Market Perspective for November 28, 2020

Stocks closed out the week on a positive note following the Thanksgiving holiday, which rounded out an impressive month of gains for stocks. Markets closed early on Friday due to the holiday but still managed to post gains across the major indexes. Even with the coronavirus case counts rising at record rates across the country, the optimism over the potential for a publicly available vaccine helped propel stocks. Consumer spending for the start of the holiday season has been strong so far, especially online retail sales, and is expected to continue at a solid pace over the coming week.

The S&P 500 gained 0.24 percent on Friday. It was up 2.3 percent for the week and an impressive 11.3 percent for the month. The Dow closed up 0.13 percent. For the week, the Dow gained 2.2 percent. It has gained 13 percent gain in November. The Nasdaq gained 0.92 percent on Friday. Increases in shares of Tesla (TSLA) of 2.1 percent, Alphabet (GOOGL) of 1.3 percent, and Netflix (NFLX) of 1.3 percent on Friday. For the week, the Nasdaq was up 3 percent. The Russell 2000 was up 0.56 percent for the day.

Black Friday, the day after Thanksgiving and widely recognized as the official start to the holiday shopping season, was viewed cautiously by major retailers. However, retail sales thus far are much rosier than expected. The SPDR S&P Retail ETF XRT posted a 0.90 percent gain. Online retail sales were particularly strong for the week. According to estimates from Adobe Analytics, the final online sales numbers from Black Friday will exceed $10 billion. Amazon (AMZN) gained 0.30 percent on Friday. Shopify (SHOP) was also up 1.50 percent for the day.

Online retail sales are anticipated to get another boost on Cyber Monday Adobe Analytics projects that consumers will spend more than $12.7 billion via online shopping this Monday, which represents a 25 percent increase over what consumers spent online for Cyber Monday last year.

Following the announcement by Pfizer (PFE) and BioNTech (BNTX) a week ago that they have sought emergency use authorization of their vaccine from the FDA, the University of Oxford and AstraZeneca (AZN) stated that they will have to initiate a new set of trials to determine the efficacy of their vaccine at a lower dosage due to an apparent dosing error in their most recent clinical trials. This led to a decline in AstraZeneca shares immediately following the announcement. However, shares of Moderna (MRNA) and Novavax (NVAX), two major contenders at the forefront of the race for a coronavirus vaccine, jumped on the news of their competitor’s setback. Moderna and Novavax shares were up 16.3 and 22.5 percent, respectively, at the end of Friday. Likewise, shares of Pfizer and BioNTech experienced a significant bump on Friday of 2 and 4 percent, respectively.

Airlines were among the hardest hit by the pandemic and they benefited from the vaccine news. U.S. Global Jets (JETS) gained 8.77 percent for the week. Casino operator Wynn Resorts (WYNN) rallied 5.86 percent.

The energy sector continued it outstanding performance. SPDR Energy (XLE) returned 8.44 percent. Crude oil rallied to $45.52 per barrel, the highest price since March. Natural gas also climbed this week and finished near $3 per mmBTU. First Trust ISE-Revere Natural Gas (FCG) climbed 11.28 percent. Alternative energy also rose in lockstep with fossil fuels. Invesco Solar (TAN) rose 8.86 percent and First Trust Global Wind (FAN) added 3.16 percent.

Interest rates rose slightly on the week. The 10-year Treasury yield gained 2 basis points to close at 0.84 percent. The general rotation into value boosted financials though. SPDR Financial (XLF) advanced 4.49 percent.

The U.S. government’s second estimate of third quarter GDP matched the initial estimate of 33.1 percent annualized growth.  Flash PMI readings showed both the manufacturing and service sectors strengthening in the U.S. Consumer confidence in November was slightly weaker than expected at 96.1 versus 97.3 in the Conference Board index, but the University of Michigan consumer sentiment survey came in slightly stronger at 76.9 versus 76.8 forecast.

Housing remains the brightest spot for the economy. New home sales in October hit an annualized pace of 999,000, ahead of forecasts and barely down from September’s 1,002,000 pace.

Initial claims for unemployment were 778,000 the week prior, ahead of the 720,000 consensus forecast but in line with market expectations given the return of lockdown policies in some states. Long-term unemployment extended its decline, but there was a small uptick in total long-term unemployment because of increased applications for federal pandemic assistance.

