tv Power Lunch CNBC July 19, 2021 2:00pm-3:00pm EDT
good afternoon, everyone and what an afternoon it is. a very busy one. the worst declines in the market for the year welcome, everybody, to "power lunch. along with kelly evans, i'm tyler mathison glad you could join us the sell-offis intensifying, the dow heading for its worst decline of 2021. as pandemic fears grip investors
this day energy and industrials the biggest laggards as growth concerns take hold >> the yield on the ten-year breaking belowits 200-day moving average investors are looking for safeties is this shakeout the start of something bigger is it a healthy pullback and what should investors do about it >> we have team coverage and will start things off with who better than bob pisani tracking the market action from the new york stock exchange. robert >> reporter: the markets are living in a post-covid, post-vaccine world but, of course, the virus has not gone away and that's the major problem. let's look at the issues the markets are dealing with first, of course, is the covid variants and how serious are they secondly, high valuations and, third, the peak growth story they're all combining to see a 2% to 3% decline here. if you look at the payment process, a very simple way to express the concern people have about not going out asmuch maybe anymore. you see companies like visa and mastercard down notably, western
union and global payments. they're on the weakside. the usual reopening names, the cruise lines, the airline companies, the hotel companies like marriott and the restaurants. they're all notably weaker as well then we have the energy companies. remember, we also have a deal with opec going on so oil was weaker and, regardless, would have been down but those high names like marathon down 5% or 6% global industrial names that have benefited from the reopening story are also weak. the general electrics, the boeings, and the honeywell, of course, a major dow component as well and at 1.1%, 1 is.2%, the earnings have been terrific. regional banks down 3% or 4% interestingly mega cap tech holding up comparatively well. we even had positive territory for nvidia and other names out there. the bottom line is i think that
the big cap growth names, people believe those are going to do well regardless of how the strains of the covid variant works out. major indices, keep an eye on this the markets have been concerned about peak everything for a while and some of the big names out there, the mid cap stocks, the russell 2000, they peaked a while ago. they peaked several months ago there's been a lot of concerns about that peak growth story finally, i want to point out, kelly, the s&p 500 is still up about 13% this year. there's the drop here we are for the full year. just keep in mind it's straight up essentially 13% growth we're down 2% today. just a little bit of perspective. kelly, back to you even before today the markets were experiencing a stealth correction mega cap tech getting sold off with the broader markets back tomike santoli for alook at what that divergence means in particular, mike >> reporter: yeah, kelly, you can go back to february.
that's where speculative tech and crypto, may, june and july, the cyclical groups started to roll over. this eqal etf is the equal rate of the russell 1,000, a good proxy for the average stock. that's underperforming over a couple months ago versus the market cap weighted s&p 500. home builders, transports, banks, all had already been in at least a 10% correction before today, and that's compared to the s&p 500. what you see is this idea we're in a little bit of a growth scare, that we have this slowdown, that the treasury yields are getting compressed below where most people thought they would be has been making its way into the stock market. what does it mean? one, the footing of the market was a little bit less sure than you might have thought by looking at the market cap weighted indexes the other thing is it usually means it's probably going to be a catchdown move so to speak from the s&p itself. maybe this is the long-awaited
5% plus pullback haven't had one since october. if we do get that it takes the index back to the mid-april highs, wipes away a few months of further upside. that was where we capped the market a couple months it wouldn't be that unusual in terms of the basic rhythms of the market digesting a 100% gain over 15 or 16 months, which is what we had in the s&p in this fashion. >> mike, this feels, to me, in a way like professional investors, traders sort of selling and asking questions later, that they're just not going to wait that they were ready to hit the button and whether these were program trades or human driven trades, that's what's going on here >> reporter: yeah, i think there's a case to be made it's gradually and then suddenly, which is how these things tend to operate on the other hand last 5% of upside on the s&p 500, what was the incremental good news we got that was causing that?
