CNBC Special Report: Taking Stock 8/16/24

Mike Santoli (0:07)

Hello, I'm Mike Santoli. welcome to the CNBC special, Taking Stock. This has been the best week of the year for the markets and the best hour of television for you. And I'm not saying that just because Josh Brown isn't here. Liz Young-Thomas and Dan Greenhouse joining me for the hour as we break down this week's Market Moves and get you ready for what could be another wild consequential week from Wall Street to Wyoming. Let's get right to it. We are on the clock. The biggest stories of the day and the week. We are going to start with that rollicking week on Wall Street. Stocks turning in their best week of the year with the NASDAQ surging 5 percent on the week, both the S&P and the Dow now less than 2 percent off of all time highs. The last week's volatility spike all been erased from the market's collective memory anyway. So client comes to you and says, what happened? I mean, was the downside an overshoot? Liz, has the rebound been a little bit too far, too fast? What were we trying to reprice through all this?

Liz Young-Thomas (1:07)

Well, I think much like some of the last recoveries that we've had after pullbacks, this was a little game of put the money back where it came from. So yes, last Monday, I think, was an overshoot to the downside, but the market always does that. That's not new. We overshoot to the upside, we overshoot to the downside. So that was an overreaction. But I think it's important to note that even after Monday, we didn't start recovering right away. We tried and failed Tuesday and Wednesday. We didn't really start rallying again until Thursday, which to me says this market now needs good news in order to rally. So we needed good initial jobless claims, which we got last week, and then we got another one this week. We needed good retail sales. We needed good results from somebody like Walmart. We needed a tame CPI and PPI. So we got all of that, and the market now felt justified to keep going up. However, you don't usually see a day like that, and just one and done. So I would still be on guard. I don't think that the volatility is over.

Dan Greenhouse (2:06)

I don't think it's fair to suggest that the market needed until Wednesday to know that Josh Brown was not going to be on the show.

Liz Young-Thomas (2:11)

This is true.

Dan Greenhouse (2:12)

I don't think that's appropriate at all. And as a fellow Long Islander, I'll take his place for the day. But listen, at the end of the day, what happened on Monday was incorrect, for lack of a better word. Far be it for me to tell the market.

Mike Santoli (2:24)

You mean a week ago Monday.

Dan Greenhouse (2:25)

I'm sorry, a week ago Monday.

Mike Santoli (2:26)

Down 3% and the volatility index surged above 50 and everything else.

Dan Greenhouse (2:30)

When you've got a VIX north of 60, the only times that's happened is when things are going really, really wrong in markets. And granted, Japanese stocks down 12% is something going really, really wrong, but it's going really, really wrong over there. To Liz's point, you've got Walmart, you've got retail sales, you've got jobless claims here coming down a little bit. The US still seems to be operating fairly well. And maybe it took a day or two for people to step back from what happened to Japan. But at the end of the day, whenever you walk in and futures are down five, six percent in the case of the S&P, more in the case of the NASDAQ, unless something is going on, that's something you should buy.

Mike Santoli (3:04)

You know, Liz, it all makes sense that we had a growth scare that was all concentrated and it had these knock on effects with other leveraged trades getting unwound. It came after a long period of very calm markets. But you also have to wonder about the starting point. So what was assumed about the economy and the durability of the expansion, and of what the Fed is going to do on July 16th, one month ago today when the S&P 500 made its peak at 22 times earnings, right? So it's one of those things where, yeah, maybe 3% down in a day and 10% in no time is a lot in a hurry. But maybe it also is because we were up at these levels where we were out on a limb.

Liz Young-Thomas (3:42)

Well, I mean, yeah, coming from really high levels, that drawdown, although because it happened so quickly, felt dramatic, it felt scary, but in reality wasn't that bad. It was like a cute little thing that happened on that day. So when you look at basically coming into that, I think maybe the bigger risk, I know we talk about positioning a lot. I don't want to get into the technicals of that right now on a Friday night, but the bigger risk, I think coming into that is that everybody had sort of decided we've secured the soft landing and stocks are going to be fine. We're going to pull this off. Inflation's under control. Jobs are okay, cooling, but okay. And stocks are still going up. So why can't they just keep going up? And anytime you get that many people on one side of an argument, you're at risk of something else happening, which is where that positioning discussion comes in and that just exacerbates it on the downside.