Market Analysis

Beyond the Number

More Upbeat Vaccine News May Lead To Initial Strength On Wall Street
11/18/2020 8:48 AM

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks likely to move back to the upside following the pullback seen in the previous session.

Early buying interest may be generated in reaction to more upbeat news regarding the coronavirus vaccine candidate being developed by Pfizer (PFE) and BioNTech (BNTX).

Pfizer and BioNTech said the final efficacy analysis of their ongoing Phase 3 study of the coronavirus vaccine candidate indicated a vaccine efficacy rate of 95 percent.

The companies said that efficacy was consistent across age, gender, race and ethnicity demographics and suggested the vaccine candidate also helped to fend off severe disease.

Pfizer and BioNTech said they plan to submit a request to the FDA for an Emergency Use Authorization for the vaccine “within days.”

“With hundreds of thousands of people around the globe infected every day, we urgently need to get a safe and effective vaccine to the world,” said Dr. Albert Bourla, Pfizer Chairman and CEO.

In other coronavirus-related news, the FDA announced it has issued an EUA for the first COVID-19 diagnostic test for self-testing at home and that provides rapid results.

The test kit developed by Lucira Health has been authorized for home use with self-collected nasal swab samples in individuals age 14 and older who are suspected of COVID-19 by their health care provider.

The Dow is also likely to benefit from a notable advance by shares of Boeing (BA) after FAA Administrator Steve Dickson signed an order that paves the way for the Boeing 737 MAX to return to commercial service.

Stocks regained ground after an early move to the downside during trading on Tuesday but still ended the day mostly lower. With the drop on the day, the major averages partly offset the strong gains posted on Monday.

The major averages all finished the day in negative territory. The Dow slid 167.09 points or 0.6 percent to 29,783.35, the Nasdaq dipped 24.79 points or 0.2 percent to 11,899.34 and the S&P 500 fell 17.38 points or 0.5 percent to 3,609.53.

Profit taking contributed to the initial pullback on Wall Street after the strength seen on Monday lifted the Dow and the S&P 500 to new record closing highs.

The advance seen on Monday came amid more upbeat news regarding a potential coronavirus vaccine, although a continued spike in cases weighed on the markets.

Data from John Hopkins University showed more than 166,000 news coronavirus cases on Monday, with the total number of cases in the U.S. now exceeding 11 million.

Negative sentiment was also generated in reaction to a report from the Commerce Department showing retail sales rose by less than expected in the month of October.

The report said retail sales rose by 0.3 percent in October after jumping by a downwardly revised 1.6 percent in September.

Economists had expected retail sales to climb by 0.5 percent compared to the 1.9 percent spike originally reported for the previous month.

Excluding an increase in sales by motor vehicle and parts dealers, retail sales edged up by 0.2 percent in October after surging up by 1.2 percent in September. Ex-auto sales were expected to increase by 0.6 percent.

Gregory Daco, Chief U.S. Economist at Oxford Economics noted retail sales are 4.9 percent above their pre-Covid levels but called the near-term outlook "concerning."

"While phase one of the recovery proved that fiscally supported incomes can be potent drivers of spending on goods, we should not fall for alluring rearview mirror economics," Daco said.

He added, "Phase two of the recovery is significantly slower with muted employment gains and reduced fiscal aid weighing on incomes, and a worsening Covid outbreak once again limiting activity across the country."

Meanwhile, the Federal Reserve released a separate report showing a significant rebound in U.S. industrial production in the month of October.

The Fed said industrial production jumped by 1.1 percent in October after falling by a revised 0.4 percent in September.

Economists had expected production to surge up by 1.0 percent compared to the 0.6 percent drop originally reported for the previous month.

The National Association of Home Builders also released a report showing U.S. homebuilder confidence improved to another new record high in November.

Utilities stocks moved sharply lower over the course of the trading session, dragging the Dow Jones Utility Average down by 2 percent. The average gave back ground after ending Monday’s trading at its best closing level in over eight months.

Considerable weakness was also visible among gold stocks, as reflected by the 1.3 percent drop by the NYSE Arca Gold Bugs Index.

The weakness in the gold sector came amid a modest decrease by the price of the precious metal, with gold for December delivery slipping $2.80 to $1,884.50 an ounce.