i think there's a lot of sort of, hey, the market rotation is working really well. i see the erosion under the surface, some of the cyclicals falling away this market wants to rotate higher so i will be with it while it does. and then the minute it does then, if you owned them because they weren't going down, once they start going down that's one of the premises that goes away for actually buying more or now you want to lighten up i think that's a typical kind of emotional rhythm that the market gets into as well. >> thank you, michael. mike santoli reporting for us. as investors dial back risk taking today, the ten-year yield has tumbled as much as 12 basis points, even dipping below 1.2%. i checked it was 1.18% about an hour ago what happens if the slide in yields continues joining us now is sanctuary chief investment officer, jeff
where is the sanctuary in this market >> i think there is a sanctuary and to santoli's point, we are not in basic rhythms, we are not in normal times. the ten-year note is driving lower. it's important, tyler, to understand in 2020 the ten-year note was tethered to the 90 basis points to kick off 2021 we saw the ten-year note go from 1% up to 1.75% when all the inflation alarmists came out trying to get in front of the fed. what has fed chairman powell articulated? the fact they're not moving rates anytime soon you saw the ten-year note come back down in yield it's a very lonely view, ty. but the delta variant, that really stoked a lot of fears we're seeing equity sell-offs so it seems like, ty, what goes up may come down and 1.05 was the yield on the ten year that woe took off from back in february we go back and test but i think we'll settle in and that's what the fed wants. they want the velocity to dampen down
all these moves are not basic, they're not normal in the wake of covid-19, we do not have a playbook. >> it is curious, you know, the orthodox view would be when you have an economy that's running pretty hot as this one surely is and is likely to unless the covid variant really begins to take off nationally and internationally, you've got a hot economy, you've got inflation coming in hotter than the fed expected you would anticipate -- and you have earnings of companies doing very well. you would anticipate that yields would at least stay stable they would not fall. so what is the bond really telling us about the state of the economy and the state of markets? and the state of inflation >> no, ty, it brings up a great point and what is stagflation, lower growth with higher inflation. i do not think we're there this is a function of the fact we saw too many people getting out in front we talked about the federal
reserve moving interest rates higher fed chairman powell never said that he talked about supporting the marketplace in perpetuity, in unlimited capacity and now in the month of june the federal reserve's balance sheet went above $8 trillion so that commitment -- it's important to remember, ty, they owned one-third of the ten-year issuance they want to see rates move higher but they are controlling that long end of the curve despite it's flattening. the spread is still healthy and 99 basis points. i know this acute volatility is not welcome by investors but this is an opportunity to put some of that cash -- deploy some of that cash you are not going to see yields go back down to 1% if they do the fed has all the tools to keep the long end of the curve up higher and steepen again. i think you have to remain calm and be aware of the fact where this ten-year note came from, that's the critical component of today's action, but yields will go lower >> you said earlier that you wouldn't be surprised to see the
ten year test 1.05 >> at sanctuary we talk about position, this global fixed income reposition is happening when you see the ten-year note at 1.50, thaere are people repositioning their books. we're seeing the way it's intertwined. tyler, i think this acute move, this time of move is welcome because it puts us in a different regime the old 2020 ten-year note yield stuck around 90 basis points, now we're tethered to 1.30, 1.40, rates slowly move higher, not 2% or 2.5% >> jeff, even while that seems like a big reach right now it would be well below what would make economic sense. even if we're past peak growth, we're still talking about high gdp, high nominal gdp because
inflation is so high the fact the ten year would be at 1.3%, 1.4% seems to make no sense. >> i think this has been moved because you could argue, kelly, it made no sense it shot up to 1.75%. this is part of the process. we talk a lot going back to my days in the '90s at the cme group. there's a back and fill opportunity. so that volume has to come back to the yield to digest and conso consolidate. i think this is a really healthy move i do understand your point and that's where that stagflation conversation gets in point but we are seeing gdp. gdp is still growing i think this earnings season -- i can't believe we're not talking a lot about earnings season as we have 330 companies reporting, but it is critically important to your point. >> all right, jeff kilburg, thank you. appreciate your insights jeff kilburg >> thanks, pal >> you bet our next ghuest is focused n
