Vaccine Breakthrough Raises Market Sentiment
Weekly Market Update (November 09 – November 13, 2020)
Vaccine Breakthrough Raises Market Sentiment
On Monday, Pfizer announced that their small COVID-19 vaccine trial had a 90% efficacy rate among participants and as a result, many hard-hit industries including hospitality and travel performed exceptionally well, as did all major indexes, all of which rose during daily trading.
This shift in balance however, turned against the growth and tech stocks, bringing down their lofty valuations. As a result, both the S&P 500 the Dow Jones pushed higher by +1.2% and +3% respectively, while the Nasdaq was down 1.5%.
The energy and financial both thrived as cyclical stocks performed strongly, however, with growth stocks falling, the consumer discretionary sectors, information technology and communication services all finished in the negative.
Positivity in the market also seemed to be boosted by the possibility of a split Congress. A split Congress could bring about more political moderation and reduce the likelihood of on-sided policy changes.
On Tuesday, ongoing positive vaccine news continued to bolster the Dow Jones.
Pfizer’s announcement on Monday preceded Eli Lilly’s overnight report that they had received emergency use authorization for their antibody therapy. The reports and announcements saw the airlines industry, lodging companies and cruise line companies all gain strongly during day trading as all these industries would largely benefit from a successful vaccine.
Overall, value stocks in the industrials, materials, energy, consumer staples and financial industries all performed strongly.
Both the S&P 500 and Dow Jones followed these industries in moving towards the upside before paring some of their gains before market close.
On market close, the Dow Jones finished 0.9% higher however the S&P 500 closed 0.1% down.
Comparatively, the pandemic’s safe-haven tech stocks struggled to perform in daily trading. As a result, the Nasdaq dropped 1.4%. Rounding up, the consumer discretionary, information technology, and communication services industries all finished in the negative.
On Wednesday, we saw tech stocks recover some of their previous losses from earlier in the week. Wednesday also saw the information technology, consumer discretionary and the communication services industries perform well through the day. As a result, the Nasdaq was up by 2.01%.
Utilities, real estate, and consumer staples also finished in positive territory and this helped the S&P 500 grow by 0.8%.
The health care, financials, energy, industrials, and materials sectors however all finished in the negative territory.
With a shift away from value towards growth, the Dow Jones dropped 0.1% however market analysts believe this market recalibration is an overall healthy move.
As the economy continues to recover, the market would theoretically then rely less on tech and mega-cap stocks and more on value and smaller cap equities. The next couple of months may feature an oscillation between these areas of the market as the market redistributes its weightings.
On Thursday, key market indexes fell to session lows, as the Dow Jones lost nearly 400 points and the Nasdaq reversed lower.
The Dow Jones dropped 1.3%, the S&P 500 was down 1.2%, and the Nasdaq edged 0.7% lower in the stock market today.
Small caps stocks gave up 1.6%.
Volume was mixed, lower on the NYSE but higher on the Nasdaq vs. the same time Wednesday.
First-time unemployment claims for the week came in at 709,000, as reported by the Labour Department. That was 48,000 lower than the prior week’s 757,000.
Stocks turned lower as Senate Republican Leader Mitch McConnell said he is not interested in “dramatically larger stimulus” regarding a coronavirus aid bill. President Donald Trump continues to make unsubstantiated claims about election fraud.
President Donald Trump claimed on Twitter that an election technology firm “deleted” large numbers of his votes or “switched” them to count for Joe Biden.
Trump and his supporters have launched attacks on one of the most widely used technology firms in the U.S. – Dominion Voting Systems – seeking to sow doubt in the results of the 2020 election, despite no evidence of any serious irregularities.
On Friday, the stock market entered the last day of weekly trading on a mixed note, with the Dow Jones – a big winner several days earlier due to positive COVID-19 vaccine news – dipping at the open, while the Nasdaq pressed forward. Among the early factors was Thursdays better-than-expected weekly unemployment report.
At the same time, the Labour Department reported that the Consumer Price Index was unchanged in October after rising by 0.2% in September.
The S&P 500 followed a similar path, while the Nasdaq, up in the morning, fell moderately after lunch, closing by 77 points.
It seems that the vaccine rally faded and was replaced by new fears about the spread of COVID-19 – with the latest day seeing more than 144,000 new cases of this disease – coupled with the realization that widespread distribution of this preventive vaccine will take several months to produce.
Additionally, there is no fiscal stimulus package yet on the horizon, and we may not see one until the new Congress meets in early 2021.
