In today’s episode of Market Domination Overtime, hosts Josh Lipton and Julie Hyman dive into the most prominent dynamics leading stocks and the US housing market.
US equities (^DJI, ^IXIC, ^GSPC) are in focus as the major indexes rebound following a bad day for Big Tech stocks. Paul Hickey of Bespoke Investment Group joins to discuss the “rubber band” dynamic being created within markets.
Mortgage rates are on a decline, potentially opening the door for new homebuyers. Zillow senior economist Orphe Divounguy joins to discuss everything buyers need to know from housing affordability to the best markets to shop in.
This post was written by Angel Smith
Video Transcript
There is a close bell on Wall Street and now it’s market domination over time.
We’re joined by Jared Blick to get you up to speed on the action from today’s session.
Let’s see where the major averages ended the day.
We had a little late day coming down off the highs for the major averages.
But the dow still finishing higher by almost 250 points or 6/10 of 1%.
The S and P up a half of 1%.
So cutting some of its gains but still higher on the day, the NASDAQ up by 6/10 of 1% here.
And as we’ve been discussing the ro the rotation that we saw yesterday has not reversed itself today, but we’re still seeing pretty broad based gains, the S and P equal weight.
For example, today, outperforming the S and P 500 small cap, still continue uh to beat the broader market again, Jared, we’re gonna continue to watch to see if that continues.
Yes, Julie, I think it’s gonna be fascinating track if what we’ve seen this reversal, this market rotation over the last day, if that continues into the next week and maybe beyond.
So let’s go to the, let’s load the Wi Fi interactive behind me.
I’m going to stick this.
I’m going to leave this on the Russell 2000 for a second.
Just want to show you for the week up.
6.19%.
Most of that was Thursday, huge, huge out performance there.
And there’s more we can dig into.
I’m going to be doing a deep dive with Josh in about 30 minutes.
But here’s a set for today.
It consumer discretionary after a dropping yesterday.
Well, most a lot of the mega cap sectors took big hits yesterday.
It is in the number one position today.
Up 1.3% communication services.
The only sector in the red here also note that materials and tech XL B and XL K also up about 8 to 9 basis points.
And if we take a look at the NASDAQ 100 much prettier picture than yesterday.
Although we are still seeing some red and dark red meta meta, you’ll notice at the bottom is down about almost 3% while NVIDIA is back up 1.5% apple up over 1% Microsoft Amazon alphabet just under by less than half a percentage each of those names.
Story continues
And if we take a look at some of the leaders here, we can see for the day Solar was a big performer followed by disruptive small tech, that’s the Arc Fund that you’re looking at there, Arc Innovation Fund and then home builders after yesterday.
And this has to do with the decreasing interest rates, especially on the longer end, we saw a big jump in home builders that has continued today and just kind of more of the same there.
I’m going to leave us with a picture of Arc.
This is ARC components.
Today.
You can see Tesla, there is a big elephant in the room, but if we sort by equal weight, we can see a lot of the smaller names that have been decimated over the last few years like Roblox.
Remember that pandemic, darling?
Well, that is now up outperforming Josh, thank you, Jared us stocks rebound a day after the magnificent seven saw their worst day in nearly a year.
The S and P 500 retaking that 5600 level and notching a winning week investors assessing big bank earnings and clinging on to rate cut hopes for a closer look at the market rotation.
Join us now.
Investment group, co founder, Paul Hickey, Paul.
It is good to see you.
So this market continues to be interesting here, Paul, I’m just looking at NVIDIA uh finishes the day higher, Paul tax on about 1.5% but small caps finish higher again, Paul.
So what are we, what are we to make of this Paul’s investors?
So, I think interesting is the understatement of the week to call what’s going on?
Uh it’s been just a fascinating week.
Uh, you know, back on Tuesday you saw these, you saw these big moves in Apple had come, uh Tesla had had a, uh 11 day winning streak, I think.
And, and Apple was, or this was as of Wednesday and Apple was up seven record highs in a row and it seemed like the mag seven band was back together again.
Uh But, you know, just when they got back all within, close to new highs, uh you got a day like Thursday and I think what part of this was was we highlighted this earlier in the week, the S and P 500 equal weight index had underperformed the S and P 500 over the last six months by one of the widest margins on record.
