Monday Morning Reads
- U.S. Tech Is Key to Sorting It.
- Crack the Door Open for Christmas
- Fed Faces Tricky Post-Pandemic Transition
- JPMorgan Sees Possible $300 Billion Rebalancing Flow
- Caught In Climate Trap
- Highly Effective in Preventing Covid
- Quest to Vaccinate the World
- ‘We’re Not in Kansas Anymore’ Moment
- ‘Very Stressful’
- A Day in the Life of an Amazon Warehouse Worker
- Direct Indexing
- Will Algos Go Wild?
— Lisa Abramowicz (@lisaabramowicz1) November 23, 2020
The tug of war between cyclicals and tech stocks will likely continue for the next few weeks as traders weigh growing vaccine optimism against rising coronavirus cases and lockdown measures. The last few Mondays have seen outsized gains given strong vaccine results from Pfizer (PFE) and Moderna (MRNA), while AstraZeneca (NASDAQ:AZN) and the University of Oxford became the latest to report an interim analysis of their clinical trials overnight (see below). Cyclicals will likely start today's session with a leg up given the news as Dow futures rose 0.7% vs. the 0.4% advance of the Nasdaq. Predictions are also growing that the Fed will unveil more monetary action when it meets in December after the central bank said it will comply with a Treasury request to return unused funds meant to backstop five emergency lending programs.
One regimen, given to some 2,700 people, showed an effectiveness of 90% when trial participants received a half dose, followed by a full dose at least one month apart. The other dosing regimen, given to nearly 9,000 people, showed 62% efficacy when given as two full doses at least one month apart. The combined analysis from both dosing regimens found average vaccine effectiveness of 70%. Despite a lower average efficacy rate than its rivals, the British shot has some distribution advantages. While vaccines from Pfizer (PFE) and Moderna (MRNA) have to be stored frozen, the Astra-Oxford (AZN) shot can be kept at refrigerator temperature and comes at a potentially lower cost.
At this weekend's summit in Riyadh, G20 leaders pledged to ensure fair distribution of COVID-19 vaccines, drugs and tests around the world so that poorer countries were not left out of a post-coronavirus recovery. "We will spare no effort to ensure their affordable and equitable access for all people," read the communique. "We recognize the role of extensive immunization as a global public good." One of the questions still out there is what role America will play in the process. So far the U.S. hasn't joined COVAX, which is the WHO's flagship vaccine distribution plan.
"On the 11th or on the 12th of December, hopefully the first people will be immunized across the U.S., across all states, in all the areas where the state departments of health will have told us where to deliver the vaccines," Moncef Slaoui, head of the government's Operation Warp Speed, told CNN's State of the Union. Current plans forecast another milestone around May: a 70% immunization rate across the U.S., which "would allow for true herd immunity to take place." Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) have already requested emergency use authorization for their product, while Moderna (NASDAQ:MRNA) will finish its application by the end of the month. Even if (or when) approved, there is uncertainty over whether the general public will trust the jab enough to take it. According to a Pew Research Center report in September, only about half of U.S. adults say they would get a COVID-19 vaccine.
A COVID-19 antibody cocktail from Regeneron Pharmaceuticals (NASDAQ:REGN), including casirivimab and imdevimab, has received Emergency Use Authorization from the FDA to treat patients who are not hospitalized but are at high risk of developing the disease. The cocktail was one of three pharmaceutical treatments given to President Trump for treatment of COVID-19 in October. It's the second antibody drug cleared this month for emergency authorization to use in a similar set of COVID-19 patients after Eli Lilly's (NYSE:LLY) bamlanivimab previously had won approval. Previous drugs cleared for COVID-19 use, such as Gilead's (NASDAQ:GILD) remdesivir, were only authorized for hospitalized patients. REGN +4.9% premarket.
"We see some vulnerability in equity markets in the near term from balanced mutual funds, a $7T universe, having to sell around $160B of equities globally to revert to their target 60:40 allocation either by the end of November or by the end of December at the latest,” according to JPMorgan Chase. "If the stock market rallies into December, there could be an additional $150B of equity selling into the end of the month by pension funds that tend to rebalance on a quarterly basis," added strategists led by Nikolaos Panigirtzoglou. For the retail investor, is the 60/40 portfolio still the way to go? Recent contributors on Seeking Alpha have suggested otherwise based on pricing and real returns. See articles by Jussi Askola and KCI Research.
Guitar Center, owned by private equity firm Ares Management (NYSE:ARES), has filed for Chapter 11 bankruptcy as the coronavirus pandemic moved shopping online and weighed on purchases of new music gear. The company, which has nearly 300 stores across the U.S., as well as subsidiaries including Music & Arts, has negotiated to have $375M in debtor-in-possession financing from its existing lenders and intends to raise $335M in new senior secured notes. Guitar Center will continue to stay in business during the bankruptcy process, but it could miss another major shopping period due to weaker consumer spending this holiday season.
Economic activity across the eurozone plunged in November after members of the bloc introduced new lockdowns and social restrictions to contain the spread of coronavirus. The flash eurozone PMI composite output index, which tracks both manufacturing and services sectors, came in at 45.1, marking the lowest reading in six months. Meanwhile, the ECB said it will continue its pandemic emergency purchase program as long as COVID-19 persists and continues to disrupt regular economic activity. Things aren't looking brighter. Germany is looking to extend its current lockdown into December as the number of coronavirus infections remains high across the country.
The Trump administration is close to issuing a list of 89 Chinese aerospace and other companies that would be unable to access U.S. technology exports due to their military ties, according to Reuters. That would restrict companies like Commercial Aircraft Corp of China, which is looking to compete with Boeing (NYSE:BA) and Airbus (OTCPK:EADSY), as well as Aviation Industry Corporation of China. The list, if published, could further escalate trade tensions and comes just ten days after President Trump unveiled an executive order prohibiting U.S. investments in Chinese companies that Washington said are owned or controlled by the Chinese military.
Go Deeper: GE, Honeywell among those that have supply deals with COMAC and AVIC.
What else is happening...
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In Asia, Japan closed. Hong Kong +0.1%. China +1.1%. India +0.4%.
In Europe, at midday, London +0.3%. Paris +0.6%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.7%. S&P +0.6%. Nasdaq +0.4%. Crude +1.4% to $43.01. Gold -0.4% at $1865.70. Bitcoin +3.1% to $18693.
Ten-year Treasury Yield +2 bps to 0.85%
Today's Economic Calendar