picking stocks what's on the list, steve? >> hi. and that was a great conversation just now and i think really the point to consider is not where absolute growth is, whether it be gdp earnings growth, inflation i mean, earnings season has been fantastic. the real question is the second derivative look, we're 3%, 4% off all-time highs with the delta variant pfizer and moderna are saying the vaccine is effective on these variants, but our expectations for the general economic landscape remain pretty positive over the next year. i think it's time to have investors start thinking about where the puck is headed next. the s&p 500 earnings should reach about $200 a share this year that is a massive increase, a 30% increase, over pre-covid levels the biggest question remains, what happens to growth rates from here? and i think the answer is we'll see lower growth in gdp,
inflation, and earnings and that does have a profound leadership in the markets we're coming off high rates in everything the s&p 500 operating margin is literally at an all-time high right now, so the path of least resistance is a lower growth environment. not a bad environment. it's going to be okay, but we just think it's going to be lower and investors should focus on companies that can still exhibit secular growth narratives no matter what's going on >> so there's a couple of different ways you can position. some people would say we're moving into the next phase of the recovery that's when you want to own value instead of growth. what you're saying as we enter a slower growth phase you want to own growth the easiest way to do that is to own the faangs, if you will. if you think those stories have played out, pure cycle, anss, new fortress energy, but is it the same characteristics that attract you? should people look for growth as
it becomes scarcer >> at the federated hermes group we've been looking at companies that can grow regardless of what's going on. let's take a look at pure cycle, and all due respect to dustin hoffman in "the graduate" where he said plastics are the future, this is a company trying to literally trying to change the world. they may be small and may be more risky but it doesn't matter what's going on in inflation pure cycle has a technology where they -- i've seen them i've gone out to their plant two hours outside of cincinnati -- where they take chopped up plastic trash from stadiums and they put it through their system and out comes pure polypropylene. it's a huge problem. our children's children are not going to be using one use plastics and you take a look at this company and you say they're taking a shot. their process works. they have stuff from procter & gamble, licenses, where this
technology can create virgin polypropylene. >> let me understand what the implications are, stephen. growth in the market and growth in the economy is not as likely to be as fast as it's been the last year or six months in the case of the economy. one that grows at a slower rate and what we may be going through is a recalibration in recognition of that. do i understand you correctly? >> absolutely. it's going to be a goldilocks type of market it's going to be year two of a bull market where you historically see earnings slow sequentially year over year. we're going to have about 50% earnings growth in the s&p 500 this year that will slow to more
historical averages 8% to 10% in 2022 and you're going to see a phased transition from these reopening stocks value stocks typically work, think about it, when everything is working, when rising tides are lifting all boats. when you have slower sequential growth we still want those companies that can create their own offense, their own shot and grow regardless those are typically growth stocks let's take inflation, at google trends, the search term for inflation. that peaked in mid may, just people searching for the word inflation. you've seen copper, lumber, corn stop going up every single day inflation is transitory. this superhigh growth rate is transitory it's called tougher comps. and in that environment you want a secular story. >> so the implication then for people who are looking at their portfolios today is stay the course ride out these bumps like today
because a better day is probably coming, and many more better days are coming rather than this being the end of a bull market you're saying we're going into year two of a bull market. maybe year three >> let's take a step back. we're only 3% or 4% off all-time highs. anything can happen these days you're coming up with a narrative for why the markets are moving whatever which way. just innovation in general remains helpful. >> stephen, thanks over to dom chu for a market flash. nvidia is rallying in today's session. it's currently up by around 3% or so on heavier than average volume it's one of a handful of chip stocks that are higher on the day. now this is the biggest semiconductor stock in the s&p 500. it had fallen 14% off its recent
highs. indicating, kelly, perhaps this notion there are value investors out there looking to buy the biggest chip company out there or some of those folks covering their short bets we'll see if that trade carries through into the closing bell. >> dom, we were debating this one. you think if bitcoin was down nvidia and amd would be doing worse. maybe it's a video game play and this kind of maybe going back into a shutdown trade. >> or maybe a 15% discount from its recent price is good enough for some people to say it's on sale >> for some of the best performers a big reason stocks are selling off so hard are the delta var yiant fears and low vaccination rates. let's bring in meg tirrell for the latest meg? >> reporter: hey, kelly. we are seeing cases at a level we haven't seen since mid may. now 32,000 daily cases being reported is up 66% week over
