Markets open in the green on hopes for slower coronavirus spread

Matt Maley, Miller Tabak & Co Chief Market Strategist, joins Yahoo Finance’s Editor-in-Chief Andy Serwer, Alexis Christoforous, Brian Sozzi and Jared Blikre to discuss the latest in the markets.

Video Transcript

ALEXIS CHRISTOPHOROUS: Welcome back to "Yahoo Finance Live" on this Monday morning as we continue to broadcast you from our home. Thanks so much for being with us. Stock futures rallied here into the opening bell. We'll see if we can hang on. Let's pause now for the ringing of the opening bell at the New--

[BELL RINGING]

And there we have a new trading day and week underway on Wall Street. Investors looking ahead now to those earnings reports that are going to start flooding the market in the days and weeks to come. Right now, the Dow [INAUDIBLE], up better than 600 points.

I want to check in with Andy Serwer, our editor in chief, who had a very interesting write-up this weekend on our website with which actually, Andy, flows quite nicely with the Jamie Dimon annual letter of JP Morgan Chase. You talked about what it takes to be a leader at this time in our country's history, during this pandemic. And actually, in Jamie Dimon's letter, he listed how leaders are failing the US right now. What was your takeaway?

ANDY SERWER: Yeah. Well, Alexis, it's interesting because CEOs of big companies always have a really tough job. And it's a balancing act, right? You're balancing between the demands of investors on the one hand and then also your employees and your customers and then society. It's sort of the four constituents a lot of CEOs like to talk about.

And at a time like this, you really have to think about things other than the bottom line. You have to think about your employees, and you have to think about your community. Those are number one and number two right now. And in fact, that might come at the expense of shareholders, at least over the short term, and even customers.

But you have to make sure your people are safe. You might need to pay them a little bit more. And then you need to support things like the local hospitals and medical workers and emergency workers and make sure that they're taken care of. And maybe it means taking money out of your cash trove and giving it to them to buy supplies like masks and ventilators.

So CEOs that are stepping up right now are really the ones that are being counted. And those are the ones that I think, in the long run, will be looking good as we get out of this crisis, ultimately.

ALEXIS CHRISTOPHOROUS: All right, guys. I want to give you a quick check of the markets. Dow up about 900 points right now. We've got the NASDAQ up nearly 300, the S&P about 100. I want to bring in Matt Maley now, chief market strategist at Miller Tabak. Matt, always good to see you. With the market up the way it is today, do you think that this is something substantial? Is it the beginning of us perhaps rebuilding this market, or do you think that this is a bear market trap?

MATT MALEY: Well, you know, one of the things-- I think it's probably more the latter, more of a market trap. I just think that we've had this first period of liquidation, but I think we could have more of it, because a lot of these investors, we've got kind of the forced selling, because that's what always happens. Margin calls don't happen until the market falls by a decent amount.

But then we're going to have the second phase, because we're in a de-risking process. And now we have to have the companies, which have loaded up to the gills in terms of debt over the last 12 years. And as they de-risk and deleverage themselves, that's going to keep the economy from picking back up the way it did following the 2018 deep correction. And I think that could lead to another pullback on the market. But I think we're more than halfway done with this decline. But when people keep talking about it being a bottoming process, I agree with that.

- You know, Andy, going back to your weekend story on CEOs and leadership, what CEOs are doing it right right now?

ANDY SERWER: Well, you know, you've got a long list. And we've got stories about that, Brian, at Yahoo Finance. You've got companies like Mars. You've got companies like Starbucks. You've got companies like Walmart.

So those are the companies that are, frankly, making headlines by making sure their employees are continuing to be employed and actually giving out pay to those people who are on the front lines who need to stay at work. In other words, there's this divide in our country between employees who can work at home-- and a lot of those are salaried employees-- excuse me. Those are the people who-- those are white-collar workers, I should say, whereas the hourly workers, the blue-collar people, are the people on the front lines who are more exposed.

And our company, our parent company, Verizon, Hans Vestberg has given out enhanced pay to the people who have to go out and either stay in the stores or in the trucks going into people's homes to do service calls, because that stuff is still very, very important. So there's any number of CEOs. And frankly, it's a great opportunity for these companies to put out press releases and talk about, well, Mars is doing a $20-million fund to help support people who are fighting coronavirus. You know, what a great thing for them to do.

ALEXIS CHRISTOPHOROUS: Absolutely. Matt, I want to talk to you a little bit about what you're doing right now with your portfolio and what clients are telling you. Are you feeling that there is that appetite to take on a little more risk? I was talking earlier with our Jared Blikre about the fact that yields are starting to rise now. We're seeing that yield on the 10-year treasury starting to push up a little bit. Do you think that investors have turned the corner here with this pandemic, and they're seeing some opportunities and some light at the end of the tunnel?

MATT MALEY: Yeah, definitely. I mean, even though I think that we could see the market pull back a little bit more and retest the lows and even undercut them, you can never pick the exact low in the market. And so with the market already down as much as it is, you can start dipping your toe back in. And you just want to be able to go into the high-quality companies with the great managements that you're talking about that have great balance sheets, et cetera.

But if you buy them gradually on a scaled-down basis-- I mean, traditionally, investors will scale down by a little bit here, by a little bit more down-- down 1%, down another 1%. Now you [INAUDIBLE] down 5% or down a little bit more. And when you do it that way, you may not buy a full position, but boy, you're going to build a really nice base from which to build on when we do kind of-- you know, when the coast is clear.

