Monday, November 16, 2020

Morning Note: A Unique Display

In last Monday's morning note we put numbers to an impressive rally on the back of news that Pfizer's covid vaccine was looking to be hugely (90%) effective. And here we are, one week later, and reports from Moderna suggest the same for theirs (94% effective!). 

Last Monday's open saw the Dow and the Russell up big, the S&P 500 not quite as much (but certainly up) and the Nasdaq modestly higher by comparison. Same thing, although the numbers aren't quite as startling, this morning.

Dow up 409 points (1.39%), S&P 500 up 0.97%, Nasdaq up 0.71%, Russell 2000 up 2.04%. Asian stocks were already in impressive rally mode on the inking of a massive trade deal involving 15 economies (not including ours), with 15 of the 16 markets we track closing in the green. Europe's rallying big this morning as well, with all but 2 of the 19 bourses we track trading nicely higher.

Beyond equity markets, however, the similarities to last Monday, well, not as much:

The VIX was getting creamed last week, it's flat (-0.04%) as I type; suggesting that there's disbelief in the options (for SP500) pits this morning. VXN (Nasdaq vol) is indeed down (-0.55%), but nothing like last Monday, when it started the day down nearly 4%.

Oil's up 4.11%, but that's half the bounce we saw a week ago. Gold, instead of getting creamed like last week (it was down over 4%) is actually up a hair, 0.07%. Silver's off a hair, 0.02%, but last Monday saw it down nearly 6%. Copper futures, on the other hand (responding to China's upbeat industrial data and a fresh round of liquidity injections), are actually higher to start the week, up 1.46% (vs 0.96% last week), and the ag complex is matching last Monday's open, up 0.80%. 

The 10-year treasury was getting demolished last week (yield was screaming higher). Directionally the same this morning, but to a substantially lesser extent. The dollar's down 0.13% this morning, it started last Monday down 0.31%.

Our core mix -- hampered by its gold position, trailed stocks at the open (but it was still up 2%) last week -- is just about matching the S&P (but with a far different mix of securities) this morning, up 0.94% as I type. Our top 5 winners are energy, banks, industrials, financials and materials. Our only losers so far are silver and Verizon.

So, while the covid numbers, worldwide, and their economic implications are very concerning, we can understand why the stock market -- a supposed discounting mechanism -- might be nevertheless rallying in anticipation of a much better 2021. However, the somewhat disconfirming action in other assets and in the derivatives market suggest not all's necessarily well as we look out on the horizon. 

Of course the market/economic horizon features many moving parts, and, make no mistake, they're assembled together in a display quite unique to modern history. More on that to come herein...

Have a great day!

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