week hospitalizations also on the rise 31% higher than last week. up to 19,000 people in the hospital and deaths have started to rise as well up 17% to 266% now the state seeing the highest infection rates are among the states with the lowest vaccination rates. arkansas still the hardest hit right now, and you can see it's among those with the lowest vaccination rates. missouri, florida, louisiana and nevada, also up. one of the reasons you're seeing these case numbers grow so quickly is just because of how infectious the delta variant is. dr. del rio from emory was talking about this today explaining this number called the r0 is about 2.5 to 3 with alpha that went up to delta and with delta 8 to 9. you see one person infect eight
others who are not vaccinated. those affect eight others as well and that's why they're emphasizing it is so important meanwhile, we are starting to hear more talk about emphasizing masks again. the american academy of pediatrics put out guidance recommending universal masking in schools saying because, quote, a significant portion of the student population is not yet eligible for vaccines, masking is proven to reduce transmission and protect those who are not vaccinated guys, you're seeing that in schools recommending this, people under the age of 12 are not yet eligible, but you see places like southern nevada's health department, where las vegas is, regardless of vaccination status people should mask up. >> the numbers you showed about the r0, the replication, the delta variant infects eight to nine people whereas the original
variant affected two to three additional -- there you go, eight to nine people is this what one would expect to see with mutations of a virus or is this more virulent than you would typically expect to see? >> reporter: this is a brand-new virus. if you think what a virus is trying to do, it's trying to replicate, spread itself around, making itself more contagious and perhaps less virulent, less deadly to people, sort of makes sense from an evolutionary perspective. we asked a doctor about that, a virologist who joined us months ago, is that what this virus will do? you can't count on it being a linear making sense kind of evolutionary process, but that doesseem to be what's happening. this is not to the extent other variants like beta and gamma can do in that sense delta, though, is more contagious.
if you're vaccinated it's a better variant >> if you had a young child in elementary school under the 12-year-old vaccination limit, would you make them wear a mask? >> reporter: yes i have a 2 1/2-year-old. if we were taking somewhere crowded, i would ask him to wear a mask >> and presumably the teachers in those schools would wear masks? >> reporter: presumably, yes >> unless they were vaccinated or maybe even if they were vaccinated, right? >> it's funny you say this -- >> reporter: it's nice to know the vaccination status if you don't know -- >> but can you ask can school systems ask teachers whether they've been vaccinated or not make it a requirement? >> reporter: yeah, i believe so. we haven't seen this go into the legal system and get tried yet, but a lot of folks i've been talking with do think it's legal
even under emergency use to require vaccination and to know status >> my pediatrician is having this same discussion, people coming in and out concerned about the school year because there's not a mask mandate and others saying spreading covid is not the issue. this is going to be a battle >> it is going to continue to be a battle into the fall with schools. given the worries about the delta variant, did investors look away from stay-at-home stocks too soon? a number of them are bucking today's downdraft. kroeger up 3% today. peloton up 6%. i didn't do my workout today docusign up 3% and chewy up about 7%. steve grasso joins us, head at stewart frankel and a cnbc "fast money" trader. good to see you. >> good to see you and you look great, tyler no one can tell -- no one can tell you missed that workout
>> good to see your entire face. always looking good. so is this a case where people are just moving impulsively to these stay-at-home stocks, the zoom video, clorox is higher, roku is higher, peloton and so forth. >> i think it's rates. i think it's more about rates, less about the delta variant, more about rates if you chart the ten-year yield over zoom or docusign or peloton, you get the same chart. they're all inversely correlated when the ten-year yield sold off, that simple i don't want to oversimplify it on a day where everyone is really having a tough time looking at their portfolio, tyler, but i think it revolves around rates not aroundthe delta virus. >> and so for those of us who might need a refresher course in
why rates are so critical to these -- to this class of high-growth names, why is that >> so when rates are rising you want to be a buyer of value. when rates are falling, you want to be a buyer of growth stocks you don't buy growth stocks while rates are increasing that is basically investing 101. >> and that is why >> that is the sweet spot. >> in a rising rate environment isn't worth as much as in -- >> correct you're paying for those future earnings because they're not earning money currently. so you're buying basically a depreciating asset >> finish, please. i'm sorry. >> what i think was more concerning for the overall market was the fact that we had entered the pandemic in a deflationary environment and i mentioned that with you about a month or so ago.
