It was undeniably broad.
All of the major, as well as the narrower equity indices moved higher (for the most part) on Monday. The session truly was about as positive in hindsight as any we've seen without the "blowout" headline performance numbers. A November that from higher elevations might appear to be fraught with danger, has instead become one of forward-looking optimism. This would appear difficult to explain, as the SARS-CoV-2 coronavirus spreads way too rapidly for anyone to become complacent, and as leaders both local and regional, move back toward shutting or partially shutting down economies in order to reduce human interaction.
We have written about the "vaccine put," which is very real. One after the other, between those working on either vaccines or therapeutics, over a less than three-week period, good news has been released by Pfizer (PFE) , BioNTech (BNTX) , Moderna (MRNA) , then Pfizer again, Eli LIlly (LLY) , Regeneron (REGN) , and AstraZeneca (AZN) , as well as a Covid-related acquisition announcement made by Merck (MRK) .
So it was that the Monday session of a holiday week opened and held at elevated levels on elevated trading volume from the prior Friday. Not that common an occurrence. At the New York Stock Exchange, winners topped losers by more than 3 to 1, advancing volume beat declining volume by roughly 5 to 1. At the Nasdaq Market Site, winners beat losers by close to 2 to 1, and advancing volume bested declining volume by more than 8 to 3.
The interesting thing would be that the large-caps, outside of the Dow Industrials (which counts for a lot less than you think), underperformed the broader marketplace. The S&P 500 gained 0.6%, as the Nasdaq Composite moseyed along for a 0.2% increase. The transports, mid-caps and small-caps carried equity markets higher as they have been doing all November.
Incredible November. OK, tell us more...
Month to Date
The story is wild. Equity markets, especially when taken at headline value, appear to have moved sideways for more than a week, almost two. By most data-driven measures these markets have run wild since the closing bell on Oct. 30, and on darned positive breadth at that. Solid earnings? Certainly better than what was priced in, but it's much more than that. While large-caps have run hard -- the S&P 500 is +9.4% month to date, and the Nasdaq Composite is +8.9% -- it is the more economically sensitive indices that have really taken flight.
The Dow Transports are up 11.9% for November. The S&P 400 (mid-caps) is up an astonishing 14.8%, while the small-caps have just hit the cover off of the ball. The S&P 600 is up 19.1%, while the Russell 2000 is up 18.2% just this month alone. Incredible.
Want to talk about sectors? OK, how about Energy, the sector that so many (to include yours truly) left for dead. The Energy Select Sector SPDR ETF (XLE) is now up (sit down before continuing) 33.5% since Halloween. Two weeks ago the XLE took it's own 50-day line (in what appears to me to be a gap that could get dangerous, and then took the 200-day line last week, only to break out yet again on Monday.
Back to Monday
The markets were trading higher. Then we all felt the algorithms kick the action up a notch with about an hour left in the regular session. Rumor ran across Wall Street that President-Elect Biden had chosen an heir apparent to Secretary Steven Mnuchin at Treasury. There were three supposed finalists, and one was clearly favored more than the other two by Wall Street. Hmm.
The VIX sold off. The CBOE Options Total Put/Call Ratio (including both single stock and equity index-related options) finished the session at its lowest spot in more than 10 weeks.
For the day, which like the month was led higher by Energy stocks, economically sensitive sectors followed suit. The Financial, Industrial, Discretionary, and Materials sectors all contributed to the spread of the color green across your screen for the day.
Even peering inside the Information Technology sector, as it has been, is quite telling. The Technology Select Sector SPDR ETF (XLK) may have closed close to unchanged (-0.02%), but this sector really should perhaps be broken in three. The Philadelphia Semiconductor Index ran 1.6% on Monday, while the Dow Jones U.S. Software Index closed "unch" at -0.05%, and the Dow Jones U.S. Computer Hardware Index fell hard at -2.6%, again on Apple (AAPL) weakness. If this sounds as familiar as watching old episodes on The Andy Griffith Show on TV Land, you are not alone. This story has been aired almost every day of late.
By the way, anyone else watching "Happy Days" on MeTV around dinner time? Wow, those later seasons were terrible.
