Get out your Surfboard – The Georgia senate election had been on everyone’s calendar since November and it now appears markets will get a Blue Wave after all.  Exactly how much can be done remains the question, but the rotation occurring today is a hint as to where investors see the opportunity.  Rate sensitive financials (yields moving higher) are the day’s best performers.  JPM (+5.5%), BofA (+7.6%) and Wells Fargo (+7.6%) are just some of the highlights, and the performance is putting them on the Redburn 3 month relative high list.  Metals and Miners are also getting a boost (infrastructure spend) from US Steel (+18%) and Century Aluminum (+17%), while Industrials (+3%) benefits from Caterpillar (+6%) and Deere (+6.5%).  Even the Nasdaq 100 (-11bps), which was down 1.6% at the open due to its mega tech exposure (FANG -1.3%), has been pulled up by the broader outperformance from semi’s, retailers and leisure cos.   While there are still two hours of trade left, the S&P and Russell are in ATH territory, with Value ETFs outperforming Growth by 2.3%.

A New Year Indeed – Christmas and New Year’s Day were beautifully situated on the calendar to offer a nice extended break so many of us may feel like we haven’t been in the seat for a while. For those that qualify, we closed an otherwise dreadful year with all-time closing highs in the S&P as well as the index’s Equal-Weighted and Total Return iterations.

The closing bell – It’s a quad witching expiry day along with a special S&P 500 inclusion, creating a super volume storm for traders (although most of that coming near the close).  The Tesla event has been well flagged, but that coincides with an estimated 90mln option contracts expiring (+24% y/y).  Once those have expired, taking some of the S&P gamma hedging with it, the broader indexes could have some breathing room into year-end (Nomura sees 38% of S&P gamma hedges removed today).  The S&P is currently sitting just below one of the main levels (3700), with Homebuilders (ITB +83bps) rallying for a second day.  Energy and Autos are the laggards, albeit that latter sector will get a nice bump when the new entrant arrives.  While the S&P and Nasdaq are lower, the Russell 2k is higher by 59bps, getting a nudge by growth (IWO +1%).  Stimulus talks are ongoing in Washington.

Christmas Cranks – Markets have the vaccine, now it just needs some stimulus to get us through the winter.  The back and forth between parties in Washington continues, and that means no movement, not helping stocks for direction.  The major indexes are all trading in the red, just off their day’s low.  The last leg lower after stimulus comments that the two parties are still far apart.  As of now, the S&P and Nasdaq are about to finish with their first weekly loss since mid-November (have gained 2.5% and 4% since then though).  Despite the red backdrop, Consumer Staples (XLP +15bps) and Communication (XLC +26bps) are higher.  The latter group benefitting from the positive Disney (+14%) direct-to-consumer stats last night.  Leading on the downside are Energy (XOP -2.7%) and Metals (-2.3%), although they still are atop the 5 day winners. 

The Air Up There – Absurd. Insane. Flabbergasting. These are just some of the descriptors we’re hearing both internally and externally during a week that we may be looking back on in hindsight. You’d think DoorDash cured cancer rather than delivers food (amongst a crowded field I might add) and Airbnb came up with an antidote to stop aging instead of it’s actual purpose. Christmas isn’t just for kids and that’s never been more apparent as market pros and amateurs alike gobble up the latest shiny toy. Even the latest minted billionaire, ABNB CEO, could barely hold back his astonishment when he heard the first indication. This isn’t frothy – that’s a latte. This is an exploding dishwasher. It doesn’t’ hurt that these companies are releasing a pittance of their equity; FOMO is going next level. It’s the retail investor at home with spare cash driving the price via low and zero trading commission platforms like Fidelity and Robin Hood. Don’t believe me? See below – that’s a pretty sweet Buy/Sell ratio. It looks like the market has practically turned its back on Tesla by comparison. (it hasn’t) Our Airbnb guru loves the company but even at these lofty levels would have a look at Booking/Expedia as they now look cheap. And if the pricing is right, Marriott and Hilton are shorts.

V is for Vaccine, not Value – US equities have shrugged off a lower than expected ADP number and indexes are trading near their highs (albeit still in the red).  The UK’s approval for the Pfizer/ BioNTech vaccine for distribution starting next week) should eb the driver for the Value names (which are outperforming again), but the sectors that are associated as value have their own reasons for their outperformance.  Energy (XOP +4.3%) is getting a lift from Oil’s +2% move ahead of the OPEC meeting tomorrow (another push out of output hikes?), and Banks (KBE +1%) is moving as the 10-Treasury is trading at 0.95%.  The vaccine news IS helping the Transportation sector, with airlines and cruises up about 2%.  While banks are benefitting from the higher rates, Homebuilders (ITB -2.1%) are getting hurt, and that sector is now testing its 100 day moving average (54.72) on the downside.

Digesting – After gorging on stocks yesterday pushed indexes to joint all time highs (x Nasdaq), markets are taking a walk.  But like the second piece of pie you probably do not need, the stay at home stocks are outperforming their cyclical counterparts.  Mega tech (FANG +45bps), Zoom (+1.5%) and Peloton (+80bps) are a couple of the highlights, perhaps in expectation that the holidays are here.  Since Nasdaq did not create a new ATH yesterday, the index is currently there now (assuming it closes here), and since this is a market of opposites right now, the names that have benefitted since November 2nd are lagging.  Energy and Banks are both underperforming, down 1.1% for each.  Still, considering the moves both sectors have had in November, it is rather benign. 

4973 A daily trading perspective… Casey Badach | Jared Lechner | Andrew Chader | Ryan Maguire US dealing direct: +1 212 803 7300     MARKET SNAPSHOT   S&P: ▲ +1.56% Nasdaq: ▲ +1.30% UST 10-yr:  0.87% VIX:   21.96 EUR/USD: 1.1880 USD/JPY: 104.55 Gold: ▼ -1.72% WTI Crude: ▲ +4.27% Copper: ▲ +1.39% S&P Leaders: Energy +4.8%, […]

More the new same –  Another vaccine update (from Pfizer) has kept the rotation into underperformers moving.  But while value once again is leading (-10bps vs Growth -31bps), and getting a lift from Energy (XOP +2.1%) and Banks (BKX +44bps), the differential between the Value and Growth groups is not as extreme.  The S&P is currently testing the 3600 level, but better support is down at the 3500 area. 

I’ll See Your 90%… – And raise you to 94.5%. Keep giving us Mondays like this and the Sunday scaries will be a thing of the past! We felt the Moderna news might be imminent and indeed it was, following up Pfizer’s announcement 7 days ago with a trial result that has even greater efficacy. (The timing was good too as further vaccine/treatments may be on hold for awhile and COVID figures are going the wrong way in the short-term and foreseeable future.) The reaction was as predictable as it was familiar, although last week’s bookend performances were so robust for the value/rotation trade that it’s stunted some of today’s still impressive move. The stay at home names that got hammered on Pfizer’s announcement weathered today’s news quite well; the when/if we’ve got a handle on this virus will not result in a binary work outcome. But travel and leisure will be and airliners took flight on vaccine part two. Those jets are going to need some fuel and crude/energy names followed suit. Banks, already buoyed by the morning news, got another boost when PNC paid $11.6bn for BBVa’s US unit, increasing hopes for further consolidation in the space.