that was more trumbling to me. this is more troubling, i'm not worried about inflation. if you look at lumber prices, look at where they peaked. now they're off drastically. and they're not only off drastically because everyone says, well, they rallied so hard they're actually lower than the pre-pandemic level as far as lumber prices. that says a lot. and that says a lot to me -- go back to june 2018. that was the taper tantrum, and that's where you see lumber prices are actually roughly 25% lower than where they were back then i do believe it is a transitory event. i do believe it hurts when you're trying to purchase gasoline and lumber and things like that, but i do believe that the transitory nature will have people scratching their heads for a long time. >> a couple specifics, what
stocks do you think should perform well in the kind of environment you're describing? >> so i do believe that you're going to get that value basket perform again because the valuations have dropped dramatically the knee-jerk reaction to rates falling and everyone dumping that value basket. you know the names that i'm long i'm long tse, oln. but i also believe on the other side docusign will be successful in any environment i don't know how you two have been with this, kelly and tyler, but docusign makes my life so much more easy and regardless whether i'm in the office, out of the office, on the west coast or on the east coast, i'm looking for a docusign sent to my email versus the archaic fashion. >> agreed. and zoom, which has come to stand for the ultimate sort of stay-at-home pandemic beneficiary but is down because of a big deal they announced
maybe this morning or over the weekend, correct >> yeah, exactly i believe this has some lasting power but there is the nature whereas docusign has helped people, there is the idea people are getting zoomed out i don't know about your office space, but it seems like the zoom out phase is there. >> i think we had an event last week where we had a couple executives from zoom on, and i think they would even concede that they see growth for their company. they see fantastic future ahead, but they, themselves, they pointed to some weariness of being on 19 zoom calls a day >> i agree with that one last thing, nvidia, if you look back on a chart to may 21so one stock split, we're getting into that adjustment if you were to buy the apples,
the teslas, the nvidias, when they announced that split price and then sell them at the pinnacle, which we're getting close to, we're right here, in nvidia you made a ton of money they love every which way to love them again, a great name in the semiconductor space. this is more to do with the stock split than anything else. >> that is one that just stand back and watch it go steve, great to see you, man >> likewise. the nasdaq is lower today, but it's outperforming the dow some of the big cap tech stocks are taking a hit although netflix was in the green out to josh lipton at the nasdaq with more. josh >> reporter: the nasdaq is kicking off this week in the red. we are lower now, down for the fifth day. the longest losing streak since okay the index down about 4% from its all-time highs still up, though, 10%. turning to big tech, apple in the red. you see this does come after a
nice recent pop for the bulls. that stock hit an intraday all-time high last thursday. apple reported earnings on july 27th amazon, facebook, alphabet also lower to different degrees need flicks you mentioned was bucking the trend but just slipping into the retrend. the etf that tracks the semis edging lower here. it's on pace for its fifth straight losing session, the longest losing streak that etf since december if you pop open the hood the chip names that have pulled down the most from their highs, micron and universal display, on semiconductor. >> is it time to go small? joining us now is paul hickey, co-founder of the bespoke investment group paul, it's good to have you. the small stocks normally perform in sell-offs you tell me, you have all the stats. what do you think?
>> they've been underperforming for quite some time. you look at the open today, the russell was down 10% from its high back in the late winter, earlier this year. so it's just entering that typical threshold for a correction territory if you look historically that would rank as the seventh longest correction in the russell's history. we've been in this consolidation mode for quite some time what you're seeing in the small caps is almost a repeat of what we saw in the hyper growth tech stocks from september to earlier this year. those stocks had an enormous rally coming out of the covid lows and then they traded sideways for several months. and i think what we saw small caps came late to the party off
the lows last year but really outperformed late last year as the tech stocks were consolidating. i think now they're in their own consolidation period the russell doubled off the lows and you can only expect it to trade sideways for a little while. i think that's what you're seeing in the market overall last monday at this time the s&p had had ten record lows. i think that's what we're seeing now. i think people can calm down a little bit here and take a pause and re-assess things >> i'm going to put that on twitter, paul. everybody just calm down a little bit >> take a chill pill, right? >> listen, it's fear that creates sell-offs but because it's linked to a pandemic it's more difficult to try to assess. none of us are scientific experts and are left with this data and where we go from here
we've never been through an environment like this before let me ask you about boeing. now we have boeing which has some of its own issues to deal with but is also extremely exposed to what will happen with the pandemic the worst stock in the dow what is the tell you when you look at the way it's been performing >> yeah, you're right. it's been a horrible performer this month down almost 15% this month alone. so it's been a big sell-off on these fears of a rising delta variant impeding air travel yesterday was the highest travel day through tsa checkpoints since the pandemic the second was on friday people are still traveling you haven't seen the numbers and whenever we do get out of this pandemic, we can't escape velocity, people will be traveling by plane it's just a simple fact of life.