There were only uh 10 or 11 days in going back to 1990 where the spread in performance between the A and and equal weighted was wider and those were all from December 99 to March of, of 2000.
So you can only get the rubber band stretched so much before it either either snaps or it just comes back.
And uh I think this is what we’ve seen this week.
We’re seeing a reversion to the mean and the short term moves are just as historic in the other direction as the longer term out performance of the cap weight.
It was, uh you know, yesterday we saw these, you know, the S and P 500 underperform the Russell 2000 by the fourth most in a single day on record.
So, uh we’re seeing these moves.
Uh and, you know, it’s just, it’s hard for investors to navigate them.
But uh you know, it’s, it’s something to, to look for and, and we think longer term uh that you’re better served in, in some of the smaller names within the S and P 500 or within the market overall in small camps.
Um to go with your rubber band analogy some more Paul.
And it’s good to see you, you know, it gets stressed, it comes back or does it like sort of do like a binging effect?
In other words, like in other words, are, are, you know, are we then set for some volatility, not just in the overall major averages, but in the components as we see this sort of positioning play out.
Well, yeah, you know, when you throw a big rock in the water, you tend to see more waves going forward.
But that’s, that’s what’s the craziest thing about what we’ve seen this week is the Vix is 13.
If you look at periods when you’ve seen this type of performance divergences between large and small caps in a single day or the S and P 500 market cap versus the equal weight, the Vix was over 20 in all those occurrences and sometimes as high as 70.
So, uh you, you just look at uh the days that I was just mentioning before when the S and P underperformed the Russell 2000 by uh similar amounts or more than yesterday.
It was uh you were looking at the 87 crash, you were looking at uh the COVID lows and you were looking at October 2008.
You wouldn’t compare any of those three periods to what we’re seeing now because the market is still near high.
So, um you know, you sometimes you wanna have an answer to everything, but this is just one of those things where it’s just the last couple of days, just don’t have really any parallels to what we’ve seen in the past.
Well, I want to expand on the vics in particular a little bit because your recent research on the VICS in election years also caught my eye because the Vicks is low, like for any year, it’s particularly low for an election year.
And as you said, it’s puzzling that it’s low while all of this is also going on in the market in terms of this uh re rotation.
So what gives, what are your possible theories for why that’s happening?
You know, there’s the options market has changed a lot over the years.
So that could have some, I that could have some uh impact on what we’re seeing here.
I think there’s other people you that would have much better answers than me.
So I would, besides that, I wouldn’t get too far into it.
But what I would say is I would ex you between now and the end of the year expect to see volatility move higher.
Uh, you know, that we’re in a low volatile volatility environment right now.
So, uh you have factors, you know, you have the election coming up obviously and you just have a seasonally with the, the week time of year coming up.
So that’s something to look, look at going forward here there.
We wouldn’t expect these placid times to remain like that and we would expect more volatility because when you see moves like we’ve seen uh in the last couple of days that are so counter trend to what we’ve seen it, you know, people are gonna be offsides and it’s just gonna cause uh markets to, to, you know, become a little bit uh shakier as people reposition, you know, Paul Big Banks reported this morning investors, you know, not so thrilled sometimes, you know, you could hear investors, they look at the big banks, Paul and they say, well, it’s kind of a bellwether for how the market’s gonna perform during the earnings season.
You look at the data though and you say maybe not, not so fast.
Yeah, so I mean, you don’t, you, you have to go back just to last earnings season.
You, you if you look at what happened on that first Friday, when all the major banks reported, the stocks went down sharply.
They had pretty weak reactions to their earnings.
And, you know, people were thinking like, oh, this is could be problematic for the upcoming earnings season.
Uh, but then what we saw was an earnings season, the S and P 500 was up to percent, including the weakness on that day.
So I wouldn’t read too much into that and Encouragingly for earnings season, what we’ve seen is, you know, there’s earnings are expected to grow and there’s optimism on earnings growth.
But what we, what we track coming into earnings season is what are analysts doing, uh, in terms of the estimates on the companies they cover in the weeks leading up to earnings season.
And what we’ve seen is that there’s been more downward revisions to earnings estimates in the last month than there’s been upward revisions to earnings estimates.
And that’s the case for every sector except technology where an equal number of companies have seen upward and downward revisions.
