Stocks mixed after CDC, FDA call for pause of J&J vaccine rollout

Rayliant Global Advisors CIO Jason Hsu joins Yahoo Finance Live to discuss the latest market action.

Video transcript

AKIKO FUJITA: Let's turn our attention back to the markets because we have seen some moves coming on the back of that news out of J&J. We talked about the big bump that we've seen in Moderna, but also some of the reopening trades facing pressure in this session. The airlines, these travel stocks, Zoom, a stay at home trade, getting a big bump in this session on the back of this news. Let's bring in Jason Hsu, Rayliant Global Advisors CIO.

Jason, the doctor just pointing to some context in the news that we got today, saying that J&J is still a small part of the broader vaccine supply that exists in the US. But does the news today change your thesis at all in terms of how quickly things are likely to open up and support some of these businesses that have really struggled?

JASON HSU: Well, when you look at what's happening in the market, absolutely, your out to play stocks, your airlines, your brick and mortar retailers, versus the work from home stocks, you're seeing a bit of a pullback for the out to play stocks. But I think that's a bit of an overreaction, given that J&J really is a tiny part of our overall royal strategy. I think the market's a little fragile. And it's also responding to a phenomenal rally for the out to play or the more value oriented stocks, which have performed well year to date. So I think this is just a minor pullback. I think the thesis of the economy opening up global trades, going back online, I think that thesis remains unchanged.

ZACK GUZMAN: The other big update we got in terms of the market this morning was CPI. Obviously, a bunch of investors out there are nervous about what inflation is going to look like. We've heard the kind of calm message being deployed at the Fed here. And you could say it came in above expectations, 2.6 year over year versus 2.5. That might be a headline that a lot of media organizations might go with to maybe focus in on the month rise there, 0.6 versus 0.5 expected. But talk to me about how that fits into what we've been talking about, right? A temporary blip in inflation eventually calming out. How do you digest these numbers here?

JASON HSU: There are definitely two camps out there. We know the Fed has been printing money. And you know with the Biden administration, there's going to be a lot of fiscal easing stimulus that will continually pump in the economy. So there's one camp that worries about economy going into inflationary regime. The inflationary boogeyman, I think, has had its effect in terms of causing the rate to rise, which spooked the market a bit.

But if you look at the latest number, taking out the energy component, it really is a non-event. So it's really a matter of the two camps battling it out. Do we really go into-- are we really going to experience inflation? Or is this just a temporary shock in the energy sector that will really have no monetary lasting impact?

AKIKO FUJITA: Yeah, to your point, it looks like a big chunk of that is coming from gas prices, gas prices surging about 9% in the month. How are you positioning yourself right now, though? Energy is one of those sectors. We've heard a lot of guests say they are putting their money, especially given the growth that they're likely to see with the reopening of the economy. Where do you see that the biggest opportunities?

JASON HSU: Yeah, the energy sector, I think it's had a phenomenal rally, again, based on our thesis, the economy opening up and people are going to be out to play. We've seen some pulling back in prices, giving up half the gain year to date. And I think, again, it's really due to the fragility in the market psychology.

And I think that's an overreaction to what is a unchanging thesis of the economy is going to open up. And there's going to be pent-up demand to go out and travel. And energy prices are continue going to have upward pressure driven by both, you know, the airline sector and the automotive fuel consumption. So I think, again, this-- the strength in fuel prices will continue. And any pullback, really, is an overreaction to any imperfection in the rollout.

ZACK GUZMAN: Yeah, we had-- Tom Lee was out with a new note, too, talking about the way that it's been down, traded down eight of the last 10 days. When you go back and look at that, that tends to mean good things for Ford, three-month returns when it comes to the energy sector.

But I wonder how much of this that we're seeing now play out in regards to the reopening hitting airlines, as Akiko pointed out earlier, as well as cruise lines and everything else that stands to benefit. We've talked so much about that rotation into those cyclicals. But what this might do for maybe an unwinding of that rotation if this rollout, or reopening, rather, looks like it could be slowing after this J&J news or, you know, the global implications of that, how much do you see this kind of unwinding in the weeks to come?

JASON HSU: Well, I mean, certainly there's going to be some profit taking. The out to play economy has benefited tremendously in terms of excess return over the rest of the economy. And so some profit taking, and this is a great opportunity on a bit of a sort of bad news to take profit and get back on the sideline to see whether the rotation will continue to favor the out to play economy or whether the work from home economy could gain some strength. But overall, right, on the back of easing, on the back of money printing, even though it's just going to be rotation back and forth between the two sectors, the overall brought sentiment is still quite positive. And so it's relative outperformance, but overall, a setback to the broader economy. And the broader market is unlikely.

ZACK GUZMAN: All right, Jason Hsu, Rayliant global Advisors CIO, appreciate you taking the time here to chat with us today. Be well.