The View from 5th Avenue

Struggle for the Spotlight… The struggle for the spotlight between stimulus and vaccine “hopes” continues as headlines on both fronts came into play in the last 2 hours of the day. US indices regathered steam after 2pm as investors digested more Republicans throwing their support behind the $908bn bipartisan bill, getting an extra boost on word that Trump ally Lindsay Graham backed the compromise and had discussed it with the President (quote below).

Buy While You Wait?… US equities once again feel like they’re waiting for more catalysts to restart the rally party, but in the meantime why not grind out some more ATHs? A green finish is no sure thing however, as the S&P just blipped into negative territory momentarily with 2 hours left in the trading day. Stimulus talks continue to reassert themselves as the apple of investors’ eyes as vaccine excitement wears off, but that doesn’t mean much progress is being made. The latest back and forth today saw Senate leader McConnell say a deal is “within reach” but excitement has waned in the last hour or so as the two sides remain apart on key issues after a phone call between Pelosi and McConnell this afternoon. The mood this morning was boosted by more comforting eco data, with lighter than expected jobless claims providing a nice appetizer for NFPs tomorrow and Markit Services PMIs and ISM Services data both healthily in expansion territory. The Nasdaq is outperforming the S&P thanks to a few high flying software earnings (CRWD +14%, ZS +23%) but SPX has more of a Value tilt with Energy applauding OPEC+ reaching a deal to taper supply increases gently. Solid results from PVH (+8.7%) are leading Apparel names higher, while the cruisers (CCL +10%, NCLH +10%, RCL +5%) tow Hotel/Leisure higher following broker upgrades (we also hosted Carnival CEO yesterday, ask for more!). Hard to complain about a lack of action considering where stocks currently stand… especially when US daily COVID hospitalizations and death both marked their own records yesterday…

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.

Back to Business… Not much has changed but the calendar, but after an impatient rebalancing pause yesterday US stocks are back to doing what they did through most of November. The fresh highs are nothing new for the S&P and Nasdaq, but even usually stagnant Treasuries are getting in on the risk-on mood today, with yields moving higher on word a bipartisan group of senators is putting forth a $908bn proposal to Pelosi/Mnuchin (which the two are currently discussing on an ongoing call). Solid ISM data this morning pitched in as well. The dollar continues its slide today, getting an extra midday kick from the Euro and GBP gaining on headlines that Brexit trade deal negotiators have “entered the tunnel” (this really could be a day of loosening stalemates). It’s no doubt a Rotation-ary day (VLUE +1.5% vs MTUM +0.4%), but Tech/Media have overtaken Banks and Autos at the top of the sector table amid a busy conference schedule that includes AWS Reinvent (AMZN +2.2%). Fellow Value space Energy is well in the green but held back by crude’s preoccupation with OPEC+ talks. Defensives Telcos and Household Goods are lagging, along with Commercial Services space getting dragged lower by HIS Markit (-5.2%) giving back some of yesterday’s merger fueled gains. It’s a very cheery start to the holiday season, but with so much euphoria abound, what’s left for Santa to contribute?

Choco Advent Calendars and Shelf Elves – Lucky for me (throat clear), my husband starts playing Bing Crosby the very minute our Halloween costumes come off. But for the rest of the (more sane) world, the acceptable time to start ALL the Christmas is tomorrow, December 1. Between now and then when anything can happen (like the Tesla inclusion into the S&P?!), stocks are suffering a bit of a post one holiday / pre another exhaustion, just slightly curtailing the furious November moves. This past month has been fueled by investors hopes over the finalization of a vaccine and slightly less concerns over the presidential transition. Fun fact: for four straight Mondays a different drug maker reported advances on vaccine trials. Conspicuous. The momentum faded today thanks to headlines claiming surging levels of infections and an MSCI reweight, though equities still remain on track for historic gains. The Dow is up nearly 12% for the month, the biggest gain since January 1987. The S&P +10% and Nasdaq +11%, aren’t far behind. And one mustn’t forget the small caps – a record for them too! After today, we have 22 trading days left for 2020 (probably more like 14 real ones). Far too early for Santa rallies and plenty of ground to cover between now and Jan 1. Gulp.

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     […]

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)