Next week brings the report on November’s unemployment claims as well as testimony from Jerome Powell, Chairman of the Federal Reserve, and Treasury Secretary Steven Mnuchin in front of the Senate Banking Committee regarding the country’s economic response and emergency measures implemented to assist with the recovery from the coronavirus pandemic.

The ETF Investor Guide for November 2020

The November Issue of the ETF Investor Guide is AVAILABLE NOW! Links to the November Data Files have been posted below. Market Perspective: Value Stocks Rebound Vaccine progress and a politically […]

Market Perspective for November 23, 2020

The stock market rallied on Monday thanks to optimism surrounding additional coronavirus vaccine developments announced today. The progress from yet another vaccine manufacturer on preparing a third major vaccine candidate for emergency authorization use from the FDA fueled a positive outlook for stocks.

The major indexes closed with gains across the board. The S&P 500 gained 0.56 percent, while the Nasdaq advanced 0.22 percent. Micron Technology (MU), a maker of memory chips, was one of the Nasdaq’s standout performers for the day. Its shares traded up 4.53 percent in response to an increase in demand for Micron’s cloud data center. The Russell 2000 closed up 1.98 percent today.

The Dow gained 1.12 percent for the day. Monday’s surge in the Dow was bolstered by Boeing (BA) and Chevron (CVX) shares trading up by 5.88 and 6.15 percent. In addition, Walt Disney (DIS) shares traded up 3.53 percent and American Express (AXP) 3.18 percent, which also helped boost the index.

AstraZeneca (AZN) and the University of Oxford announced Monday that their coronavirus vaccine candidate had achieved an efficacy rate above 70 percent in late trials involving only one dose of the vaccine. When a second dose was administered, the efficacy rate shot up above 90 percent, according to the firm. This announcement follows the previous declarations by Pfizer (PFE) and BioNTech (BNTX) that their coronavirus vaccine candidate had achieved a higher than 90 percent efficacy rate and was being submitted for emergency use authorization to the FDA. Pfizer projected that its vaccine candidate would be distributed in some limited way by December. Moderna (MRNA) also presented its own positive news on its coronavirus vaccine’s effectiveness rate at the close of Phase 3 clinical trials a week ago.

News from Regeneron Pharmaceuticals (REGN) that its antibody coronavirus treatment received emergency use authorization from the FDA boosted its shares by 0.4 percent. Combined with promising news on the vaccine front, developments in therapeutics are expected to further accelerate the economic recovery and attract investors to value stocks.

Markets reacted positively to the appointment of former Fed Chief Janet Yellen as Treasury Secretary. Yellen is expected to be a stabilizing influence in the market and is known for her easy monetary policy during her leadership at the Fed. She should face no trouble getting approval having already cleared confirmation hearings for her appointment to the Federal Reserve.

The energy sector also advanced on the day. Crude oil prices reached a three-month high on Monday afternoon. The U.S. price per barrel increased by 1.23 percent to $42.94. Energy Select Sector SPDR Fund (XLE) gained 7.09 percent on Monday.

The 10-year Treasury note gained 0.857 percent on Monday, while 30-year Treasury bonds gained 1.556 percent.

IHS Markit released its manufacturing and services sector survey on Monday, which reflected the strong and relatively quick pace of the U.S. economic rebound. Both indexes from IHS Markit exceeded the consensus expectations. The manufacturing index increased from 53.4 to 56.7 last month. The services index increased from 56.9 to 57.7 over the same time period. The HIS Markit composite index, combining manufacturing and services, likewise increased from 56.3 to 57.9 in October, which marked its highest level in more than five years. Significant increases across these indices indicate a recent and sustained boom in demand for manufacturing and services.

The Conference Board will release its consumer confidence survey on Tuesday. Analysts expect a decline from October’s reading of 100.9 as rising coronavirus cases and the election had a negative impact. The University of Michigan’s advance survey of consumer sentiment for November will be released on Wednesday.

Economists predict new homes sales climbed to an annualized pace of 980,000 homes in October, up from 959,000 in September.

Initial claims for unemployment likely held above 700,000 last week with lockdown policies spreading, but economists expect 22,000 fewer claims than the prior week.

Medtronic (MDT), Autodesk (ADSK), Dick’s Sporting Goods (DKS), Analog Devices (ADI), Best Buy (BBY), Dollar Tree (DLTR), Deere & Co. (DE) and Weibo (WB) highlight a light week for earnings reports.