Market Recap: Thursday, June 10

Stocks rose Thursday as traders digested a key print on inflation, which showed consumer prices rose faster than expected as demand surged during the recovery. Sameer Samana, Wells Fargo Investment Institute Senior Global Market Strategist, and Chris Retzler - Needham Small Cap Growth Fund PM joined Yahoo Finance Live to discuss.

Video Transcript

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SEANA SMITH: And that closes out the trading day today. Again, taking a look at where markets settled today, the S&P hits a record high despite that higher than expected inflation number that we got out this morning. Dow closing up 19 points, well off the highs of the day. S&P closing up just around a half of a percent and the NASDAQ once again, the outperformer today as we see growth stocks come back into favor. We saw a number of those big tech names leading or amongst the winners, I should say today. So the NASDAQ closing up just around 0.8 of a percent.

Digging into some of the individual movers that we're seeing within the major averages, within the Dow, the outperformers today Walgreens, Merck, and Amgen. On the flip-side, the worst performers, Goldman, J.P. Morgan, and Caterpillar. Taking a look at the sector action, we have health care, real estate, and utilities among the big outperformers today.

We want to bring in our panel. We have Sameer Samana, he's Wells Fargo Investment Institute Senior Global Market Strategist, and Chris Retzler, he's Needham's Small Cap Growth Fund portfolio manager. Chris and Sameer, it's great to see both of you. Sameer let me start with you, just the higher than expected inflation number, investors obviously today shaking that off. What do think of that number that we got out and what it means here for the market's future moves?

SAMEER SAMANA: As far as the number goes it wasn't too much of a surprise. I'm sure there were some whisper numbers that were much higher and it probably came in a little bit below those. And that's probably why the bond market took the opportunity to rally, which was really interesting because you also had a 30-year auction today, and that went really well, and that's after a 10-year auction that was also well-received yesterday. So it shows you that there's a lot of demand for fixed-income even these low levels and we think that that continues to support the equity market, where people keep asking us about how valuations look. Well, when you compare them to fixed-income, when you compare them to cash, they look really attractive.

ADAM SHAPIRO: Chris, when we take a look at what's happening in these markets, a lot of people seem to be worried about inflation. And yet, behavior, it's one thing to worry, your actions are another thing, and we were talking about the 10-year yield, what are you making of what investors are telling us right now?

CHRIS RETZLER: So I think what we had today was a variable that everyone was trying to figure out and now we have the number. So moving forward the real question is, is this inflation that's going to stick with us? And I think you know when you look 9, 12 months out where the equity market typically gets priced, I would say that you know, inflationary is probably more temporal. We may still have some further numbers in the next month, but I think the fact that the CPI was hotter today than what had been expected actually probably gets more of the bad news behind us.

You know, growth outperformed value today, which is why you had the financials weaker in some of the other recovery older type industries, and more software and technology outperformed. Thereby you know, you're seeing the yield curve come down. So for equity investors, I think they're looking further out. We've gone through the correction in the spring, where the market broadened out. While painful for growth, it's hard to not invest in really good companies growing at 20%, 30% top line.

SEANA SMITH: Well, some companies that are feeling some pain today are some of those meme stocks that have been in favor recently. AMC under pressure, GameStop, Clover Health, all in the red today. Jared Blikre, he's standing by on the floor of the New York Stock Exchange. And Jared, what do you think about this move lower that we're seeing in some of these names that have become the favorites here among the WallStreetBets crowd?

JARED BLIKRE: Yeah, well GameStop is definitely leading down today. What does that mean for the other meme stocks that we've been looking at? When we see substantial losses like this and we can see on the Wi-Fi interactive, it's pretty-- a lot of dark red here today. When we see this, generally it means that the peak is somewhat over.

Here's AMC, it's only down 13%, but if you take a look at the last month, you can see still holding on to quite a big proportion of its gains there.

GameStop not looking quite as good, but I'll tell you what, when the markets are doing nothing as they were for the last week or two, we tend to see a rotation into these meme stocks and now we're seeing the S&P 500 picking up a little bit, record high for it. NASDAQ within 1.5% of its record high, a big move, big move into bonds now. So maybe the meme stock 2.0 move that we're seeing here is over. Just a question, but we're going to be talking about it tomorrow morning at 10:00 AM when we have a full hour, one-hour meme special.

SEANA SMITH: All right. Well, Sameer, let me ask you about that, the activity that we're seeing those meme stocks. I mean, obviously falling out of favor today and increasing the volatility that we've been seeing in the market. How do you think investors should be viewing some of those names?

SAMEER SAMANA: Yeah, we would probably stay away from individual names, but we do like small caps. We think they're probably the most sensitive to higher rates, higher inflation, and higher economic growth. So we would take on more small cap exposure. We'd probably just stay away from some of the individual names that can be subject to the whims of let's just call it, individual retail investors.

ADAM SHAPIRO: Want to get back to you, Chris, on these issues. And one of the things is that you think that there's still opportunity in, for instance, we were talking about the semiconductor chip shortage, you think there's a play to be made there as production ramps up right here in the United States.

CHRIS RETZLER: We think semiconductors long-term have really good secular growth trends behind them. While the supply will certainly figure itself out, we think over the next 12 months the demand for semiconductors and semi cap equipment, and also from a geopolitical standpoint to bring that manufacturing back you know, to the United States, we think that there's going to be a lot of spending there. We're supportive of government help on that front to bring those industries back. And semiconductors are showing up in just about everything, automotive, medical, defense, so semiconductors, 5G still is being built out, so we're still very positive on communications. But semis long term, we think are a great place to be investing.

SEANA SMITH: Sameer, where are you finding opportunity right now because the big debate out there, whether or not inflation is transitory or not, we're starting to see it heat up in some areas of the economy. Is this affecting your strategy at all?

SAMEER SAMANA: It is. So the two areas that we most recently upgraded was we took energy up to favorable. We think the move higher in oil is sustainable. We are seeing a lot of discipline from US producers. That's really been the key change in the past year or so is even though oil prices have moved higher, the producers aren't really bringing on new rigs. So we like energy.

And then we upgraded real estate from unfavorable to neutral. We think as the economy opens back up a lot of employers probably will choose a more hybrid approach and real estate is not dead as many had maybe thought during the crisis. And so we think there's some value there. And so we'd be adding that back.