and that will be going forward in the future. i think it's a big sell-off in boeing this month but i think at this point you're getting to levels that look somewhat attractive here. >> stephen a few minutes ago said don't expect the same rate of growth for the economy and the market we've seen the past six months or past 12 even but at the same time it is too early to right the epitaph for this bull market. you agree with that, don't you >> yeah, tyler, that's a great point. you can't keep that pace up forever. that happens in every expansion. the biggest growth is early on what we looked at in our weekend report is when the ism peaks and what happens going forward in the markets.
and just because the ism peaks doesn't mean that the market has to peak as well. you see a lower rate, not what we saw from mid-2020 up to now, you're not going to see that rate going forward but can see growth in the markets even as the rate of growth in the economy slows down >> all right paul, we appreciate your time today. thank you. >> thanks for having me. have a good one. talking about boeing in that segment. now let's move on to the airlines as that reopening trade unravels paul mentioned the pace of travel picking up. phil lebeau is tracking all the moves for us phil, what have you got? >> reporter: tyler, the pace of travel is picking up the airline stocks are moving lower. we're going to see you the four largest airlines, american, delta, united and southwest. really if you look at any of the airline stocks, they're under pressure today
specifically this week it is airline earnings week. if you want to put a title above it, you have four airline earnings reports or q2 results because earnings are likely not going to be there starting with uniting which will be reporting after the bell, southwest, american and alaska later this week the commentary will be crucial here because all of the executives and anybody you talk to in the airline industry will say the same thing leisure travel is not slowing down there may be concern about the delta variant but it's not stopping people from booking trips either for later this summer or going into the fall. what happens with two key factors or two key segments? corporate travel in the fall, does it start to slow down do companies re-assess whether or not they put people on the road as the delta variant pops up around the country? and then international travel. this is not good news what we're seeing here especially as you see a surge in cases in different parts of europe. while europe has been opening
up, if that gets delayed or pushed out you know the traffic they were hoping would continue to build will not be there in 2021 it's going to get pushed out into '22 or '23. keep an eye on the airline stocks the sell-off is not a surprise but it's the commentary during the financial reports over the next couple of days. that will get the most attention. >> phil, thank you very much phil lebeau. ahead on "power lunch" oil surprises slide. the market concerned the delta variant will curb demand energy stocks have been a top performer, is it now a sector to avoid? the delta variant and one of our traders sees an opportunity in a place you might not expect
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hair loss by the age 35. kind of scary. that's why i use keeps. keeps offers clinically proven treatment, and the sooner you start the more hair you can keep. get started for $1 a day at keeps.com. welcome back to "power lunch. the dow is down 930 points right now or 2.7%. it is boeing weighing heavily but names like goldman sachs, jpmorgan among those big decliners today. the s&p 500 down 2%. the nasdaq holding up with a decline of 1.5%. and oil getting creamed today after that surprise in
production increase. pippa stevens at the commodity desk has the numbers for us. >> reporter: tyler, a rough session for oil, on track for its worst day in more than a year opec and allies agree yesterday to increase production, but with covid cases rising, demand could be about to dip. let's get a check on prices. wti down 8% at $66.09. that is a far cry from the $77 that traded at just two weeks ago. brent crude dipping 7.2% to $68.30 opec and allies will boost production by 400,000 barrels per day each month beginning in august returning to the 600,000 that it's with holding it means the alliance is still intact baseline quotas mean more oil next year. that's not enough for today's large drop fears around the delta variant,
a jump in the dollar and broader risk are also fueling today's declines energy is by far the worst performing group down 4% diamondback energy, marathon oil among the biggest laggard dipping 5% guys, back to you. >> pippa, thanks with opec reaching their agreement, what is the outlook let's ask the head of oil and gas research at evercorp what do you think the back half holds? >> i think anytime you have the rate of forward momentum slows and, again, these are deep cyclicals. by definition when things aren't getting better, they're getting worse. in this sector we struggle with period of time the stocks come off their highs rapidly but oil
