Capital 19 Catch-Up

Major Indices Hit All-Time Highs As Retail Stocks Impress And Vaccines Get Closer To Approval


The major indices continued to hit all-time highs this week as positive vaccine news kept enthusiasm for stocks high, and we finally saw some political clarity from the recently held election. Both the Nasdaq and the S&P500 closed out the shortened week on Friday at record highs, while the Dow topped 30,000 for the first time on Tuesday and finished just below this by weeks end.

The Dow made 2.2% for the week and is now up almost 13% for the month of November. If it manages to stay positive for tonight’s session it will be the best month the headline index has had since January 1987. The Nasdaq finished the week with a 3% gain, while the S&P500 managed a 2.3% rise. The small-cap Russel 2000 index continues its strong month and is now up 20% for November, which will be its best month ever if it also can avoid a big fall in tonight’s session.

It has taken way too long, but it seems the current sitting President Trump has finally, albeit begrudgingly, conceded to allow the presidential transition team to get about organising the changeover which will occur in January. All of the legal challenges have been rejected, and the costly recounts have only seen Bidens lead increase.

This has given the markets some much-needed clarity heading into the New Year and takes away one of the major obstacles it foresaw for 2020. The Vix fear gauge slipped under 20 this week for the first time since the pandemic began way back in March and a lot of that has to do with the Wall Street anticipating a more stable government influence for the next four years.

President-elect Biden has shown this already with his choice of the Wall Street-friendly Janet Yellen as his Treasury Secretary. The former Federal Reserve chief from 2014-2018 is seen as a strong supporter of fiscal stimulus and we know there is nothing the market loves more than free money. Yellen was the first woman to hold the top Fed position and will also be the first woman to head the Treasury. She will also be the first person of any gender to have headed the Treasury, the Fed, and the White House Council of Economic Advisors.

In vaccine news, Astra Zeneca and the University of Oxford have announced their vaccine is 70% effective on average, with one dosing regimen showing 90% effectiveness. It joins the Pfizer and Moderna vaccines in the race to be approved before the end of the year. The positive vaccine news is offsetting the rise in coronavirus cases and hospitalisations across the US. Leading into the Thanksgiving public holiday there were two days of deaths reaching above 2000, something that hasn’t been seen since April. The vaccines will prove to be a much-needed relief.

Economic data was mixed during the week as manufacturing and services data hit multi-year highs but the weekly jobless claims disappointed. Manufacturing PMI for October came in at 56.7 which was its best result in six years, while the services index hit 57.7 which was its best result in five and a half years. To keep it in context they are rising off low bases, but it is still encouraging to see the economy continuing to improve. The weekly jobless claims were less impressive, with 778,000 people filing unemployment claims when analysts were expecting 733,000.

The initial Black Friday sales numbers are looking positive, and this gave retail stocks a solid boost late in the week. It is predicted that a record $5.1 billion was spent online on Thursday ahead of the Black Friday sales and Cyber Monday. Global online marketplace provider Etsy (ETSY) jumped 10.7% on the news, while video-game seller GameStop (GME) made 9%.

The retailers also impressed with earnings during the week with Dick’s Sporting Goods (DKS) the standout, finishing 3.4% higher for the week. The sports retailer beat estimates on both profit and revenue with e-commerce sales rising by an impressive 95% for the quarter. Best Buy (BBY) also beat on the top and bottom line but fell when it failed to give guidance for the holiday period. And Urban Outfitters (URBN) brought in record profits despite falling revenue. It also beat estimates on revenue and profit but fell without providing guidance for the next quarter.

In merger news, online CRM leader Salesforce (CRM) is in talks to buy software-as-a-service (SAAS) provider Slack Technologies (WORK). Both have been beneficiaries of the pandemic and the move will increase synergies between the two cloud operators. There has been little to no commentary on the buyout from the two parties but the Slack share price jumped 37% on the news while Salesforce fell 5%.

Salesforce will also announce its Q3 earnings in the week ahead. It will be joined by Zoom Video (ZOOM), Dollar General (DG), Marvell Tech (MRVL), and Snowflake (SNOW). OPEC will meet today and tomorrow to discuss oil output with many expecting a postponement of tapering to cuts, and Jerome Powell and Steve Mnuchin will appear before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. The week will culminate with the nonfarm payrolls coming out on Friday.

Have a great week.

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