Just a handful of tech stocks, including Apple, Microsoft, Nvidia, Tesla, and Amazon are responsible for the most of the big gains we have seen in the Nasdaq. Michele Schneider, Chief Strategist at Marketgauge.com tells Yahoo Finance Live why she thinks it would be "healthy" to see some of these stocks pull back.
DIANE KING HALL: But it's definitely giving stocks room to run on today's jobs data showing that over 330,000 jobs were created in the month of May. Joining us now for more on the market impact, we want to welcome in Michele Schneider, marketgauge.com chief strategist. So Michele, let's get right into and this market reaction. Right now, we're looking at the S&P 500 just really rallying, toying with that level that would kind of take us to a bull market. What do you make of it?
MICHELE SCHNEIDER: Well, it's not completely unexpected. I think the big lesson to be learned here is all the bearish narratives and all the fear and all the breath that was talked about when it comes to the debt ceiling turned out that the price never really reflected the fears and people forgot about price. And so we've had risk-on environment now for weeks, and we've held critical support.
So the question is, are we going to go into a bull market? I would say we're still very much in a trading range. We're just looking outside of the 2023 range so far by the fact that we've gotten over 4,200 in this high. But that doesn't mean it can't stop at, let's say, last August high at 4,300 or even go higher. The question is, are we really going to go into an economic growth or is this simply the sigh of relief that with all the bearish stuff that could have happened didn't happen and so people are coming back into the market.
SEANA SMITH: Michel, if we do see the Fed actually raise rates here at their meeting in just under two weeks from now, is that going to be enough to halt some of this momentum that we are seeing in the market at least today?
MICHELE SCHNEIDER: Well, I don't really necessarily believe that they will hike. I think as you guys were talking about in the very beginning, the labor report today was so mixed. And basically, you have the Fed funds rate and the CPI rate close together.
And historically, May tends to be the peak in rates that they may actually either pause here or skip. And that could actually present a new round of problems with inflation as we get into the second half of the year. So the Fed may actually be-- even with 1/4% raise, I don't think they're going to do it. I mean, it's hard for me to fathom it right now.
DIANE KING HALL: Michele, I just want to go back to-- you mentioned like stocks have been in this range. You call it this trading range that we're seeing. But today kind of paints a different picture. I mean, again, the S&P 500 flirting with that 4292 level, which would be the breakout range. I mean, there's this phrase that they use on Wall Street, the trend is your friend. So you can't really-- I mean, can you fight this trend right now.
MICHELE SCHNEIDER: Well, you're looking at the S&P. But also, you have to look at the small caps here, right? So today was the first day that the Russell 2000 was able to get through 1800. Now, can it hold? I mean, that's really going to be a key right here.
And it's almost like this flip to value and to some basic materials that have been beat up, to consumer staples that have been beat up, even the whole consumer space that really basically held major support but hasn't bounced that much remains the question in terms of what the S&P and even the NASDAQ, which we exploded off of AI can do going forward.
So I've got my eyes in there because that's really where you're going to get the picture, the real picture of what's happening in the US as far as growth in industrials, manufacturers, and what the consumers are going to do.
SEANA SMITH: Michele, you just mentioned some of the movement that we've seen in the NASDAQ. A lot of that obviously coming from the rally that we've seen in so many of these AI names. And we take a look at the narrow market breadth. I think a lot of investors out there are trying to question or trying to figure out whether or not we have seen a top in the NASDAQ at least for now. What do you think?
MICHELE SCHNEIDER: Well, for now, possibly. It certainly seems that little tired. And the ratio got stretched between the S&P 500 and the NASDAQ stocks. And obviously the race into AI was prevalent and incredible, actually. But overall, it would be healthy to see a correction in NASDAQ. And we actually started to see a little bit red in the semiconductor space today, which I found really interesting.
Because semis were part of the why we held on to even staying from dropping precipitously in the market over the last month or so. So SMH was leading then NASDAQ caught up, and you have stocks like Apple really going on there. But this question of 10 stocks leading the market, it's healthier if we pull back a little bit there and see the rotation into some of these areas. But that hasn't exactly been proven out because we've had this great one day rally today. We need more evidence.
