Market Recap Week Ending Nov 27th
Monday – Dow +327 to 29,591 NDAQ +25 to 11,880 and the S&P +20 to 3,577. The arrival of a third vaccine, made by AztraZeneca (AZN), and demonstrating 70% average efficacy, helped boost all three indices higher today. This is the third highly effective vaccine to show promise in as many weeks and does not require super freezing storage to preserve it. In other Covid news, Regeneron (REGN), was given emergency permission by the FDA to use its antibody drug to fight the pandemic. This was the same experimental drug given to President Trump after he tested positive and had to be helicoptered to Walter Reed Hospital. Finally, an FDA advisory board will convene on December 10th to vet Pfizer (PFE) and BioNTech’s (BNTX) vaccine. If it passes muster, it could be available to ship by the middle to the end of December….Former head of the Federal Reserve (2014-2018), Janet Yellen, will be nominated to President-Elect Biden’s cabinet as Treasury Secretary. She will become the first woman to hold the post in the history of the nation…Other election news; Michigan became the second hotly contested state to certify their election results and along with Georgia, has confirmed that Joe Biden won. As a result, Emily Murphy, head of the GSA, after failing to appear at a Congressional hearing today regarding her refusal to release funds for the transition, finally relented and the transition will begin in earnest tomorrow…In a reversal to last week’s poor economic data, IHS Markit Manufacturing PMI hit 56.7, its highest level in over six years and the Services number was 57.7, its highest level in more than 5 years. However, due to the surge in Covid19 infections, Goldman Sachs (GS) revised their Q4 2020 GDP forecast down, from 4.5% annualized growth to 3.5% and revised down their Q1 2020 forecast from 3.5% GDP growth to just 1%.
Tuesday – Dow +454 to 30,046 (record high) NDAQ +156 to 12,036 and the S&P +58 to 3,635 (record high). They are calling it the “transition rally.” Indices were up strongly today after news broke post close yesterday that the GSA had finally relented and will allow President-Elect Biden’s team to begin the transition. The markets were also cheering the announcement that former Fed Chair, Janet Yellen, would be nominated for the Secretary of the Treasury. Yellen, Fed Chair from 2014 until Trump refused to renominate her to the post in 2018, is known for her belief in easy money policies and the markets responded positively in the belief that the Treasury and the Fed will work together much more in lockstep…Cyclicals, small caps, and value plays all continued their strong November showing. Ten of the eleven S&P 500 sectors were up today with energy leading the charge +5%. Energy, after being down more than 50% this year, has rallied strongly and is now “only” down 34% year to date. Financials were the second strongest sector, up 3.4% today as the 10-year U.S. Treasury yield rallied to 0.88%…
Wednesday – Dow (173) to 29,872 NDAQ +57 to 12,094 and the S&P (6) to 3,629. The transition rally finally took a break today after two blazing days earlier this week. The rotation into value and cyclical reversed today as big tech resumed leadership as it has most of the year. Consumer discretionary and tech led the S&P today but with only four of the eleven sectors positive, the index could only manage to finish flat…Jobless claims rose to 778,000 vs estimates of 733,000 claims and last week’s 748k number. Perhaps not surprisingly, considering the credit card surveys from JP Morgan (JPM) and Citibank (C) over the last two weeks, Consumer Sentiment fell to 76.9 in November, down from 81.8 in October. Durable Goods orders had a blowout number, up 1.3% vs expectations of 0.5% but economists were quick to point out that the number was driven by Department of Defense spending. When military orders are subtracted, orders rose only 0.2%. Significantly, orders for new cars and trucks were down 3.2% and demand for commercial aviation also fell…Salesforce (CRM) traded off 5.37% on news that they have had negotiations to buy Slack Technologies (WORK) which rallied 37.59%.
Thursday – Markets closed in observance of Thanksgiving.
Friday – Dow +38 to 29,910 NDAQ +111 to 12,205 (record high) and the S&P +8 to 3,638 (record high). Only five of the eleven S&P sectors rallied today, led by Healthcare, Consumer Discretionary and Tech. Energy reversed after a huge month and led the underperformers, down 1.25% today. While brick and mortar Black Friday activity seemed to be down substantially today based on anecdotal evidence, it wasn’t a disaster for retail at all. The SPDR S&P Retail XRT rallied 0.9%, Etsy (ETSY) rose 10.7% and Gamestop (GME) popped 9% (on new games and consoles from Microsoft and Sony). Meanwhile, Shopify (SHOP) surpassed its peak sales per minute from Black Friday in 2019 just five minutes into today, at around 12:05 am EST; SHOP rallied 1.46%.
The week in review…Dow +647 or +2.2% NDAQ +351 or +3.0% and the S&P +81 or +2.3%. Value and cyclicals continued to lead the market this week. Energy +7.94%, Financials +3.68%, and Materials +2.53% were the big winners. On the economic front, there was more conflicting data; the manufacturing and services numbers were the best in years, durable goods orders were outstanding but inflated due to Pentagon spending, Consumer sentiment was down, and jobless claims seemed to have bottomed three weeks ago and are now trending higher. In addition, 14 million Americans are set to lose special unemployment benefits as set forth in the CARES Act as of December 26th. More bad news on the job front; Disney (DIS) announced another 4,000 layoffs scheduled to happen in March, this is in addition to the 28,000 they had announced previously. Meanwhile, over 1 million Americans travelled through U.S. airports yesterday, setting a pandemic era record for air travel. Watch for a huge surge in Covid19 cases starting December 10th and continuing over the Christmas holiday. Additional Covid19 news; AstroZeneca’s vaccine data has been called into question as the higher efficacy results were a result of a lower dose which was due to a manufacturing discrepancy which wasn’t initially disclosed. AZN will most likely launch a new Phase III trial to test the efficacy of the lower dose. Next week: will the rotation out of tech and into the value/cyclical plays continue, what will Friday’s November employment report tell us, and what insights will Fed Chair Powell and SecTreas Mnuchin reveal when they testify before the Senate Banking Committee on Tuesday?
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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), GBTC, GOOGL, MSFT, NFLX, and TSLA.