Market Recap: Monday, February 8

Stocks rose on Monday, extending advances after stocks' best week since November last week. The Dow added more than 200 points, or about 0.8%, to a fresh record high, and both the S&P 500 and Nasdaq also reached record intraday levels. The S&P 500's six-day winning streak marked its longest since August, and the Dow posted its best start to a February since 1931 with a rise of 4.7% so far for the month. Bitcoin prices spiked more than 12% to a record high of more than $43,000 after Tesla disclosed it purchased $1.5 billion of the cryptocurrency and may start allowing customers to use Bitcoin to purchase products. 1879 Advisors Vice Chairman James Bruderman and Girard CIO Timothy Chubb joined Yahoo Finance Live to discuss.

Video Transcript

ADAM SHAPIRO: Three minutes to the closing bell. Timothy Chubb, the CIO of Girard, and also James Bruderman is 1879 Advisors vice chairman. They join us right now to get us to the bell. And let's start with you, James. I want to jump in on something you said about Tesla and Bitcoin, that, quote, they may be showing some signs of speculative froth maybe. I mean, Bitcoin over 40 grand a coin with the estimates it'll go to 100,000. But you think there's a pullback coming.

JAMES BRUDERMAN: Yeah, I'm really not a big fan. I don't want to be the one to predict a pullback, especially with the Reddit crowd potentially watching. But with really nothing underpinning the value of those type of assets, it's just not something that I'd be adding to portfolios, and not something that, especially given its current rates, regardless of Elon's love for all things Bitcoining, it's just not something that I feel is-- it's got a lot of staying power.

SEANA SMITH: We just have two minutes to go until the bell. We want to get to Jared Blikre for a closer look at some of these movers into the bell. Jared.

JARED BLIKRE: Yeah, let's go straight to the YFi Interactive, where we can see all of the majors, plus the Russell 2000, set for record closes. And guess what? I said before the Russell 2000 heading for its best start to a February ever, but check this out. The Dow having the best start to a February since 1931. Got to go back 90 years for that. And just looking at the year to date in the Dow, still up only 2.4% but sitting on gains of about 4 and 1/2% for the month.

Now here is the NASDAQ 100, where we can see not as much red around some of the mega caps as we saw an hour ago, but Apple and Microsoft basically unchanged. Amazon down about 1%, off the most of that group, and Tesla up 1.2%, definitely been talking about them. Some other outperformance, Nvidia up 6% after [INAUDIBLE] said that they-- he does expect regulatory approval for that arms sale to Nvidia. That would be a huge transaction.

Also, PayPal-- that is a crypto play-- up 20% year to date, up 4 and 1/2% today, getting some of the Elon Musk Tesla effect. So let's go straight to our cryptocurrency heat map here, where we can see Bitcoin up 14%, hitting 43,000, almost at 45,000 intraday. It's up 49% year to date, 14% today. Ether futures hitting the market today. That is up to a record high, up 8%. And also checking in on Dogecoin, whether it is a joke or not, according to Elon Musk, it is up 17%.

Now here is the sector action as we head into the closing bell. Energy just really knocking it out of the park as we see Brent above $60 for the first time in over a year. And here is that closing bell on Wall Street, guys.

[BELL]

SEANA SMITH: And that does it for the trading day today. Again, all three of the major averages, plus the Russell 2000, ending in the green. The Dow closing up over 200 points. We saw some buying action into the close, with the Dow up 236, S&P up about 7/10 of a percent, the NASDAQ up nearly 1%. Jared was just going through the sector action that we saw today. Yes, energy was the outperformer all day, up more than 4%. Also oil having hitting its highest level that we have seen in over a year.

In addition to energy, we also saw some outperformance in financials and technology. The underperformers in today's market, utility and healthcare. And we want to bring back in our market panel. We have James Bruderman of 1879 Advisors, vice chairman, and Timothy Chubb. He's the CIO of Girard. Timothy, let me just go to you about the buying action that we've seen and whether or not do you think this momentum is going to continue.

