The futures for the major indices are sporting some sizable gains this morning based on news that everyone expected to hear. That news is that the FDA approved the Covid vaccine from Pfizer (PFE) and BioNTech (BNTX) for emergency use authorization in patients 16 years or older.
Currently, the S&P futures are up 27 points and are trading 0.7% above fair value, the Nasdaq 100 futures are up 57 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are up 243 points and are trading 0.8% above fair value.
That news, however, is not the actual reason why the futures are sporting sizable gains. The forward-looking stock market doesn’t trade on such happenstance.
It is good news to be sure, but the real trading gist of the matter is that the approval news everyone expected to hear is simply an accoutrement for a momentum-driven market. It sounds good and looks good, and the timing is very good — coming on the heels of a down week for the stock market.
It has effectively woken up the trading echoes, providing a spark to get things going, but it’s also not the only spark.
There has been a spate of M&A activity, there has been increased focus on the prospect of Congress making inroads on a fiscal stimulus deal, and, lest we forget, there is an awareness that everyone’s favorite market catalyst — the Fed — will be conducting its FOMC meeting this week.
Market participants know the Fed isn’t going to be anything other than dovish. The question is, just how much more dovish might the Fed get with its forward-looking communication and asset purchase program when it releases its policy directive and updated economic and interest rate projections on Wednesday?
This is something the market has to look forward to as the week begins.
In terms of the fiscal side of things, there are reports this morning that the bipartisan group of senators who made a $908 billion stimulus proposal will introduce two bills that split that package — one bill for $748 billion that carves out state and local aid and liability protection and a second bill for $160 billion that includes state and local aid and liability protection.
It is uncertain still if such proposals will be acceptable to Congressional leadership, yet the market at least seems heartened by a growing chorus of congressmen speaking to the notion that they won’t go home for the holidays until there is an agreement of some kind on a relief package.
For now, at the start of the week, that qualifies as a bullish spark.
The same goes for the M&A activity, which is feeding into a belief that the market — and valuations — haven’t hit their peak yet. AstraZeneca (AZN) in particular has fostered that notion with a $39 billion cash-and-stock bid for Alexion Pharmaceuticals (ALXN) that translates to $175.00 per share or a 45% premium over Friday’s closing price for ALXN.
That is lighting a fire under ALXN and it is apt to create a spark for other biopharmaceutical stocks. It is the headline deal of the day, which also includes PluralSight (PS) being taken private in a $3.5 billion transaction, Huntington Banchares (HBAN) and TCF Financial (TCF) planning to merge in an all-stock deal, and Electronic Arts (EA) acquiring Codemasters for $1.2 billion.
There is also some chatter that State Street (STT) is exploring options for its asset management business.
It’s all part of why the futures market is looking good this morning, as it’s all part of a mix of news that is waking up the echoes.
Originally Posted on December 14, 2020 – Pfizer Vaccine Authorization Helps Wake Up the Trading Echoes
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