Meanwhile, natural gas stocks showed a substantial move to the upside on the day, driving the NYSE Arca Natural Gas Index up by 2.1 percent to its best closing level in well over two months.

Commodity, Currency Markets

Crude oil futures are rising $0.64 to $42.07 a barrel after inching up $0.09 to $41.43 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,872.90, down $12.20 compared to the previous session’s close of $1,885.10. On Tuesday, gold dipped $2.70.

On the currency front, the U.S. dollar is trading at 103.97 yen compared to the 104.19 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1851 compared to yesterday’s $1.1862.


Asian stocks turned in another mixed performance on Wednesday as a surge in global coronavirus cases and disappointing U.S. retail sales dented investor optimism over potential Covid-19 vaccines.

Chinese shares ended a tad higher after the government hinted at additional policy measures to prop up the economy.

China will promote economic growth to a "reasonable" range while pursuing higher quality development, Premier Li Keqiang was quoted as saying on Tuesday night by state radio.

The benchmark Shanghai Composite Index rose 7.41 points, or 0.2 percent, to 3,347.30, while Hong Kong's Hang Seng Index ended up 129.20 points, or 0.5 percent, at 26,544.29.

Japanese shares tumbled amid a resurgence in Covid-19 infections at home and abroad. The Nikkei 225 Index slumped 286.48 points, or 1.1 percent, to 25,728.14 as the Nikkei business daily reported the Tokyo government was considering raising its infection alert to the highest of four levels as early as Thursday. The broader Topix index closed 0.8 percent lower at 1,720.65.

Exporters Canon, Toyota Motor and Sony dropped 1-2 percent as the dollar fell against the yen. Honda Motor plunged 3.8 percent and Panasonic fell 2.9 percent.

SoftBank shares ended 0.9 percent lower. Group CEO and founder Masayoshi Son said he has created a cash pile of more than $80 billion following aggressive asset sales this year in order to prepare for a "worst case scenario" of Coid-19.

In economic news, Japan posted a merchandise trade surplus of 872.899 billion yen in October, the Ministry of Finance said. That exceeded forecasts for a surplus of 250 billion yen following the surplus of 675 billion yen in September.

Exports were down 0.2 percent year-on-year, beating expectations for a decrease of 4.5 percent following the 4.9 percent drop in the previous month. Imports were down an annual 13.3 percent.

Australian markets rose modestly, with financials surging after Reserve Bank governor Philip Lowe said the country was "on the road back" and that rising home prices in the country are not yet a cause for concern.

The benchmark S&P/ASX 200 Index rose 32.90 points, or 0.1 percent, to 6,531.10 despite concerns about a resurgence in coronavirus infections. The broader All Ordinaries Index ended up 28.70 points, or 0.4 percent, at 6,726.50.

Lender ANZ rose 1.3 percent, while the other three big banks gained 2-3 percent. Mining heavyweights BHP and Rio Tinto ended with modest losses.

United Malt Group rallied 3 percent after its full-year net result came in well above consensus forecasts. Energy companies Santos, Origin Energy and Oil Search fell between 1.8 percent and 2.6 percent.

Bourse operator ASX edged up 0.4 percent despite Morgan Stanley cutting its price target, citing tech outages.

Seoul stocks edged up slightly to hit the highest level in 33 months, as bio stocks rallied amid concerns over a flare-up of new coronavirus outbreaks.

South Korea is facing a Covid “crisis,” said Prime Minister Chung Sye-kyun as the country recorded its largest daily increase in coronavirus infections in nearly three months.

The benchmark Kospi inched up 6.49 points, or 0.3 percent, to 2,545.64, marking the highest closing since February 1, 2018. Top pharmaceutical firm Samsung Biologics surged 4.9 percent.


European stocks turned in a lackluster performance early in the session on Wednesday but have moved moderately higher over the course of the trading day.

The strength that has emerged in the markets comes as Pfizer and BioNTech said the final efficacy analysis of the coronavirus vaccine candidate indicated a vaccine efficacy rate of 95 percent.

Europe has reported nearly 14.5 million Covid-19 cases, making it the worst-affected region in the world and accounting for more than 26 percent of all infections so far.

While the French CAC 40 Index has climbed by 0.5 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both up by 0.3 percent.

Deutsche Boerse has advanced after the stock exchange operator agreed to buy an 80 percent stake in corporate governance adviser Institutional Shareholder Services (ISS) for about $1.8 billion.

