Market Perspective for November 28, 2020

Stocks closed out the week on a positive note following the Thanksgiving holiday, which rounded out an impressive month of gains for stocks. Markets closed early on Friday due to the holiday but still managed to post gains across the major indexes. Even with the coronavirus case counts rising at record rates across the country, the optimism over the potential for a publicly available vaccine helped propel stocks. Consumer spending for the start of the holiday season has been strong so far, especially online retail sales, and is expected to continue at a solid pace over the coming week.

The S&P 500 gained 0.24 percent on Friday. It was up 2.3 percent for the week and an impressive 11.3 percent for the month. The Dow closed up 0.13 percent. For the week, the Dow gained 2.2 percent. It has gained 13 percent gain in November. The Nasdaq gained 0.92 percent on Friday. Increases in shares of Tesla (TSLA) of 2.1 percent, Alphabet (GOOGL) of 1.3 percent, and Netflix (NFLX) of 1.3 percent on Friday. For the week, the Nasdaq was up 3 percent. The Russell 2000 was up 0.56 percent for the day.

Black Friday, the day after Thanksgiving and widely recognized as the official start to the holiday shopping season, was viewed cautiously by major retailers. However, retail sales thus far are much rosier than expected. The SPDR S&P Retail ETF XRT posted a 0.90 percent gain. Online retail sales were particularly strong for the week. According to estimates from Adobe Analytics, the final online sales numbers from Black Friday will exceed $10 billion. Amazon (AMZN) gained 0.30 percent on Friday. Shopify (SHOP) was also up 1.50 percent for the day.

Online retail sales are anticipated to get another boost on Cyber Monday Adobe Analytics projects that consumers will spend more than $12.7 billion via online shopping this Monday, which represents a 25 percent increase over what consumers spent online for Cyber Monday last year.

Following the announcement by Pfizer (PFE) and BioNTech (BNTX) a week ago that they have sought emergency use authorization of their vaccine from the FDA, the University of Oxford and AstraZeneca (AZN) stated that they will have to initiate a new set of trials to determine the efficacy of their vaccine at a lower dosage due to an apparent dosing error in their most recent clinical trials. This led to a decline in AstraZeneca shares immediately following the announcement. However, shares of Moderna (MRNA) and Novavax (NVAX), two major contenders at the forefront of the race for a coronavirus vaccine, jumped on the news of their competitor’s setback. Moderna and Novavax shares were up 16.3 and 22.5 percent, respectively, at the end of Friday. Likewise, shares of Pfizer and BioNTech experienced a significant bump on Friday of 2 and 4 percent, respectively.

Airlines were among the hardest hit by the pandemic and they benefited from the vaccine news. U.S. Global Jets (JETS) gained 8.77 percent for the week. Casino operator Wynn Resorts (WYNN) rallied 5.86 percent.

The energy sector continued it outstanding performance. SPDR Energy (XLE) returned 8.44 percent. Crude oil rallied to $45.52 per barrel, the highest price since March. Natural gas also climbed this week and finished near $3 per mmBTU. First Trust ISE-Revere Natural Gas (FCG) climbed 11.28 percent. Alternative energy also rose in lockstep with fossil fuels. Invesco Solar (TAN) rose 8.86 percent and First Trust Global Wind (FAN) added 3.16 percent.

Interest rates rose slightly on the week. The 10-year Treasury yield gained 2 basis points to close at 0.84 percent. The general rotation into value boosted financials though. SPDR Financial (XLF) advanced 4.49 percent.

The U.S. government’s second estimate of third quarter GDP matched the initial estimate of 33.1 percent annualized growth.  Flash PMI readings showed both the manufacturing and service sectors strengthening in the U.S. Consumer confidence in November was slightly weaker than expected at 96.1 versus 97.3 in the Conference Board index, but the University of Michigan consumer sentiment survey came in slightly stronger at 76.9 versus 76.8 forecast.

Housing remains the brightest spot for the economy. New home sales in October hit an annualized pace of 999,000, ahead of forecasts and barely down from September’s 1,002,000 pace.

Initial claims for unemployment were 778,000 the week prior, ahead of the 720,000 consensus forecast but in line with market expectations given the return of lockdown policies in some states. Long-term unemployment extended its decline, but there was a small uptick in total long-term unemployment because of increased applications for federal pandemic assistance.

Next week brings the report on November’s unemployment claims as well as testimony from Jerome Powell, Chairman of the Federal Reserve, and Treasury Secretary Steven Mnuchin in front of the Senate Banking Committee regarding the country’s economic response and emergency measures implemented to assist with the recovery from the coronavirus pandemic.

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