- Earnings Reports
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- Lyft beat expectations and reported smaller losses than expected. Their revenue was still down 48% over the past year; however, Lyft reported $499.7 million in revenue compared to the $495.8 million expected in revenue. The ride sharing service reported that they are starting to see an uptick in demand after the pandemic crippled the industry.
- Lemonade exceeded third-quarter earnings expectations. The digital renters’ insurance company showed revenue growth of 64% to $17.8 million. They also increased their full-year revenue guidance.
- McDonald’s delivered an upbeat earnings report, posting earnings of $2.22 per share compared to the estimated earnings of $1.90 per share. U.S. sales picked up in the third quarter and helped the fast-food chain. McDonald’s plans to introduce more plant-based options, competing with Beyond Meat who delivered disappointing earnings results on Monday
- Beyond Meat reported a loss of $0.28 per share. Analysts had expected Beyond Meat to post earnings of $0.05 per share. Their revenue also came in significantly lower than expected
- Economic News
- The Small Business Optimism Index for October remained unchanged.
- September job openings increased slightly to 6.436 million. There were fewer job openings in the federal government, in part due to a drop in demand for Census workers. Retail and educations services also saw fewer job openings. Food services, wholesale trade, transportation, and warehouse services saw job openings increase.
Economic Calendar
| Time (GMT+2) | Event | Impact |
| 15:00 16.11 | EUR ECB’s President Lagarde speech | High |
| 15:30 16.11 | GBP ECB’s Mersch speech | Medium |
| 18:00 16.11 | EUR BoE’s Tenreyro speech | Medium |
| 19:30 16.11 | GBP BoE’s Haskel speech | Medium |
| 21:00 16.11 | GBP Fed’s Clarida speech | Medium |
| 02:30 17.11 | AUD RBA Meeting Minutes | High |
| 15:00 17.11 | EUR ECB’s De Guindos speech | Medium |
| 15:30 17.11 | USD Retail Sales ex Autos (MoM) (Oct) | Medium |
| 15:30 17.11 | USD Retail Sales Control Group (Oct) | High |
| 15:30 17.11 | USD Retail Sales (MoM) (Oct) | High |
| 16:00 17.11 | GBP BoE’s Governor Bailey speech | High |
| 16:15 17.11 | USD Industrial Production (MoM) (Oct) | Medium |
| 18:00 17.11 | EUR ECB’s President Lagarde speech | High |
| 19:00 17.11 | GBP BoE’s Ramsden speech | Medium |
| 21:00 17.11 | USD Fed’s Williams speech | Medium |
| 21:00 17.11 | CAD BoC’s Governor Macklem speech | High |
| 00:00 18.11 | AUD RBA’s Governor Lowe speech | High |
| 09:00 18.11 | GBP Consumer Price Index (MoM) (Oct) | Medium |
| 09:00 18.11 | GBP Retail Price Index (YoY) (Oct) | Medium |
| 09:00 18.11 | GBP Core Consumer Price Index (YoY) (Oct) | Medium |
| 09:00 18.11 | GBP Retail Price Index (MoM) (Oct) | Medium |
| 12:00 18.11 | EUR Consumer Price Index (MoM) (Oct) | Medium |
| 12:00 18.11 | EUR Consumer Price Index – Core (YoY) (Oct) | Medium |
| 12:00 18.11 | EUR Consumer Price Index – Core (MoM) (Oct) | Medium |
| 12:30 18.11 | GBP BoE’s Haldane speech | Medium |
| N / A 18.11 | EUR 10-y Bond Auction | Medium |
| 15:30 18.11 | CAD BoC Consumer Price Index Core (YoY) (Oct) | High |
| 02:30 19.11 | AUD Employment Change s.a. (Oct) | High |
| 10:00 19.11 | EUR ECB’s President Lagarde speech | High |
| 15:30 19.11 | USD Initial Jobless Claims (Nov 13) | Medium |
| 02:00 20.11 | NZD New Zealand General Election | High |
| 02:30 20.11 | AUD Retail Sales s.a. (MoM) (Oct) PREL | High |
| 03:30 20.11 | CNY PBoC Interest Rate Decision | High |
| 09:00 20.11 | GBP Retail Sales (YoY) (Oct) | Medium |
| 10:15 20.11 | EUR ECB’s President Lagarde speech | High |
| 15:30 20.11 | CAD Retail Sales (MoM) (Sep) | High |
| 17:00 20.11 | EUR Consumer Confidence (Nov) PREL | Medium |