Norwegian aluminum and renewable energy company Norsk Hydro ASA has also moved to the upside after it signed a pact with Japanese electronics maker Panasonic Corp. and Norwegian energy company Equinor ASA.

Italian insurance company Generali has edged higher after it issued an update on the progress of its three-year 2021 strategy, confirming the company's ability to deliver the financial targets by effectively navigating the Covid-19 crisis.

Shares of Halfords Group have surged after the provider of motoring and cycling products and services reported that its first-half profit more than doubled from last year on strong revenue growth.

RSA Insurance has also moved notably higher as a consortium of Canadian insurance group Intact and Denmark's Tryg offered 685p per share for the company.

Micro Focus shares have also jumped. The software group said it expects earnings margins for its last financial year will be "towards the upper end of management expectations."

On the other hand, Schaeffler Group, a leading global supplier to the automotive and industrial sectors, has come under pressure after issuing its mid-term targets up to 2025.

Maersk, the world's largest container shipping firm, has also declined after it unveiled plans to launch a $1.6 billion share buyback program.

British property development and investment company British Land has also tumbled after widening its first-half loss.

In economic news, U.K. inflation accelerated more than expected to a three-month high in October, driven by higher clothing and food prices, the Office for National Statistics said.

Consumer prices advanced 0.7 percent on a yearly basis in October, faster than the 0.5 percent increase logged in September. The rate was forecast to rise marginally to 0.6 percent.

Although inflation was the highest in three months, the rate remained well below the Bank of England's target of 2 percent.

Meanwhile, industry data showed new car registrations in Europe decreased in October after rising in the previous month.

EU passenger car registrations decreased 7.8 percent year-on-year to 953,615 units, following a 3.1 percent increase in September, the Brussels-based European Automobile Manufacturers Association said as several countries in the region returned to lockdown amid a second wave of the coronavirus.

U.S. Economic Reports

New residential construction in the U.S. spiked by more than expected in the month of October, according to a report released by the Commerce Department on Wednesday.

The report said housing starts surged up by 4.9 percent to an annual rate of 1.530 million in October after soaring by 6.3 percent to an upwardly revised rate of 1.459 million in September.

Economists had expected housing starts to jump by 3.2 percent to a rate of 1.460 million from the 1.415 million originally reported for the previous month.

With the bigger than expected increase, housing starts reached their highest annual rate since coming in at 1.567 million in February.

Meanwhile, the report said building permits came in at an annual rate of 1.545 million in October, virtually unchanged from the revised rate seen in September.

Building permits, an indicator of future housing demand, had been expected to rise by 0.5 percent to a rate of 1.560 million from the 1.553 million originally reported for the previous month.

At 10 am ET, Chicago Federal Reserve President Charles Evans is due to give welcoming remarks at the 7th Annual Summit on Competitiveness webinar event.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended November 13th at 10:30 am ET.

Crude oil inventories are expected to increase by about 2.0 million barrels after climbing by 4.3 million barrels in the previous week.

At 12:15 pm ET, New York Federal Reserve President John Williams is due to speak at the "SABEW20 - Focus on the Future" webinar event held by the Society for Advancing Business Writing and Editing.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $27 billion worth of twenty-year bonds.

St. Louis Federal Reserve President James Bullard is due to give a presentation via Zoom on the U.S. economy and monetary policy at the Rotary Club of Hot Springs National Park luncheon at 1:20 pm ET.

At 6 pm ET, Dallas Federal Reserve President Robert Kaplan is scheduled to speak in a moderated Q&A at a Dallas Fed Global Perspectives Speaker Series webinar event.

Atlanta Federal Reserve President Raphael Bostic is due to speak about "How Diverse Perspectives Improve Economics" at a Federal Reserve Education webinar event at 7 pm ET.

Stocks In Focus

Shares of La-Z-Boy are moving significantly higher in pre-market trading after the furniture maker reported better than expected fiscal second quarter results and provided upbeat guidance.

Retail giant Target (TGT) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Reynolds Consumer Products (REYN) are also seeing notable pre-market strength on news President and CEO Lance Mitchell bought 16,500 shares of the household products maker.

On the other hand, shares of Lowe’s (LOW) may come under pressure after the home improvement retailer reported third quarter earnings slightly below estimates and provided cautious guidance.
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