This week in the markets


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Rising COVID-19 cases weigh on US stocks, while rest of world rallies on positive vaccine news

November 20, 2020

Positive news on COVID-19 vaccines boosted global equities for the second week in a row. Following Pfizer Inc.’s announcement that its vaccine candidate was more than 90% effective, Moderna Inc. added to the optimism that vaccines will eventually end the pandemic when it said that its candidate was 94.5% effective. Not to be outdone, Pfizer soon followed with updated results claiming more than 95% effectiveness for its vaccine. Encouraging data was also released regarding the Oxford-AstraZeneca vaccine, and the US Food and Drug Administration approved the first at-home COVID-19 test kit. The wave of hopeful news sent several stock benchmarks — including the S&P 500, the Dow Jones Industrial Average and the MSCI All-Country World Index — to all-time highs. However, the S&P 500 and the Dow retreated to end the week lower, as tightening restrictions in many areas (to stem the rapid spread of the virus) weighed on sentiment. This was also worsened by a public disagreement between the Treasury and the Federal Reserve over releasing funds aimed at supporting the economy.

Other asset classes sent mixed messages. Confidence that vaccines will accelerate the return to normal economic activity boosted the price of oil, and sent some safe havens, such as gold, lower. However, government bonds fell, sending an opposite signal. Yields on 10-year Government of Canada bonds and US treasuries have now given back most of the gains since the Pfizer news. This was possibly in response to signs that the economic recovery is losing momentum and that the chance of additional federal stimulus in the US is fading.

Canada’s S&P/TSX Composite Index climbed to its highest level since late February and is now down less than 1% year-to-date. Technology was among the top-performing sectors, led once again by Shopify Inc. The e-commerce giant continues to benefit from the pandemic-induced boom in on-line shopping, as well as a recently announced partnership with Alipay, Asia’s biggest digital payment platform. Higher oil prices lifted the energy sector, and lower interest rates buoyed the financials sector. The defensive interest rate-sensitive utilities and staples sectors declined as rates fell. The materials sector was also down, pressured by falling gold prices. Surprisingly, Canadian retail sales jumped, solidly beating expectations.

As the S&P 500 backed away from its record high and sunk into negative territory for the week, the tech-heavy Nasdaq Composite Index held onto a gain, despite the continued retreat of many of the large cap computer and Internet companies that led the market most of the year. While there were some notable large cap exceptions (for example, Tesla Inc., which surged as it was added to the S&P 500), most of the gains in US equities came in small capitalization stocks. The Russell 2000 small cap index broke out to its first new high in over two years. Utilities and health care led the declining sectors of the S&P 500, while energy led the advancing groups. Economic data mostly pointed to a slowing of activity: claims for unemployment benefits rose for the first time in five weeks, retail sales rose at the slowest pace in six months, and the Empire State Manufacturing Index fell more than expected.

All major stock markets in Europe and Asia were higher. Countries especially hard hit by COVID-19 earlier this year and seen as major beneficiaries of vaccine progress (for example, Italy and Spain) were strongest. Asian equities received a boost after many countries in the region signed the world’s largest free-trade agreement.

 

What’s ahead next weeks:

Canada

  • No significant economic releases.

U.S.

  • Markit Purchasing Managers’ Indices (November)
  • Conference Board Consumer Confidence Index (November)
  • Gross Domestic Product (3rd Quarter)
  • Durable goods orders (October)
  • Personal income and spending (October)
  • Univ. of Michigan Consumer Sentiment Index (November)
  • New home sales (October)

This weeks market closing values

EQUITY INDICES Level Change 1-week YTD 1-year 5-year
      CAD CAD CAD CAD
S&P/TSX 17,019.10 + 343.46 + 2.06% - 0.26% + 0.08% + 4.85%
S&P 500 3,557.54 - 27.61 - 1.25% + 11.02% + 12.39% + 10.82%
DJIA 29,263.48 - 216.33 - 1.22% + 3.39% + 3.30% + 10.01%
FTSE 100 6,351.45 + 35.06 + 0.75% - 15.00% - 11.75% - 2.97%
CAC 40 5,495.89 + 115.73 + 1.89% - 2.15% - 1.92% + 4.10%
DAX 13,137.25 + 60.53 + 0.21% + 5.04% + 5.02% + 5.23%
Nikkei 25,527.37 + 141.50 + 0.81% + 13.37% + 13.20% + 8.31%
Hang Seng 26,451.54 + 294.68 + 0.65% - 4.94% - 2.48% + 2.67%
CURRENCY RETURNS CAD Change 1-week YTD 1-year 5-year
US$ 1.3094 - 0.0043 - 0.33% + 0.80% - 1.58% - 0.38%
Euro 1.5528 - 0.0018 - 0.11% + 6.60% + 5.41% + 1.79%
Yen 0.0126 + 0.0001 + 0.45% + 5.48% + 2.97% + 3.02%
CANADIAN TREASURIES Yield Change COMMODITIES USD Change
3-month 0.11 + 0.00 Oil $42.15 + $2.02
5-year 0.42 - 0.04 Gold $1,870.65 - $18.55
10-year 0.65 - 0.07 Natural Gas $2.19 - $0.66