TIMOTHY CHUBB: Yeah, it's hard to say, you know, I think, whether the momentum is going to continue here in the short term. But I think, you know, the backdrop for the rest of the year is really positive. I do question whether we've gone a little too far too fast here in the short term.

The big risk, as one of your earlier guests had said, you know, towards the back half of last year, was the vaccine distribution. We've seen pretty impressive results leading to us to believe that the economy will rebound pretty significantly as the year continues.

But I think the bigger risk-- or excuse me, the second biggest risk to the markets right now is that the economy grows too fast. And Fed Chair Jay Powell has been really trying to make sure that the market understands that they are going to be letting everyone know in advance when tapering may begin. But we may be looking at that sooner rather than later, if the labor market recovers as quickly as Janet Yellen implied this morning, as recent or as early as 2022. And I think we could be talking about tapering sooner rather than later, especially if the stimulus package is passed.

ADAM SHAPIRO: Tim, let me follow up with you on that. Because everybody is saying we won't get any kind of tapering for at least another year. And while we do expect that there's pent-up demand and money on the side, one of the things that's happened is there's still 10 million people who are not employed. And I realize they haven't had to delever the way we saw, as you point out in the great financial crisis of so many years ago. But they're still not spending money. So why do you think we might get the taper sooner?

TIMOTHY CHUBB: Well, I think everyone so far, including ourselves, has underestimated the power of stimulus. And I think for us to be in the shape that we are in right now, coming out of a global pandemic with an unemployment rate at 6.3%-- and I realize that number's skewed a bit because of how much we've seen workers leave the labor market.

I think the economy, for a lot of Americans, is actually performing extremely well. We've seen a lot of big tech obviously perform well. And they continue to be such a large part of the index. And I understand that's not a huge part of the economy.

But I think as you have a lot of consumers who have been very fortunate throughout this, and a lot of companies have been very fortunate throughout all this, ultimately, with more stimulus coming back online for some of those sectors that require face-to-face interaction that are more sensitive, I think Americans are going to be looking to get out this summer. It's going to be pretty incredible seeing the pent-up demand that we've seen. And I think a lot of those sectors that we still have been facing for relatively high unemployment rates will likely snap back more quickly than what the market is perhaps anticipating.

SEANA SMITH: James, when we talk about Fed policy, of course, that points to what's going to happen with rates, whether or not we're going to possibly see inflation. What's your assessment on the likelihood that we will see inflation this year?

JAMES BRUDERMAN: Well, I think we're certainly going to see a little bit more inflation than we've seen, but by no means do I anticipate that there's going to be runaway inflation. I don't think the demographics to support it. And I don't think that the current stage we are in, in the economic cycle really supports it either. Certainly we've seen some adjusting in pricing. You know, obviously, the yield curve has steepened, and we've seen a lot of-- we've seen some increases in materials prices and oil especially.

But I think that's more of an adjustment than a signal that inflation can really get ahead of itself. I think with the unemployment we've got with the potential for increased productivity, especially as 5G rolls out, you know, I think we've got enough upside caps on inflation. And worst case scenario, I'm confident that towards the end of this year or early next year, that we're going to see some additional tax burdens that will help take the wind if there is excess wind in the sails of the economy, will help keep that under control.

ADAM SHAPIRO: Well, James, some of the things that are showing us the wind in the economy-- I mean, energy, that sector is starting to recover. It's now, for the last 52 weeks, it's down just under 20%. Last week, you could still quote it was around down about 25%. It closed up 4% today. What are the sectors that you think are going to remain strong that you want people to pay attention to?

JAMES BRUDERMAN: Well, you know, I think that as the economy continues to improve, you know, maybe we see a little bit of a rebalancing, so to speak, maybe away from some of the quality that people are more apt to hold in difficult times and a ascendency of some of the, I wouldn't say necessarily speculative, but some of the light later cycle assets-- small caps, for example. I think technology still has a lot of room to run, especially like I said earlier about 5G. But, you know, I think overall, there's a lot of room for productivity investments in corporate America.