And what you tend to see when you see more downward revisions and upward revisions is the bar gets set low and, and the market performs considerably better during those earning season when estimates have been getting cut than when they’ve been rising.
So, uh, that’s something to look forward to, uh, and be encouraged about during, in this earnings season and that’s applicable to the broad market and not just a handful of names.
All right, we’ll see if that plays out, Paul.
Thank you so much.
Uh Nobody better at looking at market history for this kind of stuff, so really appreciate your guidance.
All right, have a great one.
Thanks.
Thanks President Biden trying to direct attention to his economic record in last night’s news conference.
Many economists thought my initial init initiatives that I put forward can’t do that.
It’s going to cause inflation, things are going to skyrocket.
The debt is going to go up.
What are you hearing now from mainstream economists?
16 economic Nobel Laureates said I’ve done a hell of a job and under my plans so far and what’s gonna happen in the future if I if I’m re-elected, that things are gonna get much better.
However, concerns over his age and ability to serve a second term are lingering, especially after the president made a blunder earlier in that same news conference referring to vice president Kama Kamala Harris as Vice President Trump for more on the road ahead for Biden the 2024 election cycle.
Who got Yahoo finances for him and now Rick, yes, the blunders overshadowed things but like, uh I don’t know, Joe Biden’s always made those types of blunders.
Those are classic Joe Biden blunders, you know where he speaks and he’s been, he’s been doing that since the 19 eighties when he was probably in his forties or fifties.
But he, but when you do it consistently, you’re 81 years old and it comes after, you know, it’s not just the blunders, it’s, it’s, it’s the terrible performance he put on during the June 27th debate.
He is still doing damage control from that.
Uh, and as much as he wants people to listen to what he says about the economy, I, I think there’s nobody who watched that press conference yesterday and their number 12 or three takeaway was, oh, the Biden economy is doing pretty well.
I mean, it was all about how I, I mean, the rest of this campaign is gonna be, you know, can Biden finish his sentence.
Um And the what does he do, Rick?
I mean, for the Biden to the possible the entire story to your point right now the election is, is this guy up to the job mentally and physically, which has been the story since that.
And it is completely blotting out what is a good economic story for Biden?
I mean, things are finally going his way.
We got the inflation news this week.
I mean, if the rate of inflation is gonna probably gonna be below 3% on election day.
And I think just as important polls are showing Americans are less concerned about inflation.
They, they don’t think inflation is going to be a problem.
It’s like it doesn’t matter for Biden because that’s because this age issue is just blotting out the sun.
What does he do about it?
If he stays in the race.
Uh, I think that he has to, he has to be out there, uh, constantly in front of people at live events, uh, on the news doing these unscripted things because reading from the teleprompter at, uh, rallies is not gonna do it because nobody, you know, the networks don’t cover that.
Um, and nobody sees it.
He has to, he has to prove in the most visible ways possible getting on prime, he has to get on prime time TV, live and prove that he’s capable.
Um Now I have, you know, I, I don’t think Joe Biden is senile or anything like senile.
I’ve been watching the way he handles questions, he stumbles over, he, he struggles to get the words out sometimes.
But on the other hand, when he talks, uh he spent about 10 minutes in the press conference yesterday ex explaining what the United States and its Western allies need to do about this new, very troublesome alliance between Russia, Iran, China and North Korea.
And he was very lucid.
Um And I thought he explained it as well as anybody I’ve heard, you know, in the, in the last four years.
Uh So I, I mean, that’s not simple stuff.
I mean, he had, he had command of the facts, but this is not what wins elections expertise, you know, is like that the ability to write it down if you have time is not win the election.
I mean, your per your TV.
Personality totally matters.
It has since 1960.
So, um, Biden has to, I, I mean, I think he has to just be in front of people constantly and showing that he’s alive.
He’s vigorous.
He has a sense of humor.
He, some self awareness about his own age.
Try to turn it to your advantage.
Well, and to your point, it’s not, you know, I think I was seeing someone on Twitter comments upon on this that it’s not a question of dementia.
There’s no question of dementia here.
It’s a question of vigor and energy and sort of being up to the task in that sense.
It’s not that he doesn’t know what, you know, know this, this know his stuff, he still, he knows he knows where he is, right?
And he knows that our standard.
No, I think it’s a little bit.
I mean, he knows, he, he, he as, as you said, a significant um you know, policy expertise, you know, as he demonstrated, you know, and he did it in this press conference to a degree.
