Weekly Market Recap

In the United States, we survived the initial COVID surge in March, the second smaller surge (in deaths) in July, and we will survive the latest surge (similar in terms of deaths). The markets experienced a schizophrenic moment last week when Pfizer reported that their COVID vaccine was 90% effective in their latest large-scale phase III testing. The news sent equity markets barreling higher. By Tuesday and Wednesday, the euphoria was over and markets had given up some of the gains due to the continued spike in Coronavirus cases. Cities like New York, Chicago, and Los Angeles have reinstituted lockdown measures and that made markets jittery. Yet, just this morning, Moderna, another drug company working on a COVID vaccine just announced that their drug was 94% effective in preventing COVID. At some point, with tests nearing 1.7 million per day, we have to come to the realization that the virus is no justification for shutting down our economy (such action would affect not just the those susceptible to the virus, but all 330 million inhabitants of the country).

The economic numbers were solid last week, all while 3rd quarter corporate earnings continue on the path of posting a record quarter. According to FactSet, a company that measures the rate at which companies beat or fall short of earnings & revenue expectations each quarter, companies stock market performance is less correlated to actual earnings and revenue reported and more correlated to outside factors, such as Coronavirus worries. When a vaccine or multiple vaccines are ready and being distributed, perhaps investors will get back to basing their investments on earnings and market fundamentals. Speaking of fundamentals, the NFIB Small Business Optimism Index came in at a higher-than-expected number for October and very near the pre-COVID highs in February. In addition, Job Openings were higher for September than the August level and Weekly Jobless Claims hit the lowest level since the COVID Crisis began. Some key announcements to watch this week will be the Retail stocks and Consumer Cyclicals that report 3rd quarter earnings and to see what guidance, if any, they offer for the 4th quarter. Also be on the lookout for economic surprises. The market is expecting most of the economic releases to be in-line with the previous month. If we get some positive surprises, that could help the market steadily march higher this week.

Read the rest of our thoughts in this week’s Market Recap.