I also think healthcare has got a lot of opportunity. Albeit over the recent past and since the beginning of the year, it hasn't been doing very much. But there's a lot to be said for, I think for healthcare, especially as we look forward.

SEANA SMITH: Timothy, how about you, specifically when it comes to technology? Because we have heard from a number of these large cap names over the last two weeks. Largely speaking, their numbers were better than expected. Are you still finding reasons to buy some of these names that have outperformed over the last 12, 13, 14 months?

TIMOTHY CHUBB: Yeah, absolutely. And I think, you know, to James' point, we've seen under the surface a lot of that speculative behavior and a lot of the companies that you would anticipate benefiting from a cyclical rebound really start to outperform some of the secular growth stories that we've seen perform over the last 12 months. And so for big tech, I mean, their results were phenomenal. And you look at their net debt is at very low levels.

You know, I keep thinking about what would happen if big tech were to lever up and start making some acquisitions to really fuel their growth for the future, but their core businesses are doing extremely well right now. And you look at some of the credit card processors. All of the big tech names that make up a large portion of the index underperformed some of the broader markets. And to me, that's where really some of the best value in the market right now, as we've seen this rotation into value and some of these lower quality cyclicals pick up.

And, you know, it's also coming at a time-- and it's still the case and it has been for the last 10 plus years now-- where you look at how many dollars are going as the equity markets are entering market cap weighted indices, or securities, I should say. They're going to be buying large proportions of those big technology companies. And so, you're looking at the S&P. Revenue growth declined 3 and 1/2% year over year. And then you look at the big tech that reported within the last week or two, seeing revenues jump anywhere from 20% to 40% and still trading at, in some cases, below market levels ex-cash. I think that's really where a lot of value exists within the market right now.

I also agree with healthcare, especially in elective procedures. I think that's an opportunity. The whole sector as a whole, I think, is trading at 17 times forward earnings versus the S&P at 23 times this year. So yeah, I really think there's a lot of value in big tech and some of these more defensive type companies that have run out of steam of late.

ADAM SHAPIRO: OK, everybody hold on. We're going to go to Jared because we have earnings from Take-Two Interactive Software. And the shares are selling off in the after hours

JARED BLIKRE: Yeah, just slightly, and I've seen them positive as well. And I got to say, the numbers, the key metrics are looking really good here, and I'll go through those now. So starting with third quarter results, adjusted revenue came in at $814.3 million. Estimate was for quite a bit lower, $752.6 million. Digital online net bookings, a key metric for them, that comes in at 664.4 million, higher than the estimate for 631.6 million.

Also beating out on physical retail and other net bookings, and their adjusted EPS came in at $1.24. And that's versus estimates of $0.95. Now they also had a pretty rosy year long forecast as well for-- excuse me, 2021. They're seeing adjusted revenue of $3.37 to $3.42 billion. That is well ahead of the estimates of Wall Street, that midpoint coming in at $3.28 billion. They're also seeing adjusted EPS for the full year at $6.05 to $6.15, and that is much higher than the estimate for $5.67.

And then, finally, for their fourth quarter forecast, they are seeing adjusted EPS, $0.52 to $0.61, when the estimate was for lower at $0.43. So let's take a look at some charts here. Still down after hours about 1 and 1/2%. We'll dig into the report and also listen on the call to see what comes of it. But over the last year, definitely looking at a COVID play, up about 89%, 90% over that period. And you've got to think the comps are going to be a little bit difficult this year, so maybe that's what's entering investors' minds right now, as the share is still down about 1.8%. Guys.

ADAM SHAPIRO: All right, Jared, thank you very much. And thank you, Timothy Chubb, the CIO from Girard, also James Bruderman, 1879 Advisors vice chairman. We appreciate your closing the bell or doing the closing bell with us.