So I guess your argument is just like Jay Powell says, we need more good data.
We need more good Joe Biden if he’s gonna, you know, if he wants to be and the obvious.
So we need to see more of him improving it.
But the obvious risk for him is he comes out and he trips over himself every single time and he says, you know, you know, twice within the space of two hours yesterday, he completely destroyed people’s names.
He did it on camera twice.
He called Zelensky Putin before he was in that press conference.
He did make a joke about it himself.
He did, he did not catch himself the second time.
So, um, that’s the risk.
I mean, I, I would say at this point, by the way, there’s still even odds or better that he’s not the nominee.
Can I ask you as you’re, as you’re gauging that, who are you watching?
I mean, are you watching the donors, congressional leadership, former speaker Pelosi, I mean, you saw her, Mo and Joe, I mean, who do you want?
Maybe you watch all those?
Right?
And um, the heavy hitters have so the heavy hitters I would consider to be Obama.
Uh Chuck Schumer, the Senate majority leader, Nancy Pelosi, the former house speaker and Hakeem Jeffries, the current uh house minority leader, the leading democrat in the house.
Uh None of them has yet said you have to go.
Pelosi has opened the door and said, I, I wanna know what Joe’s decision is.
She said it’s up to Joe, but he’s already made, you know, basically saying Joe, think harder, you know, go back inside, close the door and think it over again and come back and tell us what you decided.
Um I don’t put it but you know, this is, I think it’s gonna happen internally before it happens externally.
So that’s the way it should happen if he goes.
Now, Biden kind of hinted in that press conference yesterday.
If his advisers tell him he can’t win against Trump, then he would, he would, he would withdraw.
So he was basically saying the advisers, you gotta tell me I can’t win and I’m, I’m taking about polls have been decent for him.
Now, it’s really surprising.
Um The, the, the, the there are polls one out today from N PR showing binds a little bit ahead of Trump.
Um I guess, remember Trump has all of these problems about Biden.
Trump has all of these problems not to extended, but the same polls are so tough to read, right?
Because the N Pr poll, you’re right.
But almost, then they say almost the internals, almost two thirds Americans think Biden doesn’t have the mental is to serve as president.
It’s just so contradictory.
It’s hard to get a let the other guy less, I suppose.
And nearly six in 10, nearly six in 10 believe Trump will win.
I mean, you’re just trying to read these polls.
Voters are contradicting themselves.
What’s going maybe polls are the problem.
I don’t know.
All right, we are the fore, everything is the problem.
All right.
Except for Rick Newman.
Thank you so much.
All right.
Still to come.
We’re going to speak to Zillow’s chief economist about the latest housing hurdles.
Stay tuned, more market domination overtime.
On the other side, home buyers might finally be getting some good news, mortgage rates declining in the last week falling to their lowest level since late June.
And Fresh data from Zillow shows that nearly a quarter of all listings got a price target uh cut last month.
Joining us now is or D Zillow senior economist or good to see you here.
So we are hearing and you’re hearing through your data that people are cutting their list prices of their homes.
But that doesn’t mean that the prices are, are going down significantly across the board here.
So what are we to make of this?
Yes, look, affordability remains the biggest challenge in the housing market today.
Uh But as a result, right, buyers pulling back a little bit, you’re seeing competition is slowing down and inventory is building up our data.
Zillow data shows that total for sale inventory is now up 23% when compared to a year ago.
Of course, that’s going to put some downward pressure on house prices and or I’m, I’m looking at a 30 year fixed here per per mortgage news daily where it’s 6.82%.
Or I’m curious um when you all look at the data crunch the numbers, you know, six months out, 12 months out.
Where do you think that is ore?
Well, look, it’s, it’s good news uh especially since the labor market is still where it’s at, right?
Uh We have a low 4.1% unemployment rate.
The loosening in the labor market came from a big increase in labor supply uh as opposed to layoffs.
And so, uh potential home buyers are basically seeing mortgage rates easing and that could be helpful for the housing market going forward.
You take that and you combine that with the fact that we have more inventory than we had a year ago.
Uh And those are positive signs uh ahead, we keep hearing about all these positive signs or feet.
