Hello, this is Tom Jalics, Chief Market Strategist at Fifth Third Bank.
Most major U.S. equity benchmarks were mixed last week, following a strong rally in the prior two weeks. The S&P 500 fell 0.7% in total return for the week, while the tech-heavy Nasdaq Composite Index rose 0.3%. Small and mid-cap stocks outperformed large cap, with the Russell 2500 Index clocking a 2.1% gain for the period. Energy, industrials, materials, and financials all ended higher. Defensive sectors such as utilities and REITs came under some pressure, as did healthcare and consumer staples. News on vaccine progress continued to be upbeat, but was offset by worsening COVID-19 infection rates and increased state and local restrictions across the country to help slow the spread.
Treasury yields were lower, with the 10-year U.S. Treasury yield ending the week down 8 basis points to 0.82%. West Texas Intermediate (WTI) Crude Oil rose 5.0% to end the week at $42.15 per barrel. Gold fell 1.0%, ending the week at just under $1,871 per ounce.
Moderna announced last Monday that its COVID-19 vaccine is 94.5% effective based on an interim analysis of late-stage data. Pfizer and BioNTech said last Wednesday that follow-up data from the preliminary results show their COVID-19 vaccine candidate is 95% effective, up from the originally disclosed 90%+. Pfizer and BioNTech submitted a request for emergency use authorization (EUA) on Friday and expect potential approval by the middle to end of December.
A surge in new COVID-19 infections is driving a wave of fresh restrictions across the U.S. These include mask mandates, curfews, limits on the amount of people that can gather indoors, school closures, and bans on indoor dining. This continued to drive concerns about the headwinds for an already fragile economic recovery. However, the new rules implemented appear to be much less strict and far more narrow than the measures imposed in the initial phase of the pandemic, thus economic headwinds will likely be much less severe.
The domestic economic calendar provided a mixed view of the strength of the U.S. economy. Retail sales disappointed, with the headline measure rising 0.3% in October. It was the slowest pace in six months, and may indicate more hesitation among consumers amid rising virus cases and a lack of more fiscal stimulus. Manufacturing production rose 1.0% in October, for a sixth straight advance that matched economists' forecasts. The gain leaves the factory production index 5% shy of its February level. Housing starts were a bright spot, rising 4.9% in October, to the fastest pace since February and exceeding estimates for a 3.2% gain. Existing home sales were also better than anticipated. Sales of previously owned U.S. homes unexpectedly rose in October to the highest level in nearly 15 years. Jobless claims increased to 742,000 in the week of Nov. 14, driven by a surge in hurricane-hit Louisiana. Consensus projected a drop to 700,000 jobs.
In the week ahead, the fight against COVID-19 continues with governments around the world imposing tighter restrictions on people and businesses as cases and deaths surge. The economic calendar in the U.S. is relatively busy, even considering a shortened week due to the Thanksgiving holiday on Thursday. The most closely watched reports include the Conference Board's measure of consumer confidence, the second reading on third quarter economic growth, durable goods orders, and consumer spending. The Federal Reserve releases the minutes from its last meeting. Fed watchers will look for clues on policy makers’ support for a change to asset purchases. U.S. equity and bond markets are closed Thursday, and Friday will see an early close for U.S.-denominated fixed income securities.
As always, we’ll be watching and reporting back to you next week. Thank you.
