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Energy and Financial Sectors Boost S&P to New High as Vaccine Developments Raise Investor Sentiment

Weekly Update – November 27, 2020

  • The S&P 500 index rose 2.3% last week to a new record closing high amid encouraging progress in COVID-19 vaccine candidates and the beginning of the transition to President-Elect Joe Biden’s team from the Trump administration.
  • The market benchmark ended the week at 3,638.35, up from last Friday’s closing level of 3,557.54. The new closing high was reached just two sessions after its previous closing high of 3,635.41 had been recorded. The gains were posted in a short week as the market was closed all day Thursday for the Thanksgiving holiday and ended Friday’s regular trading session three hours earlier than usual.
  • The market’s highs this week came despite COVID-19 hospitalizations also reaching a new record above 90,000. Investors have been focusing more in recent days on the progress being reported for COVID-19 vaccine candidates. Candidates being developed by Moderna (MRNA) as well as by Pfizer (PFE) and BioNTech (BNTX) have had efficacy rates of 90% or more in studies reported in recent weeks, while data released this week by AstraZeneca (AZN) showed the COVID-19 vaccine candidate the company is developing with the University of Oxford had, on average, a 70% efficacy rate.
  • While the efficacy rate reported by AstraZeneca wasn’t as strong as the others, its data were complicated by an error that forced the trial to change dosing regimens. Meanwhile, investors continue to be optimistic as Morgan Stanley said the company’s vaccine will be “an important part of the solution” given that its manufacturing is straightforward and low-cost and that the company can manufacture more than 3 billion doses by next year.
  • Investor sentiment also was boosted this week as General Services Administration Administrator Emily Murphy, who had been resisting giving the green light to Biden’s team, finally started the transition of power at the White House. This helped relieve investors’ concerns about political instability while the market also approved Biden’s pick for Treasury secretary, former Federal Reserve Chair Janet Yellen.
  • Among sectors, the energy sector had the largest percentage gain of the week, up 8.7%, followed by financials, which rose 4.8%, and consumer discretionary, which climbed 3.0%. Only one sector fell as real estate shed 0.3%.
  • The energy sector’s climb came as crude oil futures also rose amid the optimistic market sentiment. Among the sector’s gainers, Occidental Petroleum (OXY) shares jumped 23% while Apache (APA) rose 22%.
  • In the financial sector, gainers included Wells Fargo (WFC), which climbed 12% as Raymond James upgraded its investment rating on the banking company’s stock to outperform from underperform.
  • The consumer discretionary sector’s gainers included Dollar Tree (DLTR), whose shares rose 16% as the dollar store operator reported fiscal Q3 earnings per share and sales above year-earlier results and analysts’ expectations.
  • On the downside, decliners in real estate included Equinix (EQIX). Shares of the digital infrastructure provider fell 3.8% this week. The company said it will spend $55 million to build its third international business exchange data center in Osaka, Japan.
  • Data due early next week include manufacturing statistics for November, pending home sales for October and motor vehicle sales for November. However, the November employment figures due Friday are likely to get the most attention.

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