Market Perspective, December 15, 2020

The stock market had a mixed opening to the week, with the Nasdaq posting a gain of 0.50 percent. The Dow lost 0.62 percent, while the S&P 500 declined 0.44 percent. The Russell 2000 advanced with a gain of 0.11 percent.

Projected increases in demand on the horizon for energy use and travel helped to drive up WTI crude oil prices by $0.42 to $46.99 per barrel and wholesale gasoline prices by $0.01 to $1.32 per gallon on the day. Even so, OPEC announced that it would cut its forecast for oil demand for next year down to 5.9 million barrels a day, which is 350,000 barrels less for daily demand than previously expected. As a result, Chevron (CVX) and Exxon Mobil (XOM) shares took a 3.3 percent and 3.6 hit, respectively.

Monday’s major gain-makers for the S&P 500 were Amazon.com (AMZN), Microsoft (MSFT), and Netflix (NFLX), with gains of 1.3 percent, 0.4 percent, and 3.8 percent, respectively. SPDR Technology (XLK) advanced 0.37 percent.

SPDR Consumer Discretionary (XLY) gained 0.19 percent. Tesla will be joining the consumer discretionary sector when it enters the S&P 500 Index on Friday. Amazon currently makes up more than 40 percent of the sector, but that will drop to around 35 percent when Tesla enters with a weighting close to 15 percent. XLY caps single-stock exposure, but this fund and others tracking the S&P 500 consumer discretionary sector will be top-heavy with Amazon and Tesla accounting for more than one-third of assets.

Although it represents a much smaller market capitalization within the S&P 500, Alexion Pharmaceuticals (ALXN) was still a notable winner for Monday, with an increase of 29.0 percent for the day. AstraZeneca (AZN) solidified its agreement to purchase Alexion for $39 billion, but closed with a loss of 7.8 percent.

Monday was marked by a major development on the coronavirus vaccine front. Notably, Pfizer (PFE) and BioNTech’s (BNTX) vaccine, which received emergency authorization use approval from the FDA recently, had its first round of public distribution. This initial distribution kicks off Pfizer’s contract with the U.S. government to make at least 100 million vaccine doses available to the American public by March of next year. In addition, Moderna’s (MRNA) vaccine candidate could potentially receive approval by the FDA through its emergency use authorization in the coming days or weeks.

iShares MSCI Emerging Markets (EEM) dipped 0.52 percent. Four Chinese companies were delisted from the U.S. market after not complying with audit rules. The developed market iShares MSCI EAFE (EFA) gained 0.06 percent after the European Union and United Kingdom once again extended the deadline for Brexit negotiations.

The other major situation driving market dynamics for the start of the week was the optimism boost over the status of the proposed $900 billion coronavirus relief package bill, which currently has bipartisan support.

For the coming week, the U.S. Federal Reserve has its next meeting on Wednesday. For economic data, we await the release of the November Import Price Index for Tuesday, which is projected to reflect a 0.3 percent increase in import prices over the last month. The November industrial production and capacity utilization report, which is published by the Fed is expected to show notable increases over the previous month.

Housing data is out this week. First will be the National Association of Homebuilders’ sentiment index for December. The index was at an all-time high in November. Housing starts and building permits for November will arrive on Thursday.

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