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Beyond the Numbers

More Upbeat Vaccine News May Generate Initial Buying Interest
11/23/2020 8:50 AM

The major U.S. index futures are currently pointing to a higher opening on Monday following the mixed performance seen last week.

The upward momentum on Wall Street comes as traders react to additional upbeat news regarding a potential coronavirus vaccine.

AstraZeneca (AZN) announced the its vaccine candidate being developed in collaboration with Oxford University had an average efficacy of 70 percent.

The drug maker said one dosing regimen showed vaccine efficacy of 90 percent when given as a half dose, followed by a full dose at least one month apart, while another dosing regimen showed 62 percent efficacy when given as two full doses at least one month apart.

Adding to the positive sentiment, the FDA has granted an emergency use authorization for Regeneron’s Covid-19 antibody treatment, while purportedly helped President Donald Trump fend off the disease.

Buying interest may be somewhat subdued, however, as traders also continue to grapple with concerns about the recent spike in coronavirus cases leading to new restrictions and lockdowns.

A lack of major U.S. economic data may also keep some traders on the sidelines along with the upcoming Thanksgiving Day holiday.

Extending the trend seen over the past couple sessions, stocks turned in a lackluster performance for much of the trading day on Friday before showing a significant move late in the session. The major averages came under pressure in late-day trading, closing firmly in negative territory.

The major averages finished the session near their worst levels of the day. The Dow slid 219.75 points or 0.8 percent to 29,263.48, the Nasdaq fell 49.74 points or 0.4 percent to 11,854.97 and the S&P 500 dropped 24.33 points or 0.7 percent to 3,557.54.

For the week, the major averages turned in a mixed performance. While the Nasdaq inched up by 0.2 percent, the Dow and the S&P 500 fell by 0.7 percent and 0.8 percent, respectively.

The weakness on Wall Street reflected concerns about the near-term economic outlook amid a continued spike in new coronavirus cases in the U.S.

The latest data from John Hopkins University showed nearly 188,000 new coronavirus cases on Thursday, while the daily death toll topped 2,000 for the first time.

The continued surge in new cases, hospitalizations and deaths in the U.S. has raised concerns new restrictions and lockdowns will dampen the economy recovery.

While there continues to be upbeat news on the vaccine front, traders seem worried about an economic downturn the months leading up to the widespread distribution of a vaccine.

Adding to the economic uncertainty, Treasury Secretary Steven Mnuchin announced a decision to allow five of the Federal Reserve's nine emergency lending programs to expire at the end of the year.

The Fed responded to the decision in a rare public statement, saying it would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for the still-strained and vulnerable economy.

While Mnuchin has argued he is following the intent of Congress, Gregory Daco, Chief U.S. Economist at Capital Economics, suggested the Treasury Secretary is hoping lawmakers will consider reallocating the unused funds for new stimulus measures.

"However, with partisanship in Congress preventing the delivery of urgently needed fiscal aid, and low rates negating any imminent debt servicing concern, Mnuchin's justification appears poorly grounded," Daco said.

He added, "And, it may backfire by leaving the Fed as the only adult in the room to address a concerning economic situation in the final stages of 2020."

Tobacco stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Tobacco Index down by 1.9 percent. The index continues to give back ground after reaching a nearly ten-month intraday high on Wednesday.

Substantial weakness was also visible among airline stocks, as reflected by the 1.7 percent drop by the NYSE Arca Airline Index. The pullback came after the index ended Thursday's trading at its best closing level in well over eight months.

Banking, oil service and transportation stocks also showed notable moves to the downside on the day, while most of the other major sectors showed more modest moves.

Commodity, Currency Markets

Crude oil futures are climbing $0.47 to $42.89 a barrel after rising $0.52 to $42.42 a barrel last Friday. Meanwhile, after climbing $10.90 to $1,872.40 an ounce in the previous session, gold futures are sliding $9.20 to $1,863.20 an ounce.

On the currency front, the U.S. dollar is trading at 103.75 yen versus the 103.86 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1894 compared to last Friday’s $1.1857.

Asia

Asian stocks rose on Monday as hopes for imminent coronavirus vaccines helped investors shrug off reports of renewed lockdowns in several countries.

Chinese stocks climbed after the country's financial regulators vowed to adopt a zero-tolerance approach and punish all kinds of "debt evasion" to protect investors.

The benchmark Shanghai Composite Index jumped 36.76 points, or 1.1 percent, to 3,414.49, while Hong Kong's Hang Seng Index ended up 34.66 points, or 0.1 percent, at 26,486.20.

The Japanese market was closed for the Labor Thanksgiving Day. South Korea's Kospi rallied 49.09 points, or 1.9 percent, to 2,602.59, extending gains for a fourth consecutive session on the back of improving export data and optimism over coronavirus vaccines.

