Market Recap Week Ending December 18th

December 21, 2020

Monday – Dow (184) to 29,861 Nasdaq +62 to 12,440 and the S&P (16) to 3,647. Only two of the eleven S&P sectors were up today; Consumer Discretionary and Tech, up 0.45% and 0.41% respectively. Energy was the worst of the laggards, down 3.5%, on news that OPEC had cut its 2021 oil-demand forecast from +6.25 million bbl/day to +5.9 million bbl/day. Despite the first doses of the Pfizer/BioNTech vaccine being administered today, the market was overcome by the grim news that the death toll from the pandemic had crossed the 300,000 mark. In addition, New York Mayor Bill de Blasio warned residents to prepare for another lockdown…Stimulus news continued to filter out of Washington; there are now two stimulus bills, one that contains an additional 16 weeks of unemployment benefits in addition to a $300/week Covid-19 supplemental benefit, food assistance, student loan forbearance, as well as funding for small businesses, schools and vaccines and which appears to have the votes to pass both houses of Congress. A second bill would include state and local aid and liability protections and does not appear to have the votes to pass. Most importantly, stimulus checks, which is what the most vulnerable segments of our society need right now, are not to be found in either bill…AstraZeneca (AZN) purchased Alexion Pharmaceuticals (ALXN) for $39 billion in cash and stock; AZN fell 7.8% and ALXN surged 29%…The electoral college cast 306 votes for President Elect Joe Biden, all but ending this long-drawn-out election cycle. January 6th will bring the cycle to its merciful close when Congress will assemble to certify the Electoral College vote.

Tuesday – Dow +337 to 30,199 Nasdaq +155 to 12,595 and the S&P +47 to 3,694. The markets rallied hard today on a twin jolt of positive news; the Moderna (MRNA) vaccine appears poised to be granted Emergency Use Authorizations (EUA) later this week and the stimulus negotiations seem to be gathering much needed momentum. Congressional leaders met this afternoon and again this evening to continue negotiations…Apple (AAPL) rose 5% on reports that they plan to produce 96 million iPhones in 2021, a 30% year over year increase while estimates call for them to sell 215 million phones. Those sales numbers would represent $165 billion in revenues, a 20% year over year increase and many analysts believe that sales number will need to be revised higher.

Wednesday – Dow (44) to 30,154 Nasdaq +63 to 12,658 (new record high) and the S&P +7 to 3,701. The three indices traded down to flat until the Federal Reserve’s announcement on interest rates at 2pm EST. Immediately afterwards, all three indices dipped lower before rallying in the last hour and finally closing off their highs. Chairman Powell stated that interest rates would remain near zero through 2023 and that the Fed would continue to purchase Treasury and mortgage backed bonds at their current pace of $120 billion/month. There was some hope among market observers that the Fed might increase the purchases of longer dated Treasury bonds which would push their interest rates lower and make longer dated corporate and mortgage bonds more attractive. That however, did not happen and the market dipped as a result…Congressional leaders are reportedly very close to agreement on a $900 billion stimulus bill that now includes direct payments of between $600-$700 for citizens under a certain income threshold. The inclusion of direct payments happened literally overnight after the leadership of the Congressional Progressive Caucus (CPC), composed of 96 members, signed a letter stating that they would withhold their votes in favor of any stimulus bill that did not include direct payments. The CPC is made up of 95 House members and one senator (Sanders I-VT). Founded in 1991, it is the second largest ideological Congressional caucus (the Republican Study Committee boasts 147 members). In addition, reports have filtered out that Senator McConnell changed his tune towards direct payments, acknowledging in a private meeting that the lack thereof was badly punishing his two GOP Senate candidates in Georgia..In the meantime, the post Thanksgiving Covid-19 outbreak that was widely predicted, has come home to roost; a new record of 244,365 infections were reported today in the United States along with a new record of 3,607 deaths (as a reminder Pearl Harbor 1941 2,403 KIA, Omaha Beach 1944 2,400 killed, wounded and missing, 9/11 2,977 killed). On the vaccine front, Dr. Fauci said that Moderna’s vaccine may receive EUA as soon as tomorrow…November retail sales dropped 1.1% vs expectations of a 0.3% drop and snapped a 5 month growth streak for retail sales. Among Fed Chairman Powell’s comments were the expectation of 4.2% GDP growth for 2021 and a falling unemployment rate that will stabilize around 5% by the end of next year….

