Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for November 17, 2020.
Dominating headlines yesterday was the news that Moderna’s Covid-19 vaccine has proven 94.5% effective in a late-stage trial, a week after Pfizer reported similar results in its own trial. More data is expected from the study later this month, and Moderna said that it plans to ask health authorities to clear the vaccine by early December, according to The WSJ. Similar to Pfizer’s use, stock markets popped around the world, with hard-hit value names the biggest winners. In the S&P 500, the energy sector jumped 6.5%, while financials and industrials each gained more than 2%.
Moderna itself gained 9.6%, taking its year-to-date gain past the 400% mark and its market cap past $35bn. Notably, healthcare was the only of the S&P’s 11 sectors to deliver a negative return yesterday, and Pfizer’s share price is actually down 5% year-to-date.
Late last week, Goldman Sachs chief US equity strategist David Kostin told CNBC that the firm has upgraded the healthcare sector from underweight to overweight, noting that the sector is trading at its lowest relative valuation in at least 40 years. On Monday, it was also reported that Warren Buffet’s Berkshire Hathaway made new investments in drugmakers during Q3, including Abbvie, Merck, Pfizer and Bristol-Myers Squibb.
Markets have paused for breath this morning, however, with the FTSE down 0.5% due to GBP gaining ground and increasing pressure on a Brexit trade deal. US futures are mixed, with only the Nasdaq poised to open higher. Outside of equities, and despite the vaccine news, gold has held firmer following last week’s dip. The precious metal remains close to the $1,900 mark, below the highs of $2,000 seen in August but still up 28% in the last year.
Tesla to join the S&P 500 index
The Dow Jones Industrial Average led the way in the US yesterday, closing the day 1.6% higher, while the S&P 500 was up 1.2% and the Nasdaq Composite 0.8%. In a near-mirror of last week’s Monday rally after the Pfizer vaccine news, Boeing, Chevron and Walt Disney Co led the Dow after Moderna’s vaccine announcement. The trio closed the day 8.2%, 7.1% and 4.6% higher respectively.
Outside of the vaccine-induced rally, one other major headline that landed post-market close yesterday was the news that Tesla will be added to the S&P 500. That means a host of passive funds, containing trillions in assets, that are tracking the index will be forced to buy the appropriate weighting of Tesla stock. The electric car maker’s share price jumped by more than 13% in late trading following the news. It would immediately enter the index in the top 10 stocks by market capitalisation and will come into effect on 21st December during the quarterly rebalancing. This continues to shine the spotlight on electric car makers just as we have seen huge rallies in the prices in sector peers such as Nio as competition hots up and only serves as confirmation that there is plenty more to come in this arena.
- S&P 500: +1.2% Monday, +12.3% YTD
- Dow Jones Industrial Average: +1.6% Monday, +5% YTD
- Nasdaq Composite: +0.8% Monday, +32.9% YTD
FTSE 100 continues to pare gains
Both the FTSE 100 and FTSE 250 jumped on the Moderna news, adding 1.7% and 1.8% respectively. Over the past month, the FTSE 100 is now up by more than 9%, and its year-to-date loss has been pared back to -14.9% from the more than -30% it stood at during its low point. On Monday, three FTSE 100 stocks closed the day more than 9% higher: Rolls Royce Holdings, hotel and restaurant firm Whitbread, and International Consolidated Airlines Group. Similar to the US, oil giants fared well too, with Royal Dutch Shell and BP adding 6.3% and 5.9%. At the other end of the index, Ocado was the day’s worst performer, dropping 4.1% in response to a potential return to normality and its likelihood to stymie the growth of online grocery shopping. Similarly, Just Eat Takeaway fell by 3.3%.
At the top of the FTSE 250 were Cineworld Group, retirement firm Just Group and cruise company Carnival, which were three of six companies in the index that rallied by double digits yesterday.
- FTSE 100: +1.7% Monday, -14.9% YTD
- FTSE 250: +1.8% Monday, -10.4% YTD