Stock market indexes (^GSPC, ^DJI, ^IXIC) are beginning to stabilize after selling off Tuesday in response to hotter-than-expected CPI inflation data.
Freedom Capital Markets Chief Global Strategist Jay Woods joins Yahoo Finance Reporter Madison Mills on the floor of the New York Stock Exchange to discuss yesterday’s market sell-off and the indexes’ path to recovery heading into Wednesday’s opening bell.
“It’s more of a broadening out. Everyone talks about the mega-caps having their run and lifting the indices on their shoulders. Well we’re seeing leadership in industrials, seeing it in financials minus the regional banks, and we’re also seeing it in healthcare,” Woods comments on market resiliency. “Those three sectors make up 49% of the Russell 2000 (^RUT) and that is why the Russell has remained neutral to up. We want to see the Russell get above 2000…”
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor’s note: This article was written by Nicholas Jacobino
Video Transcript
RACHELLE AKUFFO: On the floor of the New York Stock Exchange with Jay Woods, Freedom Capital Markets chief global strategist. So Madison, what are you hearing around the exchange this morning?
MADISON MILLS: I mean, it’s a good morning, Rachelle. A little Valentine’s Day gift for markets after yesterday’s sea of red on the screen. But I want to talk to you, Jay, about this because I’m curious whether this means that the market has fully moved past some of the bad news from yesterday.
JAY WOODS: Well, this reminds me of the last FOMC meeting where we sold off 1.5% after Powell spoke. Yesterday, this number came in a little hotter than anticipated, and the knee-jerk reaction was to sell off. But seeing where we’ve come from, a 14 out of 15 weeks, no 2% retracement from the high in over 75 trading days, a pullback was coming.
I thought it could extend a little bit into today. The market is very resilient. I’m watching the Russell that hit its 50 day moving average and held. So, maybe we avoided a disaster, but I think down in sideways is where we’re going to be going for the next few weeks.
MADISON MILLS: So what is this resilience based on?
JAY WOODS: Well, it’s more of a broadening out. You know, everyone talks about the mega caps having the run and lifting the indices on their shoulders. Well, we’re seeing leadership in industrials. Seeing it in financials minus the regional banks. And we’re also seeing it in healthcare.
Those three sectors make up 49% of the Russell 2000, and that is why the Russell has remained neutral to up. We want to see the Russell get above 2,000. It’s teetering there as we speak.
But right now, I think after that meeting, we’re going to go sideways. We’re going to watch jobless claims numbers every Thursday. We want to see how that unemployment is ticking up. Those are the things we’ll watch.
But I think between now and the next FOMC meetings, the highs in this market may be in. And if we pull back a little bit, it’ll be a normal pullback. There’s no fear in this market. And people were getting slightly nervous yesterday. I think that’s kind of subsided for now.
MADISON MILLS: So here at NYSE, something very cool that happens is you can buy a record-breaking S&P hat, the S&P 5000 hats, right? When is the next time that you’re going to be able to put in an order for a record-breaking hat?
JAY WOODS: Well, record-breaking hat, I don’t know when that’s coming. I would probably think after the next FOMC meeting. Let’s see in March. But I can get you a hat if you want one of those S&P 5000.
MADISON MILLS: You know I want one.
JAY WOODS: All right. And Brad, you know, I’ll see what I can do. But yeah, this has been a crazy rally going back to October. We’re pulling back. We’re digesting. Seasonally, we’re in a weaker spot. So I don’t think that we’re alarmed by a slightly-hotter-than-expected CPI.
The direction of inflation is still cooling. Is it the soft landing everyone anticipated? No, it’s a little bumpy. You get on a plane, you’re going to hit some turbulence. And I think we’re hitting some turbulence now. We’ll see what the PCE says.
As Powell says, boring. I know. One data point at a time. But overall, the trajectory is good. Earnings season was successful. And we still have a few ones that we’re watching going forward. Nvidia next week. My god, that’s going to be big.
MADISON MILLS: Big week to come next week on that, Jay. Thank you so much. Really appreciate it. Brad and Rachelle, back to you in the studio.
BRAD SMITH: All right, I’m going to be standing by. I’m going to hold them to that hat. Maddie, you let them know. It’s going to be in the rotation right next to my 76ers hat and my Eastside Golf hat. Jay Woods, Freedom Capital Markets chief global strategist, and Maddie Mills down there on the floor of the NYSE.