The Market Today
Another Positive Vaccine Development
by Craig Dismuke, Dudley Carter
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
Monitoring the Virus Headlines: Following last week’s encouraging announcement from Pfizer and BioNTech (more below), Moderna reported early Monday that its vaccine was more than 94% effective in preventing the contraction of COVID-19 and significantly reduced the severity of the symptoms for those who did become sick. The preliminary results were from a late-stage clinical trial that involved more than 30,000 participants. Both Pfizer and Moderna are expected to apply for emergency use authorization from the FDA in the coming weeks once sufficient safety data has been accumulated. Both companies indicated the preliminary safety results showed no major concerns about negative health reactions to the shots.
Early Indication of Regional Manufacturing Activity Less-Positive: The November regional manufacturing report from the New York Fed declined more than expected, down from 10.5 to 6.3 on mixed results. The outlook for employment improved further but the average workweek dropped notably, the new orders and shipments indices were less positive, and the inventory index was less negative. The drop in the headline index is consistent with other, timely data which have shown a pullback in recent activity as the virus has spiked.
Fedspeak: San Francisco Fed Bank President Mary Daly speaks at 12:45 p.m. CT and Vice Chair Clarida speaks at 1:00 p.m.
Near-Term Virus Trends Remain Highly Concerning Around the Globe: For a second week in a row, global equities got off to a quick start and have posted solid gains on the back of more encouraging news about the race for a coronavirus vaccine. The positive vaccine developments come amid another surge of the virus globally that pushed new cases and hospitalizations in the U.S. to new records last week and deaths to their highest level since May. To fight the latest wave, new restrictions have been rolled out across most of Europe and in some U.S. states, actions that have already resulted in evidence of the economic recovery slowing after a sharp rebound from the initial lockdowns. Data overnight showed Japan’s economy soared 21.4% in 3Q after contracting 28.8% in the quarter before. After a similar trend was previously reported in Germany, the country’s central bank said Monday that it expects a slowdown in the fourth quarter because of the virus.
Investors Find Hope in More Positive Vaccine News: However, with investors hopeful that vaccines could end the uncertainty of new pandemic-level outbreaks, stocks were climbing around the globe Monday. The MSCI Asia Pacific Index closed up 1.6% and Europe’s Stoxx 600 had gained 1.4% midway through Monday’s session. At 7:15 a.m. CT, the rotation back into shares of cyclical “reopening” stocks was underway, with Delta Airlines and Carnival Corporation up strongly, while “stay-at-home” stocks, including many tech names such as Zoom Video, declined. More broadly, the optimism pushed futures for the Dow and S&P 500 up more than 1% indicating both could open at all-time highs when U.S. trading begins. Treasurys and other sovereigns were under pressure as risk appetite strengthened. The 10-year Treasury yield was up 2.3 bps to 0.92% just before 7:30 a.m. CT, still below the 0.98% it flirted with early last week after the announcement from Pfizer.
ICYMI – November 13, 2020 Weekly Market Recap: It was an eventful week for global markets as investors responded to positive developments on the medical front but worrisome trends for the U.S. epidemic. Stocks and Treasury yields were jolted higher Monday before U.S. trading began by an announcement from Pfizer and BioNTech that initial analysis of the phase 3 trial results for their joint vaccine showed the shot to be safe and highly effective. The development, which is considered to be the key to economic activity fully returning, briefly sent the S&P 500 through its current record high Monday and pushed the 10-year yield up to 0.98% on Tuesday, its highest mark since March 20. From there, however, stocks and yields edged lower as the seven-day averages for U.S. cases and hospitalizations trended to new pandemic records by Thursday. Stuck between hopes that a vaccine will lead to improvement in the medium-term and worries that the current virus trends could cut off recovery in the near-term, markets pared their early moves. The S&P 500 ended the week 2.2% higher after gaining as much as 3.9% on Monday. The 10-year yield rose 7.8 bps to 0.90% after climbing as many as 16 bps to 0.98% on Tuesday. The economic data, while it didn’t impact the markets, was mixed. New and continuing jobless claims fell more than expected to new lows during the pandemic, but consumer confidence, led by a sharp drop in expectations, fell unexpectedly. Business confidence was flat and soft monthly CPI inflation dragged the YoY rates down. Click here to view the full recap.