is still holding in there. fundamentals clearly in the low 60s, really solid right now. am i misreading your note which is called no good reason to own stocks >> we did come up with punch titles on a sunday evening to attract attention. i think that was the sentiment of saying we did a lot of investor conversations as these stocks really start sliding last week a lot of our clients are sitting on good returns and we're going to need to get back involved that's what we've seen with the pullback of volumes and a lot of the summer doldrums we see in sectors. that's what we're trying to convey was a little bit of that
feedback >> so within this sector are there names that are less bad, in other words, or ones you would single out because the sector is very broad i heard an experienced investor talking glowingly about conoco phillips among others. >> that's a name we like i think, tyler, at the end of the day oil is still going to determine the direction of the sector a couple of defendable models, reset the expectations companies had an analyst outline ten-year free cash flow generations and just to say names like that we see even in the low 60s generating the cash yield. i think there's plenty for investors here but names like
conoco phillips trading above an 8% dividend yield on next year's numbers. i think there's a couple but i do think you're going to want to hear the calls and really how companies are thinking about the leading edge of demand and whether or not this is really changing the outlook if i may one of the silver lineings is any u.s. producer thinking about getting back after some growth next year will be thinking twice and i think that's the silver lining of the opec meetings. it is really important to a fundamental perspective. >> steve, thanks for joining us today. a pretty ugly session for crude. >> and dominic chu is standing by with a market flash the s&p 500 financial
sector, the worst performer or the second worst performer of the day. only energy, by the way, worse the bank stocks taking a hit as interest rates continue to fall to roughly five-month lows shares of jpmorgan chase, bank of america, citi group, the big ones lower on the day. it's the regional banks that are often considered more sensitive to a narrowing gap between long-term and short-term rates they're getting hit worse today. look at comerica, and regent's financial as well all underperforming on today's trade. back over to you >> dom, thanks let's get over to seema mody for "trading nations." >> reporter: the u.s. not the only market in sell-off mode europe and asia in the red to begin the week with a spread of the covid delta variant raising fears of the pace of this recovery taking a step back, though, looking at year-to-date performance. u.s. outperforming other regions. let's break it down with the "trading nation" team.
is now the time you would be recommending clients to diversify their holdings to stocks overseas? >> no, the exact opposite. we recommend clients tilt further towards the u.s. through this in general global diversity is warranted when internal breadth is broadening. it's better when it has narrowed and we're at one of those points equity breadth is under pressure on this pullback i would be looking at u.s. stocks, at large caps and high earnings growers >> so areas staying domestic you have your eye on a market outside of china which one is it? >> yes i really like vietnam as a long-term hold maybe the conditions will not be good for em but over the long
term fundamentals are terrific it's a booming economy, great demographics, 70% is 35 or under. the government has improved business conditions. people want to diversify their risk very wage competitive. for all of these reasons i think vietnam is an amazing place both as a manufacturing hub and a huge tourist destination so, to me, if you have a 12 to 24-month outlook it's going to be a very strong play. >> and higher by 7% over the past six months. boris and ari, thank you for more "trading nation" head to our website follow us on twitter seema, thank you coming up on "power lunch" will the fed use the delta variant as an excuse to wait to taper
peter boockvar of bleakley advisory group will tell us what he thinks and what it could mean for the market and your investments and later the likelihood of a market bounce. what past pullbacks say about what to happen next and how you might want to play it. and now the latest from "trading nation" and a word from our sponsor. >> wedge patterns signal inflection points for stocks a bullish wedge occurs within an uptrend and consists of two converging trend lines slanted down wards conversely a bearish wedge occurs in a down trend and consists of two converging lines going up
welcome back to "power lunch. the sell-off continues, rising fears over the delta variant of the covid have the dow on pace for its worst day of 2021, now down more than 900 points. the s&p 500 down 2%. how will this sell-off and the rise of that delta variant affect the fed let's bring in peter boockvar.
