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Markets more stable as Brexit fears fade, banks pass stress test, expert says

The market finally has found a little bit of stability, according to one expert.

Bill Smead, CEO and CIO of Smead Capital Management, told "Squawk on the Street" that the market's relative stability is due, in part, to the banks largely passing the stress tests "with flying colors."

"That just took one real big negative that's weighed on the market prior to Brexit off the table," Smead said, adding that this does not mean that the financials will rally right away.

As of Thursday, the major indexes have recovered the majority of their losses from the Brexit sell-off. The CBOE Volatility Index, also known as the "fear index," hit an intraday low of 15.29.

Smead said his firm believes that there will be a refocusing on the domestic market.

"We feel that globalization, that whole globalization trade, has been dying for three to five years and it's all going to be about the domestic United States economy the next five years," he said.

Looking for value

While the telecom and utilities sectors are up double digits in 2016, Bob Pavlik, chief market strategist & senior portfolio manager at Boston Private Wealth, told "Squawk on the Street" that investors should look for cheaper options.

Pavlik said he likes Baker Hughes because it is paying down its debt, buying back stock and is a potential takeover target.

Smead agreed, adding that cheap, quality stocks are likely to outperform, citing academic studies.

"If you're not in staples and you're not in utilities and you're not chasing the dead cat bounce in energy, no one's been interested in anything that you own, which makes them very cheap," he said.

"There's all kinds of bargains out there," Smead said.