In The Black, Friday

In the black, Friday.  Stocks rallied to new highs in Friday’s abbreviated session.  Early results from the holiday shopping season appear encouraging while a continued rise in virus cases… not so much.

 

N O T E W O R T H Y

 

The final push.  OK folks, it’s here, the last mile, final stretch, or whatever you want to call it, but it’s here.  For those of us in the financial services industry the time between Thanksgiving and New Years is an interesting time. Sure, everyone has a bit more spring in their step as the Holiday spirit fills us, but this is an interesting time for the markets. Volume is typically lighter and money managers spend most of the month rebalancing and window dressing their portfolios. It is a time for well-deserved holiday parties, for celebrating the closing of one chapter and opening of a new one… wait, wait… insert record scratch sound here. Need I remind you that this is 2020?  The year that started out with great potential but ended up looking like one of the darkest chapters in economic history.  If you turned off your radio, TV, and social media and focused on the stock market, but for a breath-taking dip in March, you might not have even suspected that anything was afoot . The S&P500 is up by +12.62% year to date, above its long term annual average.  Oh, and the tech-heavy Nasdaq is up by +36%… let’s call that… a lot.  Meanwhile confirmed COVID cases in the US have topped 13.385 million as of this morning.  The US death toll now stands at 266,887.  The Unemployment Rate spiked to 14.7% after resting at a 60-year low for most of last year and now sits at 6.9%, which is still unarguably high.  US GDP fell by -31% in the second quarter and bounced back by +33% in the third quarter but still remains significantly lower, in dollar terms, than it was at this same time last year.  I can go on and on, but you get the picture, because you probably didn’t turn off the TV, radio, or social media… and READ MY NOTE regularly… hopefully.  In any case this is a historically positive time for the markets as we get an early look at the all-important holiday shopping season, which seems to always be bigger than the last one. It’s also a time when side-lined investors jump into the markets in a FOMO trade (Fear Of Missing Out) as they attempt a reset for the upcoming year.  This year, better yet, this month (so far) has been one for the record books. We had an election with record turn out and we got news from 3 vaccine suppliers.  This has led markets to turn higher with the lagging Russell 2000 on course to have its best month on record (+20.6% MTD), the beaten-down Energy sector has risen by a record +34% month to date, while the VIX so-called fear index fell by -45% last week alone which is its largest weekly drop on record. Now of course today is the last day of the month and anything can happen, but it is fair to say that investor sentiment appears to have swung in a positive direction in the past month.  Black Friday sales has always stood as an early indicator of holiday retail and the numbers show that visits to physical retail stores dropped by -50% since last year… but online sales rose by +22% since last year.  Today is Cyber Monday and online sales are expected to reach a record $13 billion, according to Adobe Analytics. The first wave of COVID vaccinations appears to be just weeks away, but infection numbers continue to grow with a fresh surge expected to come as a result of Thanksgiving travel.  We still have a few late-year challenges to contend with.  The Senate returns today and the House follows later this week. They, collectively are going to have to approve a budget in order to keep the Government up and running.  Additionally lawmakers are set to reengage in stimulus negotiations, though there seems to be little incentive to get something done before the inauguration.  The Treasury and the Fed are likely to square off in the wake of last week’s tiff as Secretary Mnuchin and Chairman Powell appear before lawmakers. You may recall that the Administration requested a return of funds from the Fed essentially shutting down at least 3 of the Fed’s stimulus programs.  We have a month ahead of higher frequency economic indicators such as PMIs, confidence indexes, and employment figures, all of which have been progressing but have recently shown signs of slowing.  With all of the positive and negative forces converging on these next few months, December appears like it will be anything but smooth sailing.

 

THE MARKETS

 

Stocks traded up to fresh highs on Friday despite growing virus cases and some questions about AstraZeneca’s recently published vaccine trials. The S&P500 climbed by +0.24%, the Dow Jones Industrial Average added +0.13%, the Russell 2000 Index traded up by +0.56%, and the Nasdaq rose by +0.92%.  Bonds rose and 10-year treasury yields lost -5 basis points to 0.83%. Bitcoin fell by nearly -10% in the past few trading sessions, but added most of it back by the writing of this note… we will hear more about Bitcoin in the coming weeks.

 

NXT UP

 

– MNI Chicago PMI (Nov) is expected to come in at 59.0, less than last month’s 61.1 reading.

– Pending Home Sales (Oct) may have grown by +1.0% after falling by -2.2% in September.

– Richmond Fed President Thomas Barking will speak today.

– In the week ahead, we will get manufacturing/services PMIs, Construction Spending, Ward’s Vehicle Sales, The Fed Beige Book, Factory Orders, Durable Goods Orders. ADP Employment Change, and the Government’s monthly unemployment numbers. We still have a few earnings reports as well.  Please refer to the attached economic and earnings calendars for details.

 

daily chartbook 2020-11-30

econ numbers 11_30

earnings releases11_30