Vaccine progress fuels speculation about post-Covid economy
The week opened with a major bang after Pfizer and BioNTech announced their vaccine candidate against COVID-19 achieved success in the first interim analysis from a Phase 3 study, finding it to be more than 90% effective in preventing coronavirus. Immediately a historic risk on rally took flight. Pandemic-stricken sectors like travel and experiential entertainment saw money flood back in, at the expense of richly valued stay-at-home stocks that have fared so well in the current crisis. WTI crude jumped 10% helping drive significant flows into the energy complex. Treasury yields surged, highlighted by the 10-year moving back towards 1%, resulting in aggressive buying in the bank stocks, as well. Monday saw volatility collapse, US indices open at new all-time highs for the first time since February, and volumes explode with the NYSE running nearly 200% above its three month average.
The vaccine news set the stage for the rest of the week as markets largely pivoted around the notion that the time has come to start discounting a post pandemic landscape, juxtaposed with the current reality that virus infections are surging across much of the US and will likely necessitate localized, forced closures to stem the spread like this past spring. President Trump did not concede what he continues to describe as a rigged election even though more states were officially called in Biden’s favor and no evidence emerged of widespread vote tampering. The prospects for accomplishing anything during the lame duck session appeared bleak as neither the Republicans nor Democrats softened on their fiscal stimulus stances. Fed officials were out in force reiterating their view that additional fiscal help is imperative. Members of the Fed and ECB continued to call for more fiscal stimulus and emphasized they stand ready to do more if on the monetary front if necessary. By Friday’s close, WTI crude prices were holding above $40/bbl and the US 10-year edged away from a mid-week high above 0.97% which was the highest level since before the onset of the pandemic. For the week, S&P gained 2.2%, the DJIA added 4.1%, while the Nasdaq lost 0.6%.
In corporate news this week, with the height of earnings season in the rear-view mirror, Disney posted an EPS loss narrower than expected in its quarterly statement and reported its Disney+ streaming service has now hit 73M paid subscribers. DR Horton shares lifted after profits and revenue came in ahead of consensus, and the home-builder also saw a 50% jump in order growth in October. McDonalds notched beats on its top and bottom line and announced it was developing its own plant-based patty, justifiably dubbed the ‘McPlant,’ a product that Beyond Meat noted they had helped to develop. Southwest disclosed it has experienced a deceleration in improving revenue trends for November and December in recent weeks as coronavirus cases have risen. Apple at its product launch event confirmed its new Mac line will include the Apple-made M1 chip. Walmart launched a new pet care services division in a move to expand its full suite of animal offerings as dog and cat adoptions soar during the pandemic. EU antitrust regulators confirmed they would charge Amazon with distorting competition in online retail markets and said they would launch a second probe into its e-commerce business practices. The FAA reportedly is in the final stages of its Boeing 737MAX review and the aircraft could be approved by next week, though regulators will likely implement more fines against the aerospace giant going forward.
MON 11/9 (RU) Russia govt said to appoint Rushydro CEO Nikolai Shulginov as its new Energy Minister - press PFE Pfizer and BioNTech announce vaccine candidate against COVID-19 achieved success in first interim analysis from Phase 3 study; Vaccine candidate was found to be more than 90% effective in preventing COVID-19 in participants without evidence of prior SARS-CoV-2 infection in the first interim efficacy analysis (at seven days after the second dose) MU Ships World’s First 176-Layer NAND, Delivering A Breakthrough in Flash Memory Performance and DensityNew 3D NAND boosts storage capability across mobile, automotive, client and data center applications BA US FAA in final stages of Boeing 737MAX review; Said to be set to approve 737MAX by 18th of Nov - press TUES 11/10 *(DE) GERMANY NOV ZEW CURRENT SITUATION: -64.3 V -63.5E; EXPECTATIONS SURVEY: 39.0 V 44.3E Medicago announces positive Phase 1 results for its COVID-19 vaccine candidate DHI Guides Q1 Rev $5.4-5.6B v $5.21Be, gross margin ~23%, home sales 17.5-18K, - earnings call (US) Supreme Court Justices Roberts and Kavanaugh appear to be reluctant to strike down entire Affordable Care Act - press (US) Democratic challenger Cunningham concedes North Carolina Senate race to Republican Tillis - press RKT Reports Q3 $1.21 v $1.03e, Rev $4,63B v $4.34Be; Approves $1B share buyback (2.3% of market cap) WEDS 11/11 (UK) EU-UK negotiators said to likely miss the mid-Nov deadline to reach a trade agreement - financial press (IN) India said to announce new $20B stimulus package this week; package to focus on stressed industries and boosting employment - press (US) Georgia Sec of State reportedly set to announce hand recount in presidential race - press Medicago Confirms Positive Phase 1 Results for Its COVID-19 Vaccine Candidate THURS 11/12 SIE.DE Reports Q4 Net €1.76B v €1.7Be, Industrial Business EBITA €2.64B v €2.0Be, Rev €15.3B v €15.3Be *(UK) Q3 PRELIMINARY GDP Q/Q: 15.5% V 15.8%E; Y/Y: -9.6% V -9.4%E AZN.UK Announces COVID-19's CALAVI drug Phase II trial did not meet the primary endpoint of increasing the proportion of patients who remained alive and free of respiratory failure 700.HK Reports Q3 (CNY) Net 38.5B v 30.5Be, Rev 125.5B v 124.0Be; says overall China advertising activity appears to have largely returned to normal conditions *(US) OCT CPI M/M: 0.0% V 0.1%E; CPI (EX-FOOD/ENERGY) M/M: 0.0% V 0.2%E; CPI NSA: 260.388 V 260.474E *(US) INITIAL JOBLESS CLAIMS: 709K V 731KE; CONTINUING CLAIMS: 6.79M V 6.83ME *(US) DOE CRUDE: +4.3M V -1ME; GASOLINE: -2.3M V 0ME; DISTILLATE: -5.4M V -1.5ME (US) Fed Chair Powell: US recovery has been faster than expected, though it has slowed and has been uneven; next few months will be challenging *(US) TREASURY $27B 30-YEAR BOND AUCTION DRAWS 1.680%; BID TO COVER 2.29 V 2.14 PRIOR AND 2.28 OVER LAST 4 AUCTIONS (CN) Trump Administration said to have finalized Executive Order to ban US purchases or sales of securities in Chinese companies with links to the China military - press *(US) OCT MONTHLY BUDGET STATEMENT:-$284B V -$275.0BE DIS Reports Q4 -$0.20 v -$0.68e, Rev $14.7B v $14.3Be (CN) Former China Fin Min Jiwei: Time to study the exit of monetary policy, not fiscal policy; Even if Biden is US President, US China trade frictions will not necessarily be eased - Caixin Summit FRI 11/13 *(EU) EURO ZONE Q3 PRELIMINARY GDP Q/Q: 12.6% V 12.7%E; Y/Y: -4.4% V -4.3%E MMM Reports Oct Rev $2.9B +3% y/y; organic Rev +2% y/y *(US) OCT PPI FINAL DEMAND M/M: 0.3% V 0.2%E; Y/Y: 0.5% V 0.4%E (US) Fed’s Bullard (non-voter): downside risks to the US economy "remain substantial"; monetary and fiscal policy have been "very effective" (US) NOV PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 77.0 V 82.0E (US) NYC Mayor de Blasio: People should prepare for potential school closures; parents should have a plan for the rest of the month of November, beginning as early as Monday