But one thing we definitely know is that if you wait until the coast is completely clear and everything looks good, a lot of that bounce is going to be already behind us. So take advantage of it now. Buy a little bit. Be very gradual. And then when the market-- when you feel a bit more comfortable, then you can really load up to a more aggressive degree, I guess.

ALEXIS CHRISTOPHOROUS: And of course, now we have earnings season upon us. We know the news is not going to be good. Estimates are all over the map. Goldman Sachs is saying that it could see earnings drop 30%. Others are saying much more modest, a 4% to 5% drop in earnings. What are you expecting?

MATT MALEY: Gosh, the thing that makes this so tough-- I mean, we expected to definitely be in the double digits area. And of course, different sectors are going to be hurt much more than others. I mean, part of the thing we talk about is that we want to look over the-- you know, over the valley of this coronavirus, because things will [INAUDIBLE] back. But the point is we already are looking-- the stock market is pricing in that things will get back up fairly quickly. I mean, otherwise, let's face it-- the economy is completely locked down. The stock market would be much lower.

So the key thing right now is we've got to see what the guidance is. And the problem is the guidance can be so much tougher to really define this time around. So earnings are really going to be-- are secondary right now to investor confidence. And a lot of that, of course, is going to come-- before we really get that, we're going to have to see this coronavirus calm down quite a bit.

ANDY SERWER: And you guys, when you talk about market action and the levels of where the Dow and the S&P are trading, a lot of people are anticipating, well, you know, we're going to recover over the next couple months, and then we're just going to snap back, or once we're done with this, say, in June, then we're off to the races again. And talking to a lot of market participants over the weekend, they're talking to me about another scenario, which is a long slog.

And we're so used to the market snapping back after the sort of mini-crisis we've had since 2008. But remember, you know, sometimes when you hit a rough patch, it extends. So we may stabilize here, say, at a level somewhere in a band between 10 up or 10 down-- 10% up, 10% down-- but then just flatline for quite some time because there's so much uncertainty. And I think that's something really to take in mind here, because with all this uncertainty in terms of earnings, in terms of the disease, in terms of GDP and unemployment, know, we really can't price equities, never mind other securities. So there's going to take a lot of time-- we're going to need a lot of time to sort that out.

ALEXIS CHRISTOPHOROUS: All right. I want to check in with Jared Blikre now for a look at what he is watching as we have this early-- weak early-morning rally happening on Wall Street, Jared.

JARED BLIKRE: That's right, Alexis. I'm just dialing up the Wi-Fi interactive right here. This is a year-to-date chart of the S&P 500 and candlesticks. And we can see, basically, for the last two weeks, it's kind of gone sideways here. That was the range we were pointing out in the futures.

To the upside here, we've still got a little to go, but it remains to be seen whether or not we can break out of this, kind of getting back to Andy's point here and some of our discussion points that we really can't exactly know when the bottom is in until substantially afterwards. And we could simply have a drawn-out process where this correct over a period of time.

And so let's take a look at the Dow Jones heat map. Lots of green here. Procter & Gamble the lone red face here. Microsoft up over 2.5%. Apple up nearly 3.5%. JP Morgan up 6%. Financials outperforming as we see the 10-year T note yield finally rising. Might be putting in a double bottom here, ready to take off further. It remains to be seen if that's going to happen, but something to watch out for.

And then the NASDAQ, we have pretty much a very green picture overall. I want to pull up performance-weighted here. And we can see in the upper left Marriott, Ulta Beauty, Align Technologies, Wynn-- those are all up, basically, about 10% or more. But these are a lot of the names that have been beaten down lately. So a lot of people are going to point out, where's the leadership in the rally? Don't necessarily want to see people-- or these companies that have been so downtrodden be the leaders.

But if I look to the sectors, we can see something a little bit positive here. Materials, industrials, financials, real estate, utility, discretionary, tech all outperforming. So we've got value cyclicals, growth momentum. Those are the things that can eventually make a stable rally. And importantly, I would also add-- not shown here-- the semiconductor is doing very well as well.

The downside here, to the downside-- the underperformers are staples, energy, and health care. So that's the defensive names kind of on the bottom there. And that's what you would expect with the exception of energy waiting for that OPEC meeting this Thursday, hopefully. Alexis.

BRIAN SOZZI: Yeah. Matt, Brian here. Don't you fade this rally in the markets this morning? Look, we had JP Morgan CEO Jamie Dimon come out this morning and warn of a bad recession and financial market stress. Should investors-- should investors be paying more attention to those comments?

MATT MALEY: I definitely think so. I mean, let's face it. Back in 2016 when we saw another deep correction, which was-- we remember, of course, the one of 2018, but 2016 was also a deep correction, and everyone was worried about what was going on in the oil markets and that it would absolutely crater, which it did, the high-yield market. So it's a very similar time.

Back then, what did Jamie Dimon do? He stepped to the plate and bought $25 million of JP Morgan stock and was talking about everything turning around. Now he's saying that we need to be a lot more careful here. So I definitely agree that-- you know, nobody's perfect. He's not going to be right every single time. But going against Jamie Dimon has not been a good idea. So I do agree that it's a reason to pull back a little bit, you know, pull your horns in a little bit.

ANDY SERWER: And look at Warren Buffett, you guys. I mean, I talked to him just a few weeks ago, and he said, I'm not selling my airline stocks. Presto magic-- just the other day, he did sell his airline stocks. And so, you know, these conditions are not for the faint of heart. And also, it pays to be able to change your mind and be flexible here and to understand when you see things are different, you should act accordingly.

ALEXIS CHRISTOPHOROUS: All right. I want to thank our panel this morning-- Matt Maley of Miller Tabak, Andy Serwer, Jared Blikre, Brian Sozzi.