Today's closing price is just shy of the index's record high of 2,607.10 points recorded on January 29, 2018. Market bellwether Samsung Electronics surged 4.3 percent to reach a record high of 67,500 won, while No. 2 chipmaker SK Hynix and chemical firm LG Chem both rose over 3 percent.

Customs data showed that South Korea's exports rose 11.1 percent year-on-year in the first 20 days of November, with outbound shipments of memory chips soaring 21.9 percent over the cited period.

South Korea's social distancing alert level was raised to Level 2 for Seoul and its surrounding area as the country's new daily infections stayed over 300 for six consecutive days.

Australian markets eked out modest gains, with energy and mining firms leading the surge as the country moved a step closer to normal life on Sunday, opening some internal borders and easing restrictions in regions affected by Covid-19.

The benchmark S&P/ASX 200 Index inched up 22.40 points, or 0.3 percent, to 6,561.60, while the broader All Ordinaries Index ended up 32.10 points, or 0.5 percent, at 6,772.

Origin Energy, Beach Energy, Santos and Oil Search surged 3-5 percent as oil extended gains on hopes of a recovery in fuel demand after successful vaccine trials.

Fuel supplier Ampol jumped 4.6 percent after announcing an off-market share buyback. Qantas and Sydney Airport rose 1-2 percent as the biggest Australian states reopened borders.

Global miners BHP and Rio Tinto gained 2.5 percent and 1.5 percent, respectively. Theme park operator Village Roadshow soared 16.3 percent after receiving a sweetened takeover offer from BGH Capital.

In economic news, the latest survey from Markit Economics showed the manufacturing sector in Australia continued to expand in November, and at a faster rate, with a Manufacturing PMI score of 56.1, up from 54.2 in October.

The survey also showed that the services index rose to 54.9 from 53.8, while the composite index came in at 54.7 - up from 53.6 a month earlier.

Europe

European stocks have rsien on Monday as encouraging developments around a coronavirus vaccine spurred bets of a faster economic revival globally.

Oxford University and British pharmaceutical giant AstraZeneca announced that their vaccine for the novel coronavirus could be around 90 percent effective under a one dosing regimen.

The FDA's outside advisers are slated to meet on December 10 to review Pfizer's emergency-use application for its vaccine.

While the U.K.’s FTSE 100 Index has edged down by 0.2 percent, the French CAC 40 Index is up by 0.4 percent and the German DAX Index is up by 0.5 percent.

Aryzta shares have jumped. Elliott Advisors (U.K.) Limited, in response to press speculation, has confirmed its offer to acquire the Swiss bakery business.

Media company Daily Mail and General Trust has also advanced despite reporting a drop in earnings for the year ended September 30, 2020.

Aviva has also moved to the upside. The insurance company has agreed to sell its entire 80 percent shareholding in the Italian life insurance joint venture, Aviva Vita S.p.A., to its partner UBI Banca.

Vodafone has also risen. The telecommunications company said it will bring forward by ten years its original 2050 target to reach 'net zero' across its full carbon footprint.

Lender Crédit Agricole has rallied after its Italian unit launched an offer to buy Italian bank Credito Valtellinese (Creval).

On the other hand, McBride has tumbled after the maker of retailer own brand household goods said that its full year outlook on trading remains unchanged.

French food company Danone has edged down slightly. The company plans to cut up to 2,000 jobs in local and global headquarters with an aim to deliver 1 billion euros cost savings by 2023.

HelloFresh SE has slumepd. U.S. subsidiaries of the online meal-kit provider have entered into an agreement to acquire all outstanding equity interests of Factor75, Inc.

In economic releases, the Eurozone manufacturing purchasing managers index (PMI) fell to a three-month low level of 53.6 in November from 54.8 in October, according to the preliminary report from IHS/Markit Research. The Services PMI dropped to a six-month low level of 41.3.

An early "flash" reading of the IHS Markit/CIPS UK Composite Purchasing Managers' Index (PMI) dropped to a five-month low of 47.4 in November from 52.1 in October.

U.S. Economic Reports

The Treasury Department is scheduled to announce the results of its auction of $56 billion worth of two-year notes at 11:30 am ET.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $57 billion worth of five-year notes.

Stocks In Focus

Shares of Korn Ferry (KFY) are moving sharply higher in pre-market trading after the consulting firm reported fiscal second quarter results that exceeded analyst estimates on both the top and bottom lines.

Streaming video device maker Roku (ROKU) is also likely to see initial strength after Needham raised its price target on the company’s stock to a Street-high $315 per share from $255 a share.

On the other hand, shares of Kellogg (K) may move to the downside after Credit Suisse downgraded its rating on the cereal maker to Neutral from Outperform.
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