Stocks give up gains as market pressure mounts. What to watch now - CNBC

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It was a wild Friday on Wall Street.

U.S. stocks initially bounced after seeing their worst sell-off since March on Thursday, but reversed course later in the trading day as market pressures and worries around reopenings amid the Covid-19 pandemic mounted.

Market watchers are largely in agreement that Thursday's sell-off wasn't a one-off.

Here's what five of them said Friday:

Pullback watch

David Bianco, chief investment officer for the Americas at DWS Group, expected more weakness for equities:

"There's more days like that to come. I think the S&P still needs to correct by about 10% from here to be within my estimate of fair value."

The recovery trade

Jim Keenan, CIO and global co-head of credit at BlackRock, wasn't shying away from risk assets:

"We do like credit here. At the end of the day, I think risk assets are supported. You have an enormous amount of monetary policy and stimulus coming in, you have supportive policy from the fiscal side and you have an economy that is reopening, so, week on week or month on month we do expect positive data and I do think that's supportive for credit assets. … If you want to see, from these valuations, equities really have upside, then you have to really bet on the fact that you're going to see a significant recovery in some of the more cyclical or Covid-hit sectors. And from a credit standpoint, I think when you look at the markets right now, you have growth, you are recovering, it is supportive and in the credit markets, you can get anywhere between a 6%-8%-type return by investing in … more resilient sectors and I think that's a pretty good place to anchor your money at this point."

'The bottom has been hit'

David Rubenstein, co-founder and co-executive chairman of The Carlyle Group, figured the worst was past the economy:

"I think the bottom has been hit. I don't think it's going to get deeper in terms of a recession than what we have now. I think we're coming out of it. I think people can overreact and I think there has been some overreaction in the markets from time to time. Clearly, the economy got a body blow. We haven't had anything like this for generations. But I do think we're on our way back and there'll be some gyrations up and down as we go through this for the next couple months, but I think generally, the economy is in reasonably good shape looking over the next six to nine months or so. But it's not going to be perfect. It's going to take a while to get back to where we were at the height of the bull market."

The Fed's challenge

Thomas Peterffy, founder of Interactive Brokers, had a feeling this was "just the beginning":

"I think that more is going to come, but, of course, I've been wrong so you cannot be sure. So, there are basically two schools of thought here. One of them is that the new economy emerging from the ruins of the pandemic is going to be a different kind of digital economy that will be much stronger and more productive and a new work environment will evolve and everything will be just absolutely wonderful, and if you don't buy these stocks now you will never see these prices again. Other folks believe that, yes, that will eventually come, but there'll be much suffering and failures and bankruptcies and problems, many problems, between now and then. And then we have the Fed in between who is trying to breach the gap between these two visions, and I hope they'll be successful."

Tracking momentum

Katie Stockton, founder and managing partner of Fairlead Strategies, said the technicals supported a more bearish outlook — for now:

"Well, we did come into this week with a gap up on the S&P 500, and sometimes after prolonged up moves when you see these gaps on the chart they tend to be exhaustive. So, that's what we were looking at. Of course, there is an overbought extreme. Nobody would argue against that. However, sometimes those overbought extremes can actually be a good thing and I would argue that this one is good, but just not in the short term. Intermediate term, we've seen intermediate-term momentum improve. Long-term momentum's still basically neutral here. But with what we've seen as of [Thursday] is that the market does have some excesses built into it, and that decline left what we call as technicians an island reversal on the chart. And that supports another couple weeks of a pullback. We had initial support right around 2,955 for the S&P 500. That's seeming a bit more conservative than we'd hoped, so, now we're looking at support just below about 2,800 and that's where the market held in May, which is when we actually got that momentum buy signal that has now switched to a momentum sell signal."

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Stocks give up gains as market pressure mounts. What to watch now - CNBC
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