Market Recap: Monday, April 12

Stocks slipped on Monday as traders took a pause after the S&P 500 and Dow logged fresh record highs last week. The Dow drifted lower, shedding 55 points, or 0.2%, to steady just below its recent all-time high. The S&P 500 dipped, while the Nasdaq underperformed as technology stocks gave back some recent gains. Raymond James managing director of Equity Portfolio Technical Strategy , Mike Gibbs, and 1879 Advisors Vice Chairman, James Bruderman joined Yahoo Finance Live to discuss.

Video transcript

SEANA SMITH: Got about 90 seconds to go until the closing bell. All three of the major averages in the red. We have Mike Gibbs. He's Raymond James managing director of equity portfolio and technical strategy. We also have James Bruderman. He is 1879 Advisors vice chairman. But first, we got to get to Jared Blikre for a closer look at some of the movers here into the close. Jared.

JARED BLIKRE: Well, we've got the S&P 500 [INAUDIBLE] unchanged. If it flashes green in the final minute here, as it just did right now, that'll be good for a record close, probably. But aside from that, just seeing another low volume, lackluster day in terms of volatility. The NASDAQ off the most here, down 1/3 a percent. And here's the day's price actions. They were just meandering in the lower half of the range or so for most of the day. I do want to check in on the VIX because that is still holding below 20. That's an important threshold that we've been monitoring.

And now it's time to take a look inside the NASDAQ 100. We've got about 40 seconds till the bell. Apple is still down about 1% after some disappointing data over the weekend, suggesting it might not be shipping as many phones for the month. And Alphabet is down 1%, but Amazon up 2/10 of a percent. Communication services and tech, those are in the red. Those houses big FAANG names. Guess what's in the green? Tesla. Tesla is up 3 and 1/2%, bucking the trend of most of the other EV space. And here is your closing bell on Wall Street for the day.

[BELL]

ADAM SHAPIRO: All right, we've got a closing bell. We'll just wait for the gavel, if he's going to-- there we go. We finally got a closing bell. Watch out for the iceberg Captain Smith. Two days until April 14, [INAUDIBLE]. As we take a look at these markets, not big drops as Jared was pointing out, but we do expect the Dow to settle off about 54 points. The S&P 500 is going to settle down barely a point. NASDAQ is going to be off also about 50 points. And then the sectors, as Jared was highlighting, some of the gainers today, consumer discretionary up half a percent. Consumer staples up half a percent. Financials with the big banks reporting on Wednesday, up half a percent.

Let's go to our guests and talk about all of this. I'm going to start with you, James, because you said something that builds upon what a guest in the 3:00 PM hour told us about. Are the stock valuations we're witnessing right now too high? Jay Powell says or avoids talking about a potential asset bubble. But you pointed out that with high valuations, you know, markets can be more vulnerable to any shocks or surprises. As an investor, should I be worried that the valuations we're witnessing even being off today?

JAMES BRUDERMAN: Well, I don't think so, because we've still got a lot of fuel in the tank, as far as the economy is concerned. We're still poised, I think, in the early stages of the recovery, maybe getting a little bit into the growth stage. But I think we've got a lot of runway, especially with all the stimulus that's yet to be spent to Gillette earnings continue to support and maybe even provide some more upside. Maybe we get a little bit of ahead of ourselves, and maybe multiples get a little bit stretched. But I think we see it correcting itself in a little bit of rotation, and maybe markets go sideways.

But, you know, where we are in the economic cycle, I'm feeling rather confident about the prospects for equities. That being said, as I mentioned in our notes earlier, there is, you know, the risk of any shock can certainly have maybe a little bit more of a multiplicative effect, given those higher valuations.

SEANA SMITH: James, looking at the laggards today-- and our last guest pointed this out in-- when we were talking about the underperformance today. He was saying take note of what we're seeing in the NASDAQ, because the NASDAQ closing off just around 3/10 of a percent, that certainly wasn't the case last week. What do you make of the rotation that we're seeing out of some of those big tech names?

JAMES BRUDERMAN: Well, with a lot of those big tech names, I think the underlying fear of inflation might still be driving some of that rotation I mean, the growth-- the rubber band or the growth sector of markets has certainly had a really great run. And I think you could make a compelling case that value at least needs to catch up a little bit. But given a potentially rising interest rate environment, the multiples on some of those companies whose earnings may be out a little bit too far in the distant future could certainly be under pressure.

