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Vaccine and Stimulus Developments Lead Markets Higher

Weekly Update – December 18, 2020

  • The S&P 500 index rose 1.7% last week to a fresh closing high as the US moved toward approving a second COVID-19 vaccine and lawmakers neared an agreement on another pandemic stimulus plan.
  • The market benchmark ended the week at 3,709.41, up from last Friday’s closing level of 3,663.46 and marking its highest closing level ever. The index also reached a new intraday high Friday at 3,726.70. It is now up 15% for the year to date.
  • The advance came despite COVID-19 cases and hospitalizations also reaching fresh highs again in the US, as investors are optimistic about the ability of vaccines and more stimulus to help the US economy recover.
  • Distribution of the vaccine produced by Pfizer (PFE) and BioNTech (BNTX) got under way this week and a Food & Drug Administration advisory panel recommended that Moderna’s (MRNA) vaccine also receive emergency use authorization. Meanwhile, Congressional leaders are working on negotiations for some $900 billion in pandemic relief that would include another round of direct payments to households.
  • The week’s advance was led by the technology sector, up 2.8%, followed by consumer discretionary, up 2.2%. Just one sector ended the week in the red: Energy fell 0.7%.
  • The technology sector’s gainers included shares of Synopsys (SNPS), which climbed 7.9% as the software maker said it signed an accelerated share repurchase agreement with Mizuho Markets Americas to buy back $250 million of its shares. Under the agreement, the company will get an initial share delivery of 824,000 shares, with the remainder, if any, to be settled by April 9.
  • Also in the technology sector, PayPal (PYPL) shares rose 10% this week as the payment technology company received a boost to its price target from KeyBanc. KeyBanc’s price target on the stock is now $235, up from $215, while the firm kept its investment rating on the shares at outperform.
  • In consumer discretionary, Chipotle Mexican Grill (CMG) shares also benefited from positive analyst actions. Stifel upgraded its investment rating on the stock to buy from hold while increasing its price target on the shares. JPMorgan also boosted its price target on the shares while keeping its investment rating at neutral. Chipotle shares rose 9.1%.
  • On the downside, the energy sector’s drop came even as crude oil futures rose. Among the sector’s decliners, Kinder Morgan (KMI) shares fell 3.7% this week as Credit Suisse downgraded its investment rating on the stock to neutral from outperform.
  • Next week will be a holiday-shortened week, with the US stock market closing several hours early Thursday for Christmas Eve and closed all day Friday for Christmas Day. The week’s economic data will thus be consolidated into the first four days of the week.
  • Among the data highlights, revised Q3 gross domestic product will be released Tuesday, as well as December consumer confidence and November existing home sales. November new home sales, consumer spending and inflation data will be released Wednesday in addition to December consumer sentiment. Thursday’s data will include November durable goods and capital goods orders along with weekly jobless claims.

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