Dow Tumbles on Fears of Another Covid-19 Lockdown

What’s happening: US stocks closed mostly lower on Monday, despite the country initiating the covid-19 vaccine drive yesterday.

What happened: Healthcare workers were the first to receive vaccine shots, after the FDA gave emergency use authorisation to the candidate developed by Pfizer and BioNTech.

Although Dow Jones hit an all-time high earlier in the session, the 30-stock index gave up all gains and more to settle lower in the session amid fears of further covid-19 restrictions being imposed in the worst affected regions in the US.

Why it matters: With the coronavirus-related death count crossing the 300,000 mark in the US and New York recording the highest deaths in the country, NYC Mayor Bill De Blasio warned of a “full shutdown” in the city.

Several regions around the world, from Boston to London, imposed fresh restrictions amid a surge in coronavirus cases.

Against this backdrop, investors could not cheer news of Pfizer shipping vaccine doses to various hospitals and other sites across the US on Monday, with the first dose being administered in New York City. The FDA is also expected to announce its decision on Moderna’s covid-19 vaccine this week.

Investors were eager to receive some news on the fresh coronavirus stimulus package being discussed by lawmakers in Washington. A bipartisan group looked to push the $908 billion stimulus bill, but some disagreements remained between both chambers.

The Dow tumbled 184.82 points to settle at 29,861.55 on Monday, after rising more than 200 points earlier in the session. The S&P 500 declined for the fourth consecutive session, losing 0.4% to end the day at 3,647.49.

The weakness on Wall Street followed a mostly bullish session in Europe, as the European Union and Britain agreed to extend their Brexit trade talks.

Amid the overall downturn, investors supported stay-at-home stocks like Netflix and Amazon, helping the Nasdaq 100 record a 0.5% gain to settle at 12,440.04 on Monday.

What to watch: Investors await a basket of economic reports from the US, including import prices, export prices, New York Empire State manufacturing index and industrial production.

Import and export prices are expected to rise 0.3% each in November. The New York Empire State Manufacturing Index is projected to rise to 6.9 in December, from 6.3 in November.

Analysts expect industrial production to rise 0.3% in November, following 1.1% growth in October.

Investors will also focus on updates from the Federal Open Market Committee’s two-day policy meeting, which is scheduled to begin today. Moreover, markets will keep a close eye on the ongoing stimulus talks amid rising covid-19 cases in the US, where the total confirmed cases have surpassed 16.5 million.

The Canadian dollar will be in focus today ahead of a basket of economic data releases scheduled for later in the day.

Context: The Canadian dollar remained close to its two-and-a-half year high on Monday on optimism around covid-19 vaccines putting an end to the pandemic.

Details: The loonie earlier gained support from the overall weakness in the US dollar due to improving investor risk appetite as various countries rolled out covid-19 vaccines.

Canada, too, initiated its vaccination campaign. The country has received an initial batch of 300,000 doses of the covid-19 vaccine developed by Pfizer, sufficient for vaccinating 150,000 Canadians.

Traders were also relieved with the UK and EU agreeing to extend their Brexit talks, with EU negotiator Michel Barnier saying that a trade deal was still possible.

The CAD/USD declined from the peak of $1.2762 reached during the Asian session to $1.2731 in the Canadian session. The pair finally settled at $1.2766 by the end of the trading day.

Canadian government bonds traded higher across the board, with the Canadian 10-year yield rising to 0.748% on Monday, from Friday’s 0.716% yield.

What to watch: Traders await economic data on housing starts, new motor vehicle sales and manufacturing sales from Canada. Housing starts in Canada are likely to rise slightly to 215,000 in November, from 214,875 units in October. Analysts expect manufacturing sales to grow 0.6% in October.

Rising covid-19 cases remains a major concern for the markets, with total cases worldwide approaching the 73-million mark.

Other Markets: European trading indices closed mostly higher on Monday, with the German DAX 30 and French 40 up by 0.83% and 0.37%, respectively, while the FTSE 100 lost 0.23%.

South Africa’s leading business cycle indicator and producer prices, UK’s claimant count change and unemployment rate, France's consumer prices, Italy’s consumer prices and balance of trade, Saudi Arabia’s annual inflation rate, Russia’s industrial production as well as the US Redbook index and IBD/TIPP economic optimism index.