DIANE KING HALL: Right. We have had this great one day rally today, Michele. But again, you have these inflows into tech. You'd say 10. Bank of America put out a note talking about the magnificent seven. I mean, in terms of what's ahead for the summer, are we expecting to see more inflows in those these mega-cap tech stocks?
MICHELE SCHNEIDER: It's very possible. Let's put it this way, these companies are leading the charge in AI. Will they get it saturated to some point? To a degree. I like to actually compare it almost to like Tesla in the EV space compared to all the other companies that are making EVs, right? Tesla is just the king. No doubt about it. You can see it reflected in the stock price compared to something like Ford.
But that doesn't necessarily mean that Tesla will not come down and Ford will come up. And I think it's the same thing. Nvidia can sell off, maybe even Microsoft or Amazon or some of these companies that have really been leading the charge. But at the same time, you're seeing companies like match.com announce that they're using AI. And that's going to be the rub for AI is that it's really an everyday use that's being widespread and will be more and more adopted.
So we could see some leadership change as far as how much Nvidia goes compared to, let's say, Advanced Micro Devices. But overall, that space will continue to grow over time. But remember, fundamentals and technicals don't always agree, right? So things get overdone, PE, and things can come off. And I still think we have to look at inflation. People have stopped talking about it. I'm still really focused on it.
SEANA SMITH: Yeah. Michele, you mentioned earlier just some of the new rounds of problems that we could potentially see with inflation. What more specifically are you anticipating or warning about over the coming months?
MICHELE SCHNEIDER: Well, there's a couple of things going on now that people should be paying attention to. One is Russia. Even though Ukraine has had some victories lately, Russia is talking about pulling back in terms of allowing ships to go into the Black Sea to export grain. And so we have mother nature on top of that, which is already put stress on a lot of the grain crops, even in the United States, but also in Australia and Brazil and China. So if you combine those two, that can spark another round of food inflation.
With oil, we also have OPEC+ meeting this week. Could they cut back on supply more? It's possible. But oil has dropped, but it also held key support X factor. The dollar, BRICS. People think that Brexit is just a fantasy, but it seems the stories get stronger and stronger. Dollar's strong right now, but we have to keep our eyes there.
And shipping and supply chain. Panama Canal today reported that the water levels are so low because of drought that they now have to reduce the weight that the ships are carrying, number one. And number two is the cost of the freight that's going through is rising. These are all things that can bubble up at any time. So I wouldn't get too complacent on the inflation front right now. Not to mention the precious metals have really held up pretty well, even if they've come off from the highs.
DIANE KING HALL: I want to quickly just get back to oil. We're in really it looks like a risk-on environment today. You have both WTI and Brent crude up a little over 2% today. So what are you expecting out of OPEC? Are you expecting more production cuts? What are you looking for?
MICHELE SCHNEIDER: Well, I actually think that-- well, there's a couple of other things, by the way. The Saudis are buying cheaper oil from Russia and then selling to the EU at higher prices. So it's kind of an arbitrage there. And maybe that will relax some of their need for that oil money. But it's very possible. Don't forget, they've been warning.
They've been saying, bears, be careful because we're meeting. And they're not allowing any press into the meeting or at least not the big press release people like like a Bloomberg or a Reuters. So at this point now, I would say we have to watch price. It's always about price, right? That's what we've learned in this lesson now to this point.
And now if we can get over $80 a barrel, particularly in the Brent crude, I think that means that whatever OPEC+ decides to do, we're starting to see constraints on supply. And everybody was discounting China as a big demand, but China is not exactly as bad a shape as people would like to think. China's very forward-thinking, and they could come back also and put a strain on that supply with higher demand.
SEANA SMITH: And oil prices moving up just over 2% here ahead of this weekend's meeting. Michele Schneider, thanks so much. Have a great weekend.
MICHELE SCHNEIDER: Thank you too.