Daily Insights
Stocks are sharply higher. Futures were solidly higher on election clarity before today’s vaccine news, which has added to gains.
- The S&P 500 Index opened about 4% higher at a fresh all-time high.
- The small-cap Russell 2000 Index—part of the reopening trade—spiked more than 7%.
- European stocks are more than 4% higher in midday trading. The vaccine will dominate headlines, but Brexit negotiations between the European Union and the United Kingdom continue today.
- Asian markets closed solidly higher ahead of the Pfizer news and will add to those gains in tonight’s session.
Tremendous earnings upside. Another strong week of results has put third-quarter S&P 500 earnings on track to fall just 7.5% year-over-year, more than 13 percentage points above September 30 estimates with about 50 S&P 500 companies yet to report.
Upbeat guidance despite headwinds. Consensus next 12 months S&P 500 earnings estimates have increased by 1.6% since September 30, bucking the long-term pattern of reductions during the reporting season and setting up a strong earnings rebound in 2021.
Extreme strength last week. The S&P 500 added more than 1% on four consecutive days last week. Since World War II, this is only the fourth time that has happened—the others were April 1970, October 1974, and October 1982. Future returns after those three instances were all quite bullish, up more than 20% on average a year later, which we will discuss later today on the LPL Research blog.
Slingshot for stocks. One week after losing 5.6% (worst week since March), the S&P 500 bounced back and gained 7.3% last week (best week since April). This type of move is quite rare, last happening in March 2009 and March 2020, which led to continued higher prices in the near-term in both instances.
Week ahead. This week’s economic calendar includes:
- Tuesday: October’s National Federation of Independent Business’s (NFIB) Small Business Index and September’s US Bureau of Labor Statistics JOLTS Job Openings
- Thursday: Weekly initial unemployment claims, the Consumer Price Index (CPI), and the Treasury Budget
- Friday: Producer Price Index and Michigan sentiment
- Earnings season winds down with just 15 S&P 500 companies reporting this week.
Veterans Day is Nov. 11. November 11 is Veterans Day and a Federal holiday. LPL Financial and the stock market will be open, however, the bond market will be closed. Some banks may also be closed.
Technical update. The early morning surge pushed the S&P 500 to a breakout above its previous record high of 3588, recorded September 2. That level can be viewed as new support going forward, assuming equities are able to hold those gains today. The surge in the small-cap Russell 2000 Index also has it on the verge of a record high, something it hasn’t done since August 2018.
COVID-19 news. While the good news on Pfizer’s vaccine trial was being celebrated, new COVID-19 cases in the United States continued to surge over the weekend. New cases have surpassed 100,000 for five straight days, pushing the weekly uptrend in the seven-day average to over 30% (source: COVID Tracking Project). The rise in hospitalizations has been more gradual, but unfortunately, it’s picking up speed. Global cases topped 50 million.
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