Despite Vaccine Delays, Investors Remain Optimistic

Yesterday, the market rally was nudged off its tracks late in the session after reports Pfizer (PFE) will only ship 50 million vaccines by the end of 2020 rather than the initial target of 100 million. The thing is this breaking news was old news from the Wall Street Journal.

Management previously pointed to several factors, including scaling up the raw material supply chain on time. Meanwhile, full-scale production lines in the United States and Europe are now complete, and the company is confident it will be able to supply the 1.3 billion doses targeted for 2021.

By the closing bell, it was clear the “news” only slightly dissuaded investors. It is a historic endeavor. And it stands to reason there will be hiccups and speed bumps along the way.

The news triggered algorithms, triggering an early swoon. Most investors didn’t take the bait, even though they are sitting on humongous profits. It seems many investors are focused on the long-term distribution of vaccines, and the near-term help from the federal government and central banks. 

Mitch & Chuck

Costello: You got a pitcher on this team?

Abbott: Wouldn't be a fine team without a pitcher.

Costello: What’s his name?

Abbott: Tomorrow.

Costello: You don't want to tell me today?

Who's on First? - Abbott & Costello

I wish I could say the stimulus saga was as intriguing as a Shakespearian plot, or we had hopes of a Deus ex-Machina like Greek drama, but it has boiled down to something more Vaudevillian. 

Yesterday, Senate Majority Leader McConnell said a stimulus compromise is "within reach," and soon thereafter, Senate Minority Leader Schumer said he didn't believe that Mr. McConnell was in a deal-making mood. 

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Costello: What's the guy's name on first?

Abbott: No, What’s on second.

Costello: I'm not askin’ you who's on second!

Abbott: Who's on first.

Message of the Market

For the second consecutive session, market breadth was a lot stronger than reflected in the major equity indices.

Combined new 52-week highs climbed to 493 against 12 new 52-week lows. 

The problem was the leadership mix. Energy doesn’t have the pull it once had and could never equally offset weakness in Communication Services and Technology.  

The broadening of the rally continues, albeit at a slower pace this week:

• S&P 500 Winners: 291 average gain: +25.87%
• S&P 500 Losers: 214 average loss: -17.17%
• Nasdaq Winners: 610 average gain: +75.23%
• Nasdaq Losers: 392 average loss: -20.91%

Year-to-Date

Market gains are still an attractive lure for those professionals that missed the rally. Even if it’s plain old window dressing, there will be a lot of pressure to show winners in year-end portfolios.

• NASDAQ Composite: +37.9%
• S&P 500: +13.5%
• Russell 2000: +10.8%
• Dow Jones Industrial Average: +5.0%

Bracing for Latest on Labor

As we brace for the latest on U.S. employment, it should be noted layoff announcements have plunged dramatically. In April, there were 671,129 announced layoffs; last month had 64,797 layoffs. The decline is encouraging, but one has to wonder about the impact of the latest round of government lockdowns.

To see the chart, click here.

The problem, however, is how many businesses themselves have shuttered and shut down for good:

Entertainment

• 11,666
• 857,620 year-to-date: +5,860%

Technology

• 11,431
• 77,826 year-to-date: +22.7%

Transportation

• 10,455
• 107,129 year-to-date: +543%

Portfolio Approach

We added took profits in Materials and added two new positions in Consumer Discretionary in our Hotline Model Portfolio yesterday.

Today’s Session

Equity futures were slightly higher all morning but have gotten a little wobbly after the jobs report came in below official Wall Street consensus. 

The street was looking for 470,000 new jobs, and the actually initial tally is 245,000.  That said, there were whispers of possibly a negative number considering some high frequency trends amid more economic restrictions in November.

I’m going to do a deep dive, but there were positives:

• Wages +4.4%
• Transportation & Warehouse jobs +145,000

The negatives:

• 400,000 fewer in labor force
• -74,000 fewer employed

Much will be made of lower U3 unemployment rate declining to 6.7% as a plus but not when it comes from people leaving the labor force.  The report is poor enough to force more pressure on Congress but firm enough to underscore a stubborn resolve of Americans and American businesses.

On that note, the rally feels like its waning a little.  It would be impressive if the market found a higher gear today.  That probably would only happen with concrete news on fiscal stimulus.