Market Analysis

Beyond the Numbers

More Upbeat Vaccine News May Generate Early Buying Interest
11/16/2020 9:05 AM

The major U.S. index futures are currently pointing to a higher opening on Monday, with stocks likely to extend the rally seen in the previous session.

The upward momentum on Wall Street comes following more upbeat news on the coronavirus vaccine front, with Moderna (MRNA) reporting positive results from a trial of its vaccine candidate.

Moderna said that the trial of its potential coronavirus vaccine has met the statistical criteria pre-specified in the study protocol for efficacy, with a vaccine efficacy of 94.5 percent.

“This is a pivotal moment in the development of our COVID-19 vaccine candidate. Since early January, we have chased this virus with the intent to protect as many people around the world as possible,” said Stéphane Bancel, Chief Executive Officer of Moderna.

He added, “All along, we have known that each day matters. This positive interim analysis from our Phase 3 study has given us the first clinical validation that our vaccine can prevent COVID-19 disease, including severe disease.”

Stocks moved sharply higher over the course of the trading session on Friday, offsetting the weakness seen on Thursday. With the strong upward move, the S&P 500 reached a new record closing high.

The major averages pulled back off their highs going into the close but still ended the day firmly positive. The Dow surged up 399.64 points or 1.4 percent to 29,479.81, the Nasdaq jumped 119.70 points or 1 percent to 11,829.29 and the S&P 500 spiked 48.14 points or 1.4 percent to 3,585.15.

Despite the rally on the day, the major averages turned in a mixed performance for the week. While the Nasdaq fell by 0.6 percent, the S&P 500 shot up by 2.2 percent and the Dow soared by 4.1 percent.

The rebound on Wall Street partly reflected a positive reaction to earnings news from big-name companies like Cisco (CSCO) and Disney (DIS).

Shares of Cisco have surged up by 7.3 percent after the networking giant reported fiscal first quarter results that beat expectations on both the top and bottom lines.

Disney also posted a notable gain after the entertainment giant reported a much narrower than expected fiscal fourth quarter loss on revenues that exceeded analyst estimates.

Shares of DraftKings (DKNG) also moved sharply higher after the sports betting company reported better than expected third quarter results and raised its full-year revenue guidance.

On the other hand, shares of Revlon (REV) came under pressure after the cosmetics maker reported a third straight quarterly loss on a 20 percent drop in revenue.

The markets also seemed to benefit from news that President Donald Trump's campaign continues to face setbacks in efforts to overturn the results of the presidential election, eliminating some of the lingering uncertainty about the outcome.

Traders also continued to express optimism about a potential coronavirus vaccine even as new cases in the U.S. spiked to another new record high.

Meanwhile, traders largely shrugged off a report from the University of Michigan showing an unexpected decrease in U.S. consumer sentiment in the month of November.

The preliminary report said the consumer sentiment index fell to 77.0 in November after rising to a seven-month high of 81.8 in October. The pullback came as a surprise to economists, who had expected index to inch up to 82.0.

"The outcome of the presidential election as well as the resurgence in covid infections and deaths were responsible for the early November decline," said Surveys of Consumers chief economist Richard Curtin

"Interviews conducted following the election recorded a substantial negative shift in the Expectations Index among Republicans, but recorded no gain among Democrats," he added. "It is likely that Democrats' fears about the covid resurgence offset gains in economic expectations."

A separate report from the Labor Department showed producer prices increased by slightly more than anticipated in the month of October.

Airline stocks showed a substantial rebound on the day, with the NYSE Arca Airline Index soaring by 5.4 percent after plunging by 7.4 percent over the two previous sessions.

Significant strength was also visible among energy stocks, which regained ground despite a decrease by the price of crude oil.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index skyrocketed by 4.1 percent, the NYSE Arca Natural Gas Index spiked by 4 percent and the Philadelphia Oil Service Index surged up by 3.7 percent.

Computer hardware stocks also saw considerable strength on the day, resulting in a 3.1 percent jump by the NYSE Arca Computer Hardware Index.

Networking, steel, and housing stocks also showed notable moves to the upside amid broad based strength on Wall Street.

Commodity, Currency Markets

Crude oil futures are jumping $1.69 to $41.82 a barrel after slumping $0.99 to $40.13 a barrel last Friday. Meanwhile, after climbing $12.90 to $1,886.20 an ounce in the previous session, gold futures are slipping $4.90 to $1,881.30 an ounce.

On the currency front, the U.S. dollar is trading at 104.85 yen versus the 104.63 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1819 compared to last Friday’s $1.1834


Asian stocks advanced on Monday as upbeat GDP data from Japan and industrial output figures from China helped investors shrug off worries about rising coronavirus cases.

Chinese shares rose sharply after factory output data beat forecasts and investors saw the RCEP as an extension of China's influence in the region.

The benchmark Shanghai Composite index climbed 36.86 points, or 1.11 percent, to 3,346.97, while Hong Kong's Hang Seng index gained 224.81 points, or 0.86 percent, to finish at 26,381.67.

China's industrial output rose an annual 6.9 percent in October, the National Bureau of Statistics said - beating forecasts for a gain of 6.5 percent and roughly unchanged from the September reading.

