Stocks rose, risk sentiment was high and the probability of re-openings rose just a bit Tuesday. The consumer is — for the immediate — in good shape.
Here’s how that breaks down:
The S&P 500 rose 0.47%, not so much on the strength of big tech, as the Nasdaq rose just 0.33%. By noon, New York Stock Exchange issues that were gaining outnumbered those declining by a 4 to 1 ratio.
The 10-Year Treasury yield hit its highest level since June, when optimism on the speed of the economic recovery hit its peak, with the yield now at 0.80%. The 30-Year yield, which offers closer to a real return, rose to 1.60%. Yields rise when prices fall.
Moderna’s CEO (MRNA) - Get Report said if coronavirus vaccine trials go smoothly in the next few weeks, the company could enjoy emergency use authorization by December. The stock rose as much as 2%, before ending the day up 0.49%, a sign that investors take the announcement seriously.
Moderna is just one vaccine distributor, planning on selling over a billion doses in the next year or so and major economic reopenings may need multiple large players to distribute vaccines, but the news was certainly a positive indicator on the vaccine front.
With no fiscal stimulus in sight, it could be a vaccine acting as the ultimate stimulant to the continued economic recovery, which has slowed of late. Stocks need re-openings or small businesses to receive free cash from the government in order to continue meaningful momentum.
Positively, Procter & Gamble (PG) - Get Report bear earnings and revenue estimates, with revenue coming in at more than $19 billion, about $1 billion ahead of estimates. The stock rose 0.45%. Although the company is and not entirely correlated to changes in the economy, management’s comment that the consumer is buying more expensive products was a positive signal for other consumer companies. Large cap consumer discretionary, more cyclical than staples, rose 1.08%, while staples were down a tick.
Banks rose about 1.4%, with smaller more yield-curve sensitive banks outperforming investment banks, which see a higher percentage of their revenues from capital markets and investment banking.
Here’s what Wall Street’s saying:
Mark Haefele, Chief Investment Officer, Global Wealth Management, UBS:
"The twists and turns of the healthcare industry's search for a COVID-19 vaccine has remained a major preoccupation for markets. On Monday, Moderna's chief executive gave a positive update, telling the Wall Street Journal that he expects interim vaccine trial results to come in November. If the outcome is positive, that could pave the way for emergency authorization from the US government in December. The news is consistent with our central scenario that a vaccine will be broadly available from the second quarter of next year, supporting another leg up in equities.”
Charlie Ripley, Senior Investment Strategist, Allianz Investment Management:
"The speed of the recovery is being called into question by market participants as prior fiscal stimulus measures continue to fade and the motivation for Congress to pass a fresh round of fiscal support for the economy is becoming more stale by the day. While most economic data in recent weeks have been generally positive, one area of concern has been the labor market. In particular, the bifurcated recovery in the economy has left some sectors hit hard by the pandemic continuing to struggle. The decelerating pace of job growth is becoming concerning, as only about half the jobs lost since the lockdown have come back. Many market participants, including the Fed, have acknowledged the slowing pace of the economic recovery, and the need to add more fuel to the economic recovery in the form of fiscal spending, grows by the day. Unfortunately, politics have created a near-term hurdle in moving a fiscal stimulus package across the finish line. Overall, we expect market volatility will remain elevated in the coming months as investors position for the upcoming U.S. election, the potential for effective vaccines, and additional government spending.”
Tony Dwyer, Chief Market Strategist, Canaccord Genuity:
"The recent consolidation has helped our favored tactical indicators drop to neutral from overbought, and a push lower should help get our near-term indicators to a level that could warrant adding exposure. For now, we are in tactical no-man’s land. The percentage of S&P 500 Index (SPX) components above their 10- and 50-day moving averages pulled back to the bottom of neutral territory at 33% & 58%, respectively. We would be more interested in adding exposure on a drop to below 20% and 40%, and excited if the percentage of SPX issues trading above their 10-day moving average drops to single digits, as was the case in September.”
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