ADAM SHAPIRO: Mike, I want to talk about inflation because we're going to get a CPI reading tomorrow, a US CPI. We live in a historically low inflationary environment since the 1980s. When we talk about inflation, what really would be a problem?

MIKE GIBBS: I think you're going to have to push the-- well, forget the inflation rate. Watch the wage number, the ECI index. You're not going to get the problematic inflation without the wages going up. That's where you have the problems in the '70s and '80s. And we don't think we get that. There's too much slack. There are still underemployed people out there. So that's why we're not that concerned with inflation.

Now, we're going to get some pretty hot readings, I would think in the next few months. If you just think about the supply demand imbalances that we have, you're going to force some inflation through the system. But it's all transitory. And I think that's the way the Fed is approaching as well that any of the supply chain bottlenecks that creates inflationary type pressures, it's transitory.

And, you know, whether the market accepts that when it happens, we'll see. You know, it depends on where the market is at that time. We've had a good rally here. If we've got some shocking data on the inflation front with what's going on with interest rates and the sensitivity in the market, if it's elevated, sure, I could see us pulling back. But it's not something that I'm concerned that would derail things.

Now if you go back and look-- go back to 1954 and look at the valuation of the S&P 500 relative to different inflation rates, and when you're in that 2% to 2 and 1/2% range, which is where we're trying to get to, is where you've had your premium valuations for market, the highest valuations we've had on record. Now, once you crossed the 2 and 1/2% to 3% threshold is where you saw that break. And it's where you saw the multiples start to contract just a little bit with the S&P 500.

So, you know, I don't think that we're going to put a line in the sand on inflation. But I think that just on the back of the envelope, I'd watch that 3% level. But it's got to be something that looks sustainable, meaning it's got to come from the wage front.

SEANA SMITH: Mike, we had the $2 trillion stimulus play. And now we have Biden talking about the $2 trillion infrastructure plan potentially. How much of this is already priced into the market?

MIKE GIBBS: A lot of it. I mean, look at the individual stocks. I mean, look at the way the anything infrastructure related, just look at the way the prices have moved. But don't take that as a negative because stocks always look into the future. And they always overreact on the upside and downside. And what happens is, once they get the overreaction to the upside, then they'll go through a period of normalization. You'll go through some basing periods for the prices themselves. You'll have the prices go back.

And then through time, once that package gets out there, and we actually start spending things-- and that's the thing about the fiscal stimulus we put out there. We can instantaneously get that kind of infrastructure. It's going to take a while. I mean, just think of after the credit crisis, you know, here in the state that I live, I know there's a lot of money that just sat in the Treasury, you know, in Nashville, Tennessee that was earmarked to be spent. But it wasn't spent because nothing was shovel ready. So that's a delayed effect.

But actually, I still think that's a positive as well because that gives me some longevity of that money trickling in. But yeah, a lot of that is priced in. But I think investors should look at it, especially individual investors. Notice what moved, and notice what the investors really wanted to put their money into. But then, be very pragmatic about when you make your move. Because they're going to come back to you. Don't get caught up in the excitement. Chase them, you know, bond as they come down.

ADAM SHAPIRO: James, what Mike just advised investors to be wary of, I mean, there's a lot of easy money out there. And when easy money is out there, risk goes up. When you talk about the new normal back to normal, what about the consumer? With thousands upon thousands of dollars now in savings, will the normal be spending like it was before, James? Or will there be a new normal with people holding onto the cash in their savings accounts, despite getting [INAUDIBLE] in interest?

JAMES BRUDERMAN: Well, you got to also think about the demographics of who got all of that money. Historically speaking, a lot of the consumption that we've seen, especially consumption that driven-- that drove inflation in the '70s and '80s was because we had a huge portion of the population that was in their best spending years. Now that we've got a lot of [INAUDIBLE] later stages [INAUDIBLE] may not be as--

SEANA SMITH: All right, James, it looks like we might be losing your audio, so unfortunately, we have to end it there. But James Bruderman, 1879 Advisors vice chairman, always great to have you. And Mike Gibbs, Raymond James managing director of equity portfolio, great to speak with you as well.