Tuesday, November 10, 2020

Dow Spikes on Covid Vaccine News, End of Election

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News shaping
the markets today

     

What’s happening: The Dow Jones index jumped more than 800 points on Monday following an encouraging covid-19 vaccine update and Joe Biden’s victory in the US Presidential election.

What happened: Pharma giant Pfizer, which has partnered with German biotechnology company BioNTech to develop a covid-19 vaccine, announced positive interim data from a late-stage study.

The news lifted investor sentiment, as did the end of uncertainty surrounding the US Presidential election. Although the Dow recorded its highest single-day surge since June 5, the tech-laden Nasdaq 100 settled lower after turning negative during the afternoon session.

Why it matters: Risk appetite had improved over the weekend, with assets viewed as risky surging even before the opening bell on Monday, as ex-Vice President Joe Biden garnered enough votes to win the race to the White House.

Markets seemed unmoved by incumbent President Donald Trump’s appeals for a recounting of votes in various states, while President-elect Joe Biden announced a taskforce to handle the pandemic with the case count in the country surpassing 10 million.

Cyclical sectors, which had tumbled amid the pandemic, added gains on Monday on news of Pfizer and BioNTech achieving success for their coronavirus vaccine candidate BNT162b2, which was found to be over 90% effective in helping prevent covid-19 in healthy trial participants.

Following the achievement of the latest safety and efficacy milestone, the companies said they expect to file for EUA (Emergency Use Authorisation) with the US FDA (Food and Drug Administration) by the third week of November.

While the Dow and S&P 500 moved higher after the news, a wide sell-off in tech stocks pushed the Nasdaq 100 to the red. Investors seem to have disposed of tech shares that had achieved new highs during the pandemic to invest in more reasonably priced stocks that could benefit from an economic recovery.

Airline and cruise stocks spiked, led by gains in the shares of American Airlines, Delta Air Lines, Boeing, Royal Caribbean, and Carnival.

The Dow Jones index climbed 834.57 points, or 3%, to settle at 29,157.97, recording its best single-day percent rise since June 5. The S&P 500 also added 1.2% to finish the trading day at 3,550.50, booking its second highest close since September 2.

Although the Nasdaq 100 began the trading day on a positive note, it turned lower during the afternoon session and ended trading with 11,713.78 points, representing a 1.5% decline. The tech index was down 2.8% from its record closing on September 2.

What to watch: Markets will be keeping a close eye on further news from Pfizer and BioNTech on their covid-19 vaccine candidate and the data due for release in the third week of November. Investors also await news of a fresh stimulus package following Biden’s win as President. With the US recording new record highs in coronavirus daily cases, investors may respond positively to any update by the Biden administration’s taskforce on attempts to curb the pandemic.

The Markets Today

     

Crude oil will be in focus today, ahead of the American Petroleum Institute’s report on crude stockpiles.

Context: Crude oil closed sharply higher on Monday, with the WTI (West Texas Intermediate) prices booking the best single day rise in around six months.

Details: Oil tumbled sharply last week following a rise in covid-19 cases in the US and Europe. The daily case count in the US remained over 100,000 for the fifth consecutive day, with the total confirmed cases surging past the 10 million mark.

The rally in oil prices yesterday was driven by positive covid-19 vaccine news from Pfizer and BioNTech, which raised hopes of a faster recovery in the global economy.

The broad-based rally in the markets supported by the victory of Democratic candidate Joe Biden also helped crude oil record significant gains.

The OPEC+ (Organization of the Petroleum Exporting Countries and its allies) is scheduled to scale back production cuts in January to 5.7 million bpd (barrels per day) from the current 7.7 million bpd. Saudi Energy Minister Prince Abdulaziz bin Salman’s readiness to tweak the OPEC+ deal on output cuts also provided support to oil prices yesterday.

WTI crude for December delivery climbed 8.5% to close at $40.29 per barrel on the NYMEX (New York Mercantile Exchange), recording the biggest daily gains since May. January Brent crude also rose 7.5% to settle at $42.40 per barrel on ICE Futures Europe, booking its best single day rise since June 1. Both the US and global benchmark settled at their highest level since October 22.

What to watch: Markets await the API’s data on crude inventories. Crude stockpiles in the US had shrunk by 8.01 million barrels in the week ending October 30, following a 4.58 million rise in the earlier week.

Other Markets: European trading indices closed higher on Monday, with the FTSE 100, German DAX 30 and French 40 up 4.67%, 4.94% and 7.57%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

France’s unemployment rate and industrial production, Turkey’s unemployment rate, UK’s employment change and unemployment rate, Italy's industrial production, Eurozone’s Zew Economic Sentiment Index, Germany’s Zew Economic Sentiment Index, South Africa’s industrial production as well as the US NFIB Business Optimism Index, Redbook Index, job openings and IBD/TIPP Economic Optimism Index.