Bulls Get Vaccinated Against Market Virus?
U.S. stocks rose sharply on Friday as investors bet again on stocks that would benefit from a potentially effective vaccine and economic recovery next year.
The S&P 500 advanced 1.4% to 3,585.15, and posted a record closing high. The Dow Jones Industrial Average jumped 399.64 points, or 1.4%, to close at 29,479.81. The Nasdaq Composite advanced 1% to 11,829.29. The Russell 2000, which tracks small-cap stocks, jumped more than 2% to an intraday record, and posted its first all-time closing high since August 2018.
Shares of cruise operator Carnival rose more than 7%. United Airlines and Boeing were both up more than 5%. Disney closed 2.1% higher on the back of better-than-expected quarterly numbers. At the sector level, energy and industrials rose 3.8% and 2.2%, respectively, to lead the S&P 500 higher. Financials were up more than 1%.
Both the Dow and S&P 500 logged strong weekly gains, boosted by Pfizer’s news on Monday that the vaccine it is developing with BioNTech was more than 90% effective in a trial. This caused a rotation into the cyclical stocks that would benefit from an economic comeback next year. Investors dumped technology shares which have held up during the pandemic.
The Dow rose 4.1% for the week, and the S&P 500 closed 2.16% higher over that time period. The tech-heavy Nasdaq lost 0.6% this week, notching its third weekly loss in four weeks.
“This week’s positive vaccine news is a game-changer in our view, as it allows the market to look through the recent surge in COVID-19 cases to the impending end of the pandemic and broader reopening of the economy,” wrote Marko Kolanovic, JPMorgan’s head of macro quantitative and derivatives strategy, who was among the first to call the market’s turn in March.
However, the rotation paused midweek as traders worried that a rising number of coronavirus cases could hit the economy significantly before a vaccine gets here.
A CNBC analysis of data compiled by Johns Hopkins University showed average daily new cases are up by at least 5% over the past week in at least 47 states. Hospitalizations, meanwhile, rising in at least 46 states. On Thursday alone, more than 150,000 cases were confirmed in the U.S.
The resurgence in coronavirus cases has also led some parts of the country to re-adopt stricter social-distancing measures. In Chicago, Mayor Lori Lightfoot asked residents to cancel their Thanksgiving plans and stay indoors as cases rise in the city. In New York state, Gov. Andrew Cuomo said new curfews on bars, restaurants and gyms will take effect on Friday.
Phillip Colmar, partner at MRB Partners, wrote in a note that the global economic recovery “will be sustained, but the V-shaped portion is over, and we have already transitioned to a slower pace of two-steps forward and one back.”
Federal Reserve Chairman Jerome Powell also said Thursday the country’s economic outlook remained uncertain. “With the virus spreading, the next few months could be challenging,” he said.
Alright, it was another big week in the stock market, spent the day looking at a bunch of stocks and charts and I'm a little wiped but will muster on to complete my market comment.
Let's begin with the fun stuff, this week's best performing sectors and best performing stocks (all stocks and large caps):
Not surprisingly, following the good news on Pfizer's vaccine results that broke out on Monday morning (conveniently before the market open and after President-Elect Biden was proclaimed the winner last weekend), stocks surged on Monday led by beaten down airlines, cruise lines, casinos, hotels, REITs, energy and anything else that moves with positive news on the health front.
As shown above, cyclical stocks fared the best this week led by Energy (XLE), Financials (XLF) and Industrials (XLI). No surprise to me, Energy has been clobbered this year and in September, I told my readers to keep Big Oil on their radar.
Technology stocks (XLK) were marginally down this week as many of the cloud and fintech high-flyers that rallied sharply this year got hit hard this week, as did popular stay-at-home stocks:
What else? The bubble in electric car shares continued, prompting me to tweet this earlier today:
$LI $NIO Electric car bubble going FULL EXPONENTIAL this week as market digests news from Li Auto (LI).Check out shares of rival NIO, went from $3 to over $50 this year and holding and adding to gains. Unbelievable, if you don’t think there’s an ESG bubble, you’re delusional! pic.twitter.com/KREkjiGHRq— Leo Kolivakis (@PensionPulse) November 13, 2020
Then a big reversal happened. At one point, shares of NIO were down 25% from the morning high where they were up more than 10%, before settling down 8% on massive volume:
But here's the thing, despite what short seller Citron thinks, it can run up a lot more from these levels as long as the stock price remains over its 20-day moving average:
And it's not just NIO, the same goes for Li Auto (LI), XPeng Inc (XPEV), and Electrameccanica Vehicles (SOLO) whose shares were up 30% today on massive volume:
By the looks of things, this could be the next NIO as it has broken out and could be a ten bagger from these levels if this electric mania/ bubble continues.
