Market Perspective for November 15, 2020

U.S. stocks began with an impressive start with Pfizer’s (PFE) announcement of significant progress on its COVID-19 vaccine development along with BioNTech (BNTX). Its initial assessment of a 90 percent effectiveness rate for the vaccine has yet to be verified by the FDA, but it spurred high hopes of a safe return to pre-pandemic travel and in-person activities once it becomes widely available,. Election developments, rising coronavirus case counts, and uncertainty surrounding the potential for a coronavirus stimulus package also dominated the news and tempered positive consumer sentiment slightly.

The S&P 500 closed Friday up 48.14 points at 3,585.15, or 1.36 percent for the day, which was a new record closing since September. It rounded out a second consecutive positive trading week with a 2.16 percent gain on the week.

The Dow ended the day up 1.37 percent. It momentarily traded at 29,551.42, above its all-time closing record attained in February. This was the second positive trading week in a row for the Dow with a 4.08 percent gain on the week.

Friday’s gains in the Nasdaq lagged a bit behind the other major indexes. The Nasdaq added 1.02 percent on Friday. It was down slightly for the week with a loss of 0.6 percent. Although all 11 sectors had gains Friday, technology was the lone down sector for the week. SPDR Technology (XLK) declined 0.31 percent. Stocks that surged in the era of lockdown policies reacted poorly to the positive vaccine news. Zoom Communications (ZM) tumbled 19.30 percent, Peleton (PTON) 19.63 percent, and Shopify (SHOP) 11.99 percent.

The Russell 2000 gained 2.08 percent on Friday, bringing it up to 1,744. This was a new high for the index over the past two years. It rounded out its third positive trading week over the past four as investors flocked to cyclical stocks on the heels of Pfizer’s vaccine announcement.

Energy was the top-performing sector on Friday with a gain of 3.81 percent. U.S. crude oil futures dropped 2.4 percent for the day to $40.13 per barrel, but they were still up overall for the week by 8.1 percent.

The positive vaccine news boosted the outlook for the travel industry, with airline companies and cruise lines posting significant gains. US Global Jets (JETS) gained 13.52 percent on the week. Invesco Dynamic Leisure and Entertainment (PEJ) rose 8.66 percent.

The Consumer Sentiment Index, published by the University of Michigan, came out this week with a gauge of 77 percent. This was slightly behind the previous level of 88.1 percent and likely reflects some trepidation among consumers about the potential for additional lockdown measures.

The National Federation of Independent Business’ Small Business Optimism Index remained steady at its 104.0 level in October.

The producer-price index report this week rose 0.3 percent. This was the sixth straight month of gains in producer prices. Over the past 12 months, producer prices rose from 0.4 percent to 0.5 percent.

A rise in interest rates helped propel the financial sector last week. SPDR Financials (XLF) increased 8.34 percent. SPDR S&P Regional Banking (KRE) popped 14.05 percent. SPDR Energy (XLE) rallied 17.15 percent.

Bond yields popped this week in conjunction with stocks. The 10-year Treasury yield climbed as high at 0.98 percent before settling at 0.89 percent. Rates are at their highest level since June. Bonds were broadly lower with rates rising, but falling credit risk offset that decline for high yield bonds. iShares iBoxx High Yield Corporate Bond (HYG) gained 0.21 percent on the week.

Unemployment numbers reported last week showed improvements, with continuing claims dropping from 7.22 million to 6.79 million over the previous week. The Labor Department reported that first-time unemployment claims totaled 709,000 for the week, which was the lowest point since the beginning of the pandemic. St. Louis Fed President James Bullard highlighted the rapid pace of the U.S. economic recovery in terms of unemployment in a speech last week, commenting that this current job recovery is significantly faster than the aftermath of the 2008 financial crisis and is projected to stay the course.

 

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