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. 

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%, Banks […]

Third Time Still a Charm?… Monday isn’t exactly known as the most popular day of the week, but this recent streak is starting to make the weekends seem less exciting… AstraZeneca stepped up to the plate to make it 3 straight starts with vaccine data on the tape, but going even further back the last 10 Mondays have seen the S&P move at least 1% (7 up, 3 down). That means we have some work to do today to keep the streak alive, and even when futures were higher this morning it felt more like the vaccine data was a convenient excuse rather than a real reason behind the recent rush of enthusiasm behind stocks. Solid beats from November Flash PMIs (both Manufacturing and Services) added some juice shortly after the open, but it’s a been a bumpier ride since, with the S&P briefly turning red as weighty Tech space dragged indices down. Indices are attempting to regain steam now heading into the afternoon, and the Rotation/Reflation trade is clearly on display with Energy, Autos, and Banks leading while Tech lags along with Pharma feeling not quite so excited about the AZN news. Breaking the narrative is Semis: the sector keeps on rolling higher, this time as UMC’s (ADR +20%) plans to expand capacity show chip demand remains hot.

Roller Coaster Finish… A bit of a topsy-turvy finale to the day following the View @ Two being sent out, thanks largely to options expiry. Heading into the last hour it also seemed sentiment dampened as updated virus case numbers from California and NY brought Covid to the forefront, prompting some pre-weekend selling. However, expiry volatility was certainly at play as markets only a few minutes later whipsawed higher before fading again into the close.

Too Much Too Soon? With positive vaccine headlines seemingly on an endless stream recently, it’s no surprise that the indices rallied to start the week, when the Dow was propelled to a record high. However, stocks have been choppy since, as infections have surged and economic momentum has been shown to have slowed (see job postings chart below)

Only a Matter of Time… That’s how NYC Mayor de Blasio described the inevitable rollback of indoor dining in the city that he said this morning is likely coming in the next 2-3 weeks. At this point in the Covid resurgence investors know that more restrictions on the way, yet the fact that it’s also only a matter of time before an approved vaccine is distributed is keeping stocks seesawing near all-time highs. Today’s action has seen the lockdown fears weigh slightly heavier than vaccine hope, with futures mostly in the red even before weekly jobless claims rose for the first time in 5 weeks. Still the damage was limited and the S&P has just now broken into the green even as investors grapple with what to do next. The tech-heavy Nasdaq has been positive for most of the day as the scales tip slightly back in favor of pandemic winners (Software/Semis outperforming). Oddly though Energy is also near the top of the sector table despite crude prices trading lower amid the virus outlook (the again the space is -38% ytd). With earnings winding down it feels like this lockdown / vaccine debate is going to carry us through the end of the year (as the stimulus front remains quiet). That could mean more relatively dull days like this one, which some may welcome the way 2020 has played out…

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. 

Back to Reality… A second consecutive “Vaccine Monday” made the proverbial “light at the end of the tunnel” that much brighter for 2021, but investors are following up another Rotation burst with a more wary assessment of the more immediate obstacles blocking that tunnel exit. In addition to the daily list of states announcing new virus curbs, and an October Retail Sales print that showed slowing growth, Republican senators reminded last night they remain opposed to any large scale stimulus. That caused enough concern to spark a bit of an unwind to yesterday’s rotation, and the usual 3 Value suspects Banks, Energy, and Autos were the worst performers shortly after the open. However, sentiment has evened out as the day’s progressed (VLUE was underperforming MTUM by 1.9% at 10am, but is now only -0.6% relative) and indices are attempting to fight their way back to their unchanged marks. Now Healthcare is at the bottom of the pile, with CVS (-8.9%) and other pharmacy names (WBA -9%, RAD -16%, GDRX -20%) feeling sick about Amazon’s (AMZN +0.7%) foray into the space, and Boston Scientific (BSX -8.9%) falling after initiating a recall of one of its heart valves. Retail and Food Retail are also red following a poor reception for earnings beats from Home Depot (HD -3.0%) and Walmart (WMT -0.6%) [another sign winners may be topped out?]. More defensives sectors like Household Goods and Real Estate are faring best today, along with Apparel stocks which are benefitting from broker upgrades.

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.

Within distance – It’s been a great week for stocks and the broader indexes are getting close to hitting new highs.  If markets get a late push (anything can happen in the last 15 minutes), both the Russell and SPX could eclipse their previous bests.  All sectors are in the green, with Energy (shrugging off Oil weakness) in the top spot.  Banks are also trading well today, with the BKX up 2.16%.  Retail is the laggard, held back by Etsy (-1.3%) and Amazon (-52bps).  The WFH beneficiaries (including mega tech) are actually trading lower (Zoom -10%, Peloton -6.7%, Wayfair -5.2%), but that impact is not making it to the indexes.  If indexes close at current levels, the S&P will finish +1.7% for the week, Nasdaq -1.07%, and Russell 2K +5.3%.  A new trend forming there?