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Weekly Updates

S&P up 8.8% Month to Date, Concerns Over Lock-Downs Weigh on Market

Weekly Update – November 20, 2020

  • The S&P 500 index edged down 0.8% last week as investors worried about the potential effects of increased restrictions as governments seek to contain the COVID-19 pandemic, but encouraging vaccine data also brought hope.
  • The market benchmark ended the week at 3,557.54, down from last week’s closing level of 3,585.15, which had been a record close at the time. The S&P 500 closed higher earlier this week, recording a fresh closing high of 3,626.91 Monday, but wasn’t able to top that in the days since then.
  • This week’s slight decline stands in stark contrast to the strong gains posted in the first half of the month. The earlier November gains were so strong, the S&P 500 is still up 8.8% for the month to date.
  • The market shifted to a more cautious tone this week as escalating COVID-19 counts have prompted many governors to resume restrictions in an effort to contain the spread of the virus. Investors are fretting over how well the US economic recovery can withstand the effects of the restrictions.
  • Adding to concerns, the Centers for Disease Control & Prevention issued a sharp warning against Thanksgiving travel. As travelers called off holiday trips, airlines reported an uptick in cancellations.
  • Still, the weekly drop was limited as encouraging vaccine data provided a source of hope. Moderna (MRNA) reported a 94.5% efficacy rate for its COVID-19 vaccine candidate earlier this week and said it intends to submit for an Emergency Use Authorization with the Food & Drug Administration “in the coming weeks.” Pfizer (PFE) and BioNTech (BNTX) followed that with a report that the latest efficacy analysis of their COVID-19 vaccine candidate found it was 95% effective; they said they would file an Emergency Use Authorization application Friday.
  • The utilities sector led to the downside with a decline of 3.9%, followed by a 3.0% drop in health care. All but four sectors were in the red. The four gainers were led by energy, which jumped 5.7%, followed by a 1.1% increase in materials, a 1.1% rise in industrials and a 0.6% edge up in financials.
  • Decliners among utilities stocks included American Electric Power (AEP), which fell 8.2% as Wolfe Research downgraded its investment rating on the stock to peer perform from outperform.
  • In health care, shares of Centene (CNC) slipped 8.8% as the company said it signed an agreement to acquire Apixio, a health-care technology company, for an unspecified amount. The deal is expected to close by the end of the year.
  • On the upside, the energy sector’s climb came as crude oil futures rose. Among the gainers, shares of Diamondback Energy (FANG) jumped 19% on the week as Goldman Sachs raised its price target on the stock to $37.50 from $34.50 while keeping its investment rating at neutral.
  • TechnipFMC (FTI) was also strong this week, rising 13%, as the company said it received a notice to proceed for a contract from Sempra LNG and Infraestructura Energetica Nova at their Energia Costa Azul liquefied natural gas facility in Baja California, Mexico.
  • Among other hot stocks, shares of Boeing (BA) climbed 6.7%, boosting the industrial sector, as the aerospace company’s 737 Max won Federal Aviation Administration approval to fly passengers again. The plane has been grounded since March 2019 following crashes that killed 346 people in Ethiopia and Malaysia.
  • Next week’s schedule of economic data is consolidated into the first three days of the week as the market will be closed Thursday for the Thanksgiving Day holiday and trading hours will be abbreviated Friday.
  • Monday’s reports will include purchasing managers’ indexes from Markit for November while Tuesday’s data include the S&P CoreLogic Case-Shiller national home price index for September and consumer confidence for November. Wednesday will bring a slew of reports including weekly jobless claims; October durable goods orders, new home sales, consumer spending and core inflation; and November consumer sentiment.
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