he's a cnbc contributor. peter, always good to see you. my guess, tell me if i'm right or wrong here, if a virus variant really begins to take hold and disrupt the sort of return to normalcy, that that would forestall any plans the fed might have for tapering asset purchases late this year or early next. have i got that mostly right >> i would say so. i think that the decision would be much easier if we didn't have this variant, particularly going into the fall when schools reopen and we start going back inside again this is definitely clouding it from the perspective of the fed. that's putting aside the effectiveness of qe anyway, but it's tied to economic activity, so it would be a huge factor in the decision >> so if the fed is likely, to
use the cliche word, more dovish or delayed in raising rates or tapering off asset purchases, might one thing that the market would be encouraged by that? or for today, at least, is the concern over economic sort of slowdown or backwardation the most worrying factor, the controlling factor >> the market will put off as far into the future any sort of tightening over the past year, the market has powered through covid. that's because, obviously, the easing of the fed. i know up untilled pfizer news was a very by fur indicated market, but it's clear what the market is like, and that's a fed that is obviously future spiel ahead. any hints they would reduce the pace of them driving that car would change things. so, yes, on the one hand i understand the delta situation,
it's clear i think, though, we have no choice but to power through this, and that, of course, is not something that the fed will roll the dice with what are bonds saying? >> well, a couple things i think that the curve really started to flatten the day in mid june when the fed had their meeting and they talked about tapering, and more people wanted to hike rates in 2022. if you look back at every single qe on and off since 2008, it pays to steepen when the curve is on, it paid to flatten the curve when the qe was off. you throw in the delta, the stationary -- certain conditions that are causing actual growth slowdowns, and i think that all combines for the drop in the long end >> peter, one of the sort of debated topics is whether that exact paradigm that you described is going to prevail
for the rest of the cycle, for whatever that is if we were talking about this earlier, is that the steepening, the flattening or could this shift into a different kind of scenario are we still using the playbook from the last expansion? >> i think that's going to be the case, but the one difference this time is the level of inflation. there will be some days when it's going to be the story, and there's days that yields will fall, because people worried more about the growth scare. whether that's delta reflated, stack-flationary type of factors, i think it's a big deal this type around it's not something we've had to discuss in such a way, at least for the last decade plus so you're more worried about inflation than deflation, which
steve grasso said he was more worried about. >> well, there's no such thing as deflation, okay flation is always higher, it's just the rate of change. the debate is what happens here from now on, on the good side, going forward. i believe inflation is not temporary, and for a variety of reasons it will remain with us delta will throw some curveballs within that, certainly on the demand side and will screw up supply chains exaggerating potential shortages. i think inflation is not a conversation that will quickly go away. >> very interesting. at what level do you think it persists >> three to 4%, which may not seem a lot, but the global rates cannot support sustainable 3% to 4% inflation. >> and it's not something we've
had in a long time peter boockvar, thank you very much and goldman sachs, unitedhealth and boeing are the biggest drags on the dow today sometimes a big sell-off can be a big buying opportunity dom chu is back to look at whether it's one of those times. >> leave it to me to come up with a positive narrative. the reason why i'm going to show you this, many traders have said there's not a lot of panic in the marketplace until we reach key levels, specifically the s&p 500. what i have shown right here in the blue line is the s&p over the last year. >> is the 50-day average price, as you can see for the better part this year, there's been a couple times, but for the most part, every time we touched it
here, here, here, and then again here, we bounced off it. the trend top up side has been intact if thus one of the thor areas where you're trying to find some ability to put a stock position on, this mike one of those times, that maybe it's a discount enough to carry that current trend in place, guys >> the other question i would wonder is, what does it look like for a real sell-off when all of a sudden the chart starts sliding the other way. >> let's look over here. last summer we saw this particular move, roughly down 10%. not long after that, we headed into another move, down roughly 9% a couple times over the course of this year, this deep here, here, and here, those were about the 4% to 5% range that's right where we are right now.
if you look at the recent precedent, there's some traders who feel more constructive if you're looking at odds over the last year, it seems easing right now. >> we always seem to close that gap to kind of have a catch down to it. dom, thanks. >> you're very welcome. tyler, a pleasure to have you back >> good to be here busy day, it would be interesting tomorrow with the bezos space flight. "closing bell" picks up this market sell-off right now. well to the "closing bell," everyone i'm wilfred frost, the do you on target for the largest drop of the year. >> i'm sara eisen. let's get to what is driving the action in this final hour of trade. fears of the delta variant and concerns of another spy in covid cases is front and