I'm serious, these are crazy markets and they can leave the best traders dazed and confused:
Welcome to the wacky world we live in, compliments of the Federal Reserve and other global central banks increasing their balance sheet by trillions to "fight the pandemic" (Wall Street speculators love liquidity orgies, especially when they get money for nothing and risk for free!).
Of course, while everyone is cheering on Wall Street, the reality is COVID-19 cases are surging in the United States and Europe where a mutated strain of COVID-19 is wreaking havoc there:
California just became the second state to surpass 1 million reported Covid-19 infections since the start of the pandemic, according to Johns Hopkins University data — closely following Texas, which hit the grim milestone earlier this week https://t.co/gllyih1NJd— CNN (@CNN) November 13, 2020
A mutated strain of Covid-19 that developed in Europe was able to out-compete and eventually dominate the original virus by being much more infectious—replicating nearly 10 times faster and being much better at airborne transmission than the original strain https://t.co/HWmd87UesI pic.twitter.com/CpQk7lzpje— Forbes (@Forbes) November 13, 2020
And while Wall Street bulls are cheering every vaccine success story, some are sounding the alarm and hunkering down for what can be a rough few months ahead:
How a Covid-19 Vaccine Could End Up Helping the Virus Spread - Bloomberg https://t.co/FSjgLDwckh— Leo Kolivakis (@PensionPulse) November 13, 2020
Highlight: “We look at the growing regional bifurcation of America,” Hedgeye Author and Managing Director of Demography @HoweGeneration says about the political divide. “It creates a situation [with] either the red zone or the blue zone ... being either nullifying or seceding.” pic.twitter.com/sqab9GB04J— Yahoo Finance (@YahooFinance) November 13, 2020
Let's hope that never happens but the way things are headed, you never know.
All I know is while the bulls enjoyed a great week on Wall Street, reality is settling in and that means the next couple of months will be far more challenging.
I would caution my readers to stop listening to all the nonsense about the "market looking past the surge in COVID cases, more hospitalizations and deaths" and hunker down for a long, cold winter of hell.
Don't get me wrong, I welcome all positive news on vaccines and other treatments but I tell everyone, you need to hunker down over the next six months, keep wearing your mask, wash your hands often, practice social distancing and take a minimum of 1,000 IUs of vitamin D a day (if not three times that amount during the winter) to mitigate against the effects of COVID-19:
Researchers around the globe are investigating whether vitamin D, known as the sunshine vitamin, can help reduce people’s risk of catching the new coronavirus and even aid in treating patients with Covid-19.— The Wall Street Journal (@WSJ) November 12, 2020
Never mind the skeptics and naysayers, I've been taking high dose vitamin D for over 20 years and I never get the flu (no flu shot in over a decade) and just don't get sick.
Of course, my immune system is super strong, too strong, but I tell everyone, take your daily dose of vitamin D, give it to your kids, and practice social distancing, hygiene and wear your bloody mask when in public (this garbage that it's anti-American has to stop, what is anti-American is recklessly killing innocent people even if that's not your intention, so wear your mask in public!).
Alright, that's it from me, wish you all a great weekend and I thank those of you who take the time to support this blog using the PayPal options on the top left-hand side under my picture.
Below, CNBC's "Halftime Report" team discusses how they're investing amid the surge in coronavirus cases across the United States.Also, White House coronavirus advisor Dr. Anthony Fauci along with NIH's Francis Collins and Dr. Luciana Borio, a member of President-Elect Biden's coronavirus task force, discuss the prospects of a second wave of coronavirus and a vaccine at the National Cathedral's 2020 Ignatius Forum.Third, earlier this week, CNBC's "Squawk on the Street" team discussed hospital capacity as cases surge across the US with Dr. Marc Boom of Houston Methodist, and Dr. Alan Kaplan of University of Wisconsin Health.
Fourth, Donald Trump's legal challenges against the outcome of the US election is running out of time and plausibility as the Senate and world leaders begin to acknowledge Joe Biden's victory, according to the US Studies Centre's Simon Jackman.
Also, take the time to listen to a discussion with Scott Omelianuk, Laura Rozen and Douglas Murray on Anthony Scaramucci's Mooch FM here. Great discussion, I thank Ken Kostarakis for sharing it.
Last but not least, Fed Chairman Jay Powell participated Thursday in a policy panel before a European Central Bank Forum on central banking. The appearance featured a question-and-answer session with the US central bank chief. Take the time to listen to his comments.