Thursday – Dow +148 to 30,303 (record high) Nasdaq +106 to 12,764 (another record high) and the S&P +21 to 3,722. The anticipation of a stimulus bill being finalized over the weekend and including direct payments and extended unemployment benefits trumped another horrible jobless claims number and led to a broad based rally across all three indices (nine of the eleven S&P sectors were positive). The deal is expected to be finalized over the weekend. Of jobless claims, the number came in at 885,000 vs expectations of 800k and last week’s number of 862k. Between the jobless claims, the faltering retail sales and paltry regional manufacturing numbers, the stimulus bill and vaccines cannot get here soon enough…Moderna’s vaccine was granted EAU post close today by an FDA advisory committee. It passed 20-0 with one abstention…AstraZeneca (AZN) is conducting a new Phase III trial of its vaccine in San Francisco and Oakland as the original Phase III trial included several miscommunications and omissions which damaged its credibility with the FDA and led to the new trial. Johnson and Johnson expects their single shot vaccine to be ready early next year as they are wrapping up Phase III trials in Palo Alto and San Francisco. Thus, it’s possible that by February, we may have up to four vaccines with which to fight the pandemic….

Friday – Dow (124) to 30,179 Nasdaq (9) to 12,755 and the S&P (13) to 3,709. Markets opened higher, all three indices touched intraday highs, steadily drifted down, rallied into the bell and ultimately closed mildly lower. The lack of an agreement of a stimulus bill heading into tonight’s government shutdown (at 12:01am EST the Federal government will shut down absent a new funding deal) was the likely culprit. Regarding the stimulus bill, Senate Majority Leader McConnell is supposedly floating the idea of a 48 hour spending bill to allow the Federal government to stay open while Congressional leaders continue to hammer out an agreement over the weekend…Tesla (TSLA +5.96%) officially entered the S&P 500 at the closing bell today and set a new record high…Nike (NKE) blew out their quarterly earnings and revenue estimates and traded up 2.97% post close….

The week in review…Dow +133 or +0.4% Nasdaq +378 or +3.1% and the S&P +46 or +1.3%. The themes from last week lingered into the one just concluded. The fallout of Americans traveling post Thanksgiving hit with full force with record numbers of daily infections and deaths. The Senate and their inability to pass another stimulus bill continues to call into question the existence of the Senate as an institution (of the 100 members of the Senate, 70 Senators represent 30% of the U.S. population)…Retail sales were worse than expected and jobless claims continued to increase at a worrying pace after bottoming out December 3rd. The cherry on top will be that absent a deal this weekend, the Federal government will be shut down when the market opens Monday morning…On the bright side, the Pfizer vaccine began to be distributed across the nation and vaccinations have commenced among those at greatest risk. Yesterday, a second vaccine from Moderna (MRNA), was granted Emergency Use Authorization and should receive final approval from the FDA later today; 5.9 million doses should begin to ship this weekend…On Tuesday we will be monitoring Consumer Confidence, on Wednesday Consumer Spending and Core Inflation, and of course we will be watching with bated breath over the weekend for any developments on the stimulus and government funding bills….The markets will be open on Christmas Eve but closed on Friday, Christmas Day.

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Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities…AMZN, AAPL, Bitcoin (physical), Chainlink (physical), GBTC, GOOGL, LAZR, MSFT, NFLX, TSLA, and VLDR.