Fixed asset investment rose 1.8 percent year-on-year - exceeding expectations for 1.6 percent and up from 0.8 percent in the previous month.

Retail sales gained 4.3 percent, missing forecasts for 4.9 percent but still up from 3.3 percent a month earlier.

The unemployment rate came in at 5.3 percent, down from 5.4 percent in September. House prices climbed an annual 4.3 percent in October, easing from 4.7 percent a month earlier.

Japanese shares ended at a fresh 29-year high after official data showed the economy grew for the first time in four quarters.

Investors also reacted positively to news of the signing of the Regional Comprehensive Economic Partnership (RCEP) trade deal by 15 countries in the region after 8 years of negotiations.

The Nikkei average ended up 521.06 points, or 2.05 percent, at 25,906.93, its highest finish since June 3, 1991. The broader Topix index closed 1.68 percent higher at 1,731.81. Gainers were led by marine transportation, air transportation and real estate issues.

Market heavyweight SoftBank Group advanced 1.8 percent and Fast Retailing rallied 3 percent. In the tech space, Tokyo Electron and Advantest both rose about 5 percent.

The Cabinet Office said in a preliminary report that Japan's gross domestic product jumped 21.4 percent year-on-year in the third quarter of 2020. That exceeded expectations for an annualized jump of 18.9 percent following the 28.8 percent plunge in the previous three months.

Australian markets surged to an eight-month high at the open before trading was halted on 'data issues.' The stock exchange operator apologized for the disruption and said it was working to rectify the issue as soon as possible.

The benchmark S&P/ASX 200 index ended up 79.10 points, or 1.23 percent, at 6,484.30, while the broader All Ordinaires index ended up 77.70 points, or 1.18 percent, at 6,687.

The big four banks rose between 1.4 percent and 2.7 percent while fund managers Pendal Group and Challenger added around 3 percent each.

Mining heavyweights BHP and Rio Tinto rose about 2 percent. Woodside Petroleum, Santos, Beach Energy, Origin Energy and Oil Search rose 1-3 percent as oil prices climbed on hopes that OPEC+ will hold current output curbs.

Afterpay edged down slightly and Zip Co shed 0.8 percent after new data from the corporate watchdog revealed some consumers who use the buy now, pay later platforms were experiencing financial hardship.

Seoul stocks surged to a nearly three-year high as foreign investors extended their buying streak to an eighth session in anticipation of Pfizer's vaccine against the new coronavirus.

The benchmark Kospi inched up 49.16 points, or 1.97 percent, to 2,543.03, marking the highest close since 2,568.54 points reached on Feb. 1, 2018 even as the country's new coronavirus cases hovered above 200 for a third consecutive day.

Market bellwether Samsung Electronics jumped 4.9 percent and No. 2 chipmaker SK Hynix soared as much as 9.3 percent.


European stocks were moving higher on Monday as upbeat GDP data from Japan and industrial output figures from China helped investors shrug off lingering worries about rising coronavirus cases and new lockdowns.

Vaccine hopes also boosted sentiment, with Johnson & Johnson launching a new large-scale late-stage trial in Britain to test a two-dose regimen of its experimental Covid-19 vaccine among thousands of volunteers.

The Oxford Covid vaccine and another one being developed by U.S. biotech company Novavax are already undergoing large clinical trials in British patients.

In a statement overnight, one of the scientists behind the Pfizer and BioNTech vaccine said that "if everything continues to go well…we could have a normal winter next year."

The pan European Stoxx 600 rose 0.7 percent to 387.77 after ending flat with a positive bias on Friday. The German DAX gained half a percent, France's CAC 40 index rose over 1 percent and the U.K.'s FTSE 100 was up 0.8 percent.

BBVA shares soared 16 percent after the Spanish financial group agreed to sell its U.S. operations to PNC Financial Services Group for $11.6 billion.

Banco de Sabadell jumped nearly 13 percent on the buzz that BBVA could buy it.

Vodafone Group shares surged 3.4 percent. After a "resilient" first-half, the mobile phone operator said it was increasingly confident about its full-year performance.

The company maintained its dividend and reiterated its free cash flow and EBITDA guidance.

Diversified engineering company Smiths Group rallied 2.5 percent after saying it expects to meet market views for the full year.

Orange shares advanced 1.6 percent. The telecoms group said it has received a favorable decision from the French State Council regarding a tax dispute that began nearly ten years ago.

Unibail-Rodamco-Westfield gained 11 percent after reports that the company may see its chief executive officer Christophe Cuvillier and Chief Financial Officer Jaap Tonckens leave.

U.S. Economic Reports

New York manufacturing activity unexpectedly expanded at a slower rate in the month of November, according to a report released by the Federal Reserve Bank of New York on Monday.

The New York Fed said its general business conditions index fell to 6.3 in November from 10.5 in October. While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to rise to 13.5.

Looking ahead, the index for future business conditions held steady at 33.9, suggesting that firms remained optimistic about future conditions.

At 1:45 pm ET, San Francisco Federal Reserve President Mary Daly is scheduled to speak at a University of Michigan event.

Federal Reserve Vice Chair Richard Clarida is due to speak about the latest developments in the economy and in monetary policy at a Brookings Institute online event at 2 pm ET.
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