But on the flip side, um there’s a chart from Morgan Stanley that really struck me when we spoke to somebody from there yesterday and it has to do with the average mortgage of someone who is in their home right now versus the current mortgage.
And you can see on the right side of your screen, the big gap obviously, and you know, you’re well aware of this, right.
But again, it just illustrates the cost of moving is high right now for people who have mortgages that they got more than a couple of years ago.
So isn’t gonna take quite a long time for that to change.
Uh Look, yeah, I’m very familiar with that chart.
Rate lock is kind of rate lock is kind of loosening a bit.
Uh We saw this uh this year so far new listings, uh the the number of homes uh coming on the market, fresh homes coming on the for sale market actually increased.
Uh, they increased up until last month.
We had a, uh, so a drop of about 9% this month, but that’s, uh, basically normal.
Uh The mar the housing market is seasonal.
Uh, if the drop that we saw in new listings this month is similar to what we would have seen in 2019 or 2018.
Uh, you’re right.
So we have more and more people coming on the housing market.
Those people are, are basically, you know, either getting married and having kids, uh, needing more space.
Uh, so homeowners are coming back.
Uh, of course, uh, they’ve returned to that kind of pre panem seasonal pattern.
Uh, and so for the rest of the year, we’re expecting new listings to decline, uh, as we head into the slow season.
But, uh, but with more inventory, right, uh, that we had a year ago, I expect 2025 to be, uh, an even better year, uh, than we’ve had in the last couple of years or let’s say I was looking to move.
Um, I can go anywhere in the country I want, I wanted to, you know, I want an area that was relatively more affordable.
Um, had more inventory, more diverse kinds of inventory and any areas of the country that would come to mind.
I would go to Texas, I would go to, I would go to Austin, I would go to Houston, you know, those are markets where you know, when you look at, uh let me throw an interesting stat, we did some Zillow research shows that basically the down payment needed to keep your monthly cost affordable for a median income household is about 100 and $28,000 across the country.
Uh On average, you go to markets like San Francisco and that’s close to $900,000 you go to, right.
And you go to an Austin and you can still get uh you can still put down roughly 20% or even lower.
Uh in order to keep your monthly cost affordable.
In San Antonio, that number is just $92,000.
And so, uh so you go to markets that build a lot of housing and you have more inventory.
In fact, in Austin, we now have more inventory than we had before the pandemic.
It’s the most housing inventory uh increase in housing inventory compared to pre pandemic times in the country.
So there’s a lot more options.
Buyers have a lot more bargaining power.
Uh And at least that’s what our Zillow market heat index suggests uh that basically buyers, even though sellers have more bargaining power across the country.
Uh in places like Austin in Texas and Florida, you have uh the pendulum is swinging in favor of buyers.
All right, Austin, more inventory.
Great barbecue.
I don’t know what else you could ask for or thank you so much.
Appreciate it.
Pleasure to be on time now for to watch next week.
Starting off on the earnings runs, earnings season is in full swing.
Now we’re going to be getting a new batch of bank earnings throughout the week.
Morgan Stanley Bank of America, Goldman Sachs all on deck is coming after mixed results from big banks, Friday, JP, Morgan Wells Fargo and the city group all did close lower on the day outside of the banking sector, United Health Group, Netflix and United Airlines reporting earnings next week, Netflix, one of the big ticket reports and it will be announcing for the second quarter on Thursday.
Analysts expect big numbers from strong engagement and subscription growth and moving over to the economy monthly retail sales coming out on Tuesday.
Economist forecasting sales decline 0.2% for June.
We’re also gonna get some housing data with housing starts and building permits.
On Wednesday, housing starts expected to tick up slightly to 1.3 million and building permits holding steady at 1.39.
And finally, if you’re low on stamps, it might be time to stock up.
The price of us postage stamps is rising from 68 cents to 73 cents.
On Sunday.
The price hike coming as the US Postal service reported last November, that first class mail fell to the lowest volume since 1968.
Wow, you gotta love those forever stamps in your back pocket.
Do I have not?
You send any mail I don’t send a lot of mail either.
I guess that’s the problem.
All right.
That will do it for today’s market doin overtime.
Be sure to come back Monday at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.
But don’t go anywhere on the other side of the break.
It’s asking for a trend.
We got you covered for that tap hour with the latest and greatest market moving stories.
So you can get ahead of the themes affecting your money.
Stay tuned.
