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Tech stocks are expected to continue to fall, as S&P 500 futures are down, while the Dow has swung. Monday’s action saw investors turn to value or cyclical stocks, which have been battered by the COVID-19 pandemic and would benefit from an economic recovery.
Naturally, strategists begged investors not to get ahead of themselves, given a long list of uncertainties – for example, how many fiscal stimulus we will get and how long we will live with the pandemic. – which weigh on this market.
Our call of the day comes from Jonathan Golub, chief US equities strategist at Credit Suisse, who said he’s looking for two signals that will tell him whether the current direction of the market which sees value stocks and small caps, which also benefit from a better economic climate, keep winning at the expense of technology.
“I’m looking at the direction of interest rates and the direction of the VIX,” Golub told customers on a Monday night call to discuss Pfizer’s vaccine news with a team of top pharmaceutical analysts.
“For stocks to go up and pro-cyclical trading to continue to work, you want to see the 10-year bond yield TMUBMUSD10Y,
push towards 1.25%, or keep going up, and you want to see the VIX come back to or below 20, ”Golub said. “That would be the real metric to tell you whether value trading has legs or not.”
The VIX VIX,
or the Cboe Volatility Index, measures stock market volatility and has just come out of a pre-election run that sent it to 35. Its long-term average is 19.
The 10-year bond yield, meanwhile, jumped 13.6 basis points to an eight-month high of 0.957% on Monday, the biggest daily rise in months. Stronger economic growth, or perceptions of, means higher returns and lower prices, as the two move in opposite directions. The yield was held just below this level on Tuesday.
Note that a certain caution was heard at the end of the day Monday by the Federal Reserve, on the market’s expectations of an economic rebound.
“Given the high level of uncertainty associated with the pandemic, assessing the pressures on valuations is particularly difficult, and asset prices remain vulnerable to significant declines if investor risk sentiment declines or the economic recovery recovers. weakens, ”the central bank said in its financial stability report released after the markets closed.
The steps
YM00 technology stocks,
ES00,
NQ00,
are having a difficult day, while it is mixed elsewhere and SXXP European equities,
have moved higher. Asian stocks had a mixed day. CL.1 oil price,
should add to the biggest gain in six months.
The buzz
Actions of Eli Lilly LLY,
are in place after the drugmaker’s COVID-19 antibody treatment was approved for emergency use by the Food and Drug Administration on Monday. Meanwhile, Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said Pfizer’s PFE,
the coronavirus vaccine could begin its deployment by the end of the year. On Monday, the United States counted 130,000 more daily cases.
The European Commission said it had told Amazon it believed the e-commerce giant had violated antitrust rules and had opened a second investigation into potential preferential treatment for Amazon’s own offerings and some sellers.
Actions of Beyond Meat BYND,
are falling, after the meat firm’s results fell well below Wall Street expectations.
Profits are ahead of home builder DR Horton DHI,
A new survey shows small business owners grew more anxious in October. Jobs are still to come.
The Fed identified climate change as a risk to financial stability for the first time. President Donald Trump has reportedly demoted a key climate change scientist.
Table
Thomas Lee, founder of Fundstrat Global Advisors, said he expected that once investors are convinced of a “road map” to get out of the pandemic, markets will get a “violent rotation towards epicenter stocks ”, aka cyclicals.
What we saw on Monday was a “small step” of 10% in that direction, he told customers in a note. “And as the chart below shows, today’s rally barely closes any relative YTD performance gap. [year-to-date] between FANG and epicenter stocks, ”he said. FANG is a benchmark for highly traded tech companies, such as social media giant Facebook FB,
technology giant Apple AAPL,
Netflix NFLX streaming platform,
and Alphabet’s Google GOOGL,
Fundstrat
But Lee suggested that investors keep those big tech players who are now part of our lives – Amazon AMZN,
Zoom ZM videoconferencing software,
Netflix, etc. and will continue to do so.
Shuffle playbacks
NASA identifies 300 million habitable planets.
Just a goat, crawling on its hind legs.
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