to do sometimes is rebalance.

Absolutely.

Especially in this unique case where you have investors who could be 5060 70% long NVIDIA relative to an entire portfolio.

Right.

Great stock.

Probably a great future near future, certainly until competition picks up in several years.

But if you're long 5060 70% NVIDIA relative to the rest of your portfolio makes an awful lot of sense to dial that back.

And now people are beginning to understand that there are many other ways to participate in A I and A I infrastructure without owning just NVIDIA had exposure to GP US.

And so what are some of those ways, Jim walk us through it.

What are some smart strategies?

Well, uh it's across the board in terms of where you are.

We started a A I Infrastructure Fund earlier this year.

It touches utilities, it touches uh energy infrastructure, it touches everything into the data centers, it touches water, it touches construction companies.

So plenty of industrials uh are ways to play this one company that we like a lot is called Core scientific.

If you're thinking about A I infrastructure, you really wanna spend some time looking at the Bitcoin miners because something that happened earlier this year was Core scientific symbol, Corz an agreement with a private company called Co Weave which is a hyper scaler and that agreement was for cove to come in and take what will amount to about 500 megawatts of compute power from core scientific.

And what that's done is it's taken these Bitcoin miners and extracted them from being pure play Bitcoin miners.

Now it's more about high performance compute and that's a critical element.

And if you take another step back and just provide a framework around valuation, Blackstone just bought a company in Australia called Air trunk paid about $20 million per megawatt.

So look at some of these miners now it's not apples to apples per se, but still from a valuation uh perspective using a deal that was just done a couple of weeks ago, you can overlay that on some of these miners and get a sense of the fact that their valuation are multiples away from a deal that was just done in Australia.

OK.

So how do you look at it from an options perspective then and try to take advantage of that?

Sure.

So the way we're thinking about this with some of our clients is if you're overweight, NVIDIA, let's start working out of that gradually.

But let's exploit the fact that NVIDIA implied volatility is 45 right?

Compare that to Apple Microsoft.

Those are about half as much, right?

So we can take premium out of NVIDIA via the listed options market and work out of some portion of that stock over time.

So the way we framed it up here is looking at November 1st expiration if you're long NVIDIA, this was priced up this morning.

So I know stocks a little bit lower, but you sell 140 strike call in the size where you wanna reduce your position, right?

So what you're doing is you're matching the number of calls, you're selling against your long stock with the amount of stock you act, you wanna reduce in NVIDIA, right?

You sell that you pocket, it was around $2.50.

That annualize is at about 20% a year simply annually.

It, if you make the assumption that those calls expire worthless, right?

Eventually, what probably happens is uh NVIDIA moves up, you get called away in that stock and so you're naturally reducing your position, but you're exploring the fact that there's elevated implied volatility in NVIDIA by doing that.

So it's a nice use of the option market to take down your NVIDIA exposure while generating income.

And then the other side of that is that core scientific, right?

So whats play exactly?

So what we like in core scientific is going all the way up to uh April next year.

Expiration, right?

Stocks about $12.5 right now, you sell a 10, 7 put spread, you're selling a 10, put, you're buying a seven, put your maximum risk is those three points.

And that's how you're sizing that position, you turn around, you buy a 20 strike call, couple things here.

Number one, we want this story to play out.

That's why we're going all the way out to April.

You also, as I mentioned, core weave is expected to make it announcement in the next week about an additional 120 megawatts of, of uh compute power that they're gonna contract with core scientific near term catalyst.

And core weave is also expected to go public next year.

So core scientific could be a very nice proxy for core weave as it goes through the process of announcing it's going IP O and then leading up to that IP O investors are going to want exposure, core scientific core weave.

Now in this lovely agreement together, core uh core scientific should benefit from that as a proxy to core weave core, we've got a $19 billion valuation on an $8 billion debt raise a few months ago.

I'm gonna remember this when Corre Weve is going public and we're gonna have to have Jim back in.

We will Jim.

Thanks so much for being on set.

I appreciate those ideas.

Thank you very much time now for to watch next week.

October is a big month for Elon Musk and Tesla.

The company expected to report earnings toward the end of the month and have its long awaited robo tax reveal on the 10th.

But to kick things off, Tesla is expected to report delivery numbers for the third quarter.

Coming on Wednesday.

Analysts estimate deliveries to come in at about 462,000.

But some analysts are saying that number could be as high as 470 pounds.

Turning over to the labor market.

We will be getting a new batch of jobs data starting next next week, starting with monthly jolts.

Numbers remember that's the job openings and labor turnover survey that comes out Tuesday morning, economists forecast openings will increase to 7.7 million in August.

And then of course, on Friday, we've got the full job report, September that's out ahead of the open 130,000 non farm payroll jobs expected to be added and the unemployment rate forecast to hold steady at 4.2% of course jobs data now at the forefront for the Federal Reserve after cut rates for the first time in four years and on the earnings calendar, going to hear from Nike Con Agra and Carnival Corporation among others, Nike report first quarter earnings on Tuesday after the close and was expecting weaker sales for Q one.

But we listen closely for any commentary on the company's recent CEO transition.

Plus on Tuesday, we could see the start of that port strike.

We've been talking about along the gulf and east coast.

If the longshoreman go on strike, it will be the first time that all of these ports will be shuttered in nearly 50 years.

That'll 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.

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

It's asking for a trend.

I've got you covered for the next half hour with the latest and greatest market moving stories.

You can get ahead of the things affecting your money.