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Mystery Theater Set to Begin



Chief Market Analyst

There is some mystery theater to take in today as it is anyone’s best guess where the stock market will choose to go.

Will the reopening trade win out or will it be the shutdown trade? Will there be hope in fiscal stimulus plans or will there be despair? Will there be optimism about COVID vaccines or will there be pessimism about the explosion of coronavirus cases?

Maybe we will see a little bit of everything as the day progresses. That was the case yesterday. Whatever the case turns out to be, it promises to be the difference between a winning week for the S&P 500 and a losing week, unless of course the S&P 500 closes 0.09% higher, which means the week would end in a draw.

That’s right. For all of the big headlines this week, the S&P 500 has gone nowhere. Look more closely, though, and there has been a lot of movement in spaces tied to the reopening trade.

The Russell 2000 is up 2.3% for the week; oil prices are up 4.7% for the week; copper prices are up 2.7% for the week; the Philadelphia Semiconductor Index is up 2.5%; the S&P 500 energy sector is up 5.5% while the industrials, financials, and materials sectors are up 2.0%, 1.4%, and 1.2%, respectively.

Conversely, counter-cyclical sectors like utilities (-4.0%), health care (-2.8%), and consumer staples (-0.8%) have underperformed.

Overall, then, one has a good bit of latitude to label this an optimistic-minded week for the stock market. It just doesn’t come across that way at the index level at first blush. That’s because the heavily-weighted information technology (+0.1%), communication services (-0.4%), and health care (-2.8%) sectors have been pulling their weight in a different manner.

As it stands now, there isn’t much weight in the futures trade as a directional driver.

The S&P 500 futures are down eight points and are trading 0.2% below fair value, the Nasdaq 100 futures are up three points and are trading slightly above fair value, and the Dow Jones Industrial Average futures are down 95 points and are trading 0.3% below fair value.

The mixed disposition is interesting as it fits right in with the mixed disposition of leading headlines.

  • Pfizer (PFE) and BioNTech (BNTX) are filing an application with the FDA today to provide emergency use authorization for their COVID-19 vaccine.
  • Eli Lilly’s (LLY) baricitinib received emergency use authorization from the FDA to be used in combination with remdesivir for patients hospitalized with COVID-19.
  • The Treasury Department is not going to extend five emergency programs — the PMCCF, SMCCF, MLF, MSLP, and TALF — funded by the CARES Act and is requesting the Federal Reserve return unused funds ($455 billion) to the Treasury.
  • The Federal Reserve has said it would prefer that the Treasury Department extend all emergency facilities.
  • Retailers Williams-Sonoma (WSM)Foot Locker (FL)Ross Stores (ROST), and The Buckle (BKE) exceeded consensus Q3 EPS estimates by a large margin.
  • California said it is implementing a curfew from 10:00 p.m. – 5:00 a.m. as part of its efforts to help contain the spread of the coronavirus; meanwhile, Joe Biden and President Trump have both said they will not call for a national lockdown.

It will be entertaining to see who gets the curtain call today. It could be the bulls or it could be the bears, but like any good mystery theater, there is just no telling ahead of the curtain going up at 9:30 a.m. ET.

Originally Posted on November 20, 2020 – Mystery Theater Set to Begin

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