Hello, this is Tom Jalics, Chief Market Strategist at Fifth Third Bank
Most major U.S. equity benchmarks finished last week higher as optimism around the path for COVID-19 vaccines remained elevated. The S&P 500 Index added 1.7% in total return for the week, while the tech-heavy Nasdaq Composite Index rose 2.2%, and the blue chip Dow Jones Industrial Average rose 1.2%.
Bond yields moved higher last week with the positive vaccine headlines. The U.S. 10-year Treasury yield rose to 0.97%, up nearly 13 basis points from the prior week. The yield curve steepened, as the yield on the 2-year U.S. Treasury held steady at 0.15%. West Texas Intermediate (WTI) Crude Oil rose 1.6% to end the week at $46.26 per barrel. Gold rose 2.9%, ending the week at just under $1,839/ounce.
Last week, the U.K. approved a COVID-19 vaccine from Pfizer and BioNTech, as expected. The Food and Drug Administration meets to consider emergency use authorization for that vaccine in the U.S. this week and for a vaccine candidate from Moderna the following week. The Washington Post pointed out that if both vaccines receive emergency authorization, 40 million vaccine doses could be distributed in the US by year-end, enough for 20 million people to receive protection. Vice President Pence told governors last week that distribution could begin by the third week of December. In addition, a new poll from the Pew Research Center revealed that 60% of Americans now say they would “definitely” or “probably” get a vaccine, up from 51% in September. Approval and distribution expectations helped to overshadow some renewed attention on logistical complications. Still, COVID-19 trends continue to worsen, with record hospitalizations and deaths.
The big focus on the domestic economic calendar was last Friday's labor market report. The jobs numbers disappointed, with U.S. employers adding 245,000 to payrolls, much lower than the 460,000 expected by economists. The report indicated that the surge in COVID-19 cases is impacting workers and slowing the economic recovery. The unemployment rate edged lower to 6.7%, as anticipated. However, the labor force participation rate dipped to 61.5%. Average hourly earnings rose at a 4.4% year-over-year pace, ahead of forecasts and matching the prior month's pace.
Additionally, the ISM Manufacturing Purchasing Managers' Index (PMI) fell, but remained well in expansion territory for November. The index dipped to 57.5, weaker than expectations. The drop was concentrated in the employment index, which fell back below the level of 50 that indicates expansion. The ISM Services PMI also fell to 55.9, to the narrowest pace of expansion since the index first rebounded above 50 in June.
In the week ahead, as mentioned earlier, the Food and Drug Administration is scheduled to meet on December 10th to discuss emergency use of a COVID-19 vaccine. President Trump plans to host a COVID-19 vaccine summit on Tuesday to discuss the authorization and delivery of vaccines. In Europe, negotiators are expected to conclude Brexit trade discussions. France has warned it may veto a trade deal between the U.K. and the European Union if it doesn't like the terms. The European Central Bank's (ECB) Governing Council meets to "recalibrate" its monetary policy this Thursday. Economists are expecting the ECB to increase and extend its pandemic bond-buying program and give banks access to more long-term loans. On the U.S. economic calendar, the first measures of inflation for November, small business optimism, and the JOLTS report are all on the docket for this week.
As always, we’ll be watching and reporting back to you next week. Thank you.
