Dominating headlines yesterday was the news that Moderna’s Covid-19 vaccine has proven 94.5% effective in a late-stage trial, a week after Pfizer reported similar results in its own trial. More data is expected from the study later this month, and Moderna said that it plans to ask health authorities to clear the vaccine by early December, according to The WSJ. Similar to Pfizer’s use, stock markets popped around the world, with hard-hit value names the biggest winners. In the S&P 500, the energy sector jumped 6.5%, while financials and industrials each gained more than 2%.
Moderna itself gained 9.6%, taking its year-to-date gain past the 400% mark and its market cap past $35bn. Notably, healthcare was the only of the S&P’s 11 sectors to deliver a negative return yesterday, and Pfizer’s share price is actually down 5% year-to-date.
Late last week, Goldman Sachs chief US equity strategist David Kostin told CNBC that the firm has upgraded the healthcare sector from underweight to overweight, noting that the sector is trading at its lowest relative valuation in at least 40 years. On Monday, it was also reported that Warren Buffet’s Berkshire Hathaway made new investments in drugmakers during Q3, including Abbvie, Merck, Pfizer and Bristol-Myers Squibb.
Markets have paused for breath this morning, however, with the FTSE down 0.5% due to GBP gaining ground and increasing pressure on a Brexit trade deal. US futures are mixed, with only the Nasdaq poised to open higher. Outside of equities, and despite the vaccine news, gold has held firmer following last week’s dip. The precious metal remains close to the $1,900 mark, below the highs of $2,000 seen in August but still up 28% in the last year.
Tesla to join the S&P 500 index
The Dow Jones Industrial Average led the way in the US yesterday, closing the day 1.6% higher, while the S&P 500 was up 1.2% and the Nasdaq Composite 0.8%. In a near-mirror of last week’s Monday rally after the Pfizer vaccine news, Boeing, Chevron and Walt Disney Co led the Dow after Moderna’s vaccine announcement. The trio closed the day 8.2%, 7.1% and 4.6% higher respectively.
Outside of the vaccine-induced rally, one other major headline that landed post-market close yesterday was the news that Tesla will be added to the S&P 500. That means a host of passive funds, containing trillions in assets, that are tracking the index will be forced to buy the appropriate weighting of Tesla stock. The electric car maker’s share price jumped by more than 13% in late trading following the news. It would immediately enter the index in the top 10 stocks by market capitalisation and will come into effect on 21st December during the quarterly rebalancing. This continues to shine the spotlight on electric car makers just as we have seen huge rallies in the prices in sector peers such as Nio as competition hots up and only serves as confirmation that there is plenty more to come in this arena.
S&P 500: +1.2% Monday, +12.3% YTD
Dow Jones Industrial Average: +1.6% Monday, +5% YTD
Nasdaq Composite: +0.8% Monday, +32.9% YTD
FTSE 100 continues to pare gains
Both the FTSE 100 and FTSE 250 jumped on the Moderna news, adding 1.7% and 1.8% respectively. Over the past month, the FTSE 100 is now up by more than 9%, and its year-to-date loss has been pared back to -14.9% from the more than -30% it stood at during its low point. On Monday, three FTSE 100 stocks closed the day more than 9% higher: Rolls Royce Holdings, hotel and restaurant firm Whitbread, and International Consolidated Airlines Group. Similar to the US, oil giants fared well too, with Royal Dutch Shell and BP adding 6.3% and 5.9%. At the other end of the index, Ocado was the day’s worst performer, dropping 4.1% in response to a potential return to normality and its likelihood to stymie the growth of online grocery shopping. Similarly, Just Eat Takeaway fell by 3.3%.
FTSE 100: +1.7% Monday, -14.9% YTD
FTSE 250: +1.8% Monday, -10.4% YTD
What to watch
Walmart: Supermarket giant Walmart has gained 28% in 2020 so far, as its status as a seller of essential goods meant it was able to keep stores open during Covid-19. The business has also had substantial success with its online efforts and has launched Amazon Prime rival Walmart+ this year. The firm reports its Q3 earnings today, after delivering a substantial earnings beat in Q2. Wall Street analysts are expecting an earnings per share figure of $1.18 for Q3 and will be watching closely for the progress that Walmart+ has made since its September announcement. Currently, 25 analysts rate the firm’s stock as a buy or overweight, six as a hold, and two as an underweight or sell.
Home Depot: DIY supplier Home Depot also delivers its latest quarterly earnings today, the day after announcing an $8bn deal to acquire HD Supply Holdings, which distributes products for the maintenance, repair and operations market. The acquisition will certainly be a key point of focus on the company’s earnings call, as will the ramifications of an effective vaccine for the firm. Home Depot’s stock has jumped 28% in 2020, as consumers stuck at home have taken on improvement projects, but that demand boost may not be sustained if and when normality resumes.
US retail sales: Retail sales data for October will be reported in the US today, after Friday’s report that consumer confidence took an unexpected hit in November. Expectations are that retail sales will post a sixth straight month of gains for October.
Crypto corner: Bitcoin surge continues as experts think it could “pull a Tesla”
Cryptoasset backers and analysts are increasingly divided over the outlook for Bitcoin amid the ongoing surge in its price.
Bitcoin jumped above $16,000 this week amid news of another vaccine against coronavirus, this time from Moderna.
Tyler Winklevoss, CEO of Gemini and a Bitcoin billionaire, reportedly said recently that he expects to see an all-time-high price for Bitcoin before 2020 is over.
“Even though the price has climbed from 10k to almost 14k in less than a month, it hasn’t really gone on a breakout run yet. When we start to see 3-5k surges, then the bulls will be on the run,” he said on Twitter.
Economist and market analyst Alex Kruger added he thinks the cryptocurrency could end up pulling a “Tesla” like rally in the months ahead
“Been asked if there’s a level where I would significantly reduce my bitcoin exposure. There isn’t. There are levels where I would reduce exposure if intraday price action and/or funding metrics indicate may be putting in a local top. That’s about it. $BTC could rip faces off in the next 2-3 months, pull a Tesla. The returns profile remains asymmetric.”