Thing One
Remember "The Cat in the Hat"? Remember those two blue-haired humanoid creatures that ran amok, until the lead character, the "Cat" could capture them, allowing the situation in the house to calm down? Thing One and Thing Two. The markets are experiencing their own version of "Thing One and Thing Two" right now, and unlike those two wild things, these are both potentially positive. Very much so.
I have already told you that the algos kicked it up a notch at around 3 p.m. ET on Monday. Thing One. By all reports, the president-elect has chosen former Fed Chair Janet Yellen to be his nominee at Treasury. Why is this such a big deal? One, instant credibility. Current Fed Chair Jerome Powell has done an excellent job running the central bank through the current crisis. That is undeniably true. That said, given Janet Yellen's reputation is one for being meticulous and careful, while staying outside of politics, I am sure that there must have been times in 2018 that President Trump probably regretted switching out a leadership that most likely would have been slower to raise interest rates at that time.
In addition, Yellen and Powell are thought to have great respect for each other, and appear to have worked well together before. Continued cooperation between the Fed (I would not expect a President Biden to make a change there, at least not until the pandemic is subsiding and the economy seriously accelerating) and the U.S. Treasury will be imperative to achieving better outcomes at the national level.
Hey Sarge, weren't you critical of Janet Yellen's dovish Fed back in the day? Good memory. Yes, I was. That said, this is the careful type of accommodative economist that might be needed right now. Not only is Yellen likely easily confirmable by a U.S. Senate regardless of majority control, this is supportive of enhanced fiscal stimulus financed through the Fed just in the odd case that Congress might ever decide to get down to business again. In short, I like this pick.
Thing Two
This was really an after-hours story. It certainly cheered not only U.S. equity index futures markets, but global equities markets as well. While not yet formally conceding the election, President Trump on Monday tweeted that he had recommended that the GSA (General Services Administration) "do what needs to be done.... in the best interest of the country." In other words, President Trump told his administration to start cooperating with President-Elect Joe Biden's transition team.
While the move is probably overdue, it is welcome. Even as the president's legal pursuits have not yet come to an end, preparation must be made for a smooth transfer of power should nothing come of those efforts.
The indication is that the current administration will now at least consider that the election might have been lost. This had been one gigantic risk that if not yet quite removed from price discovery appears well on its way to being priced out. You may or may not be on board with this transfer of power, but doing so peacefully is what makes us (and other democracies/republics) exceptional.
Ride the Wind
I ran through my charts last night, making note of names that I have written about publicly that either are breaking out, or are still very much capable of doing so. Of course the list is long, but there are few names, all of which I remain long, that appear poised for greatness... or at least perhaps will try to make a run. I will stick to names that I have written on at least somewhat recently in order to keep the list manageable.
Off to the Races: Boeing (BA) , General Electric (GE) , Raytheon Technologies (RTX) , Tesla (TSLA)
Fighting Off Pivotal Pull: AbbVie (ABBV) , Moderna (MRNA) , Peloton (PTON)
Knocking at the Door: Walmart (WMT)
Readers should take a look at these daily charts on their own and see what they come up with. Of course there are others, but I find these interesting as well as relevant. Remember this game is more about driving in runs than it is about batting average. Price targets and panic points are far more important than being right more often than wrong (though that certainly helps).
Economics (All Times Eastern)
08:55 - Redbook (Weekly): Last 1.7% y/y.
09:00 - FHFA HPI (Sep): Expecting 0.9% m/m, Last 1.5% m/m.
09:00 - Case-Shiller HPI (Sep): Expecting 5.1% y/y, Last 5.2% y/y.
10:00 - Consumer Confidence (Nov): Expecting 98.1, Last 100.9.
10:00 - Richmond Fed Manufacturing Index (Nov): Expecting 21, Last 29.
16:30 - API Oil Inventories (Weekly): Last +4.174M.
The Fed (All Times Eastern)
11:00 - Speaker: St. Louis Fed Pres. James Bullard.
12:00 - Speaker: New York Fed Pres. John Williams.
12:45 - Speaker: Federal Reserve Vice Chair Richard Clarida.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (ADI) (1.32), (BBY) (1.70), (DKS) (1.02), (DLTR) (1.15), (EV) (0.87), (HRL) (0.45), (SJM) (2.23), (MDT) (0.80), (TIF) (0.66)
After the Close: (DELL) (1.40), (GPS) (0.33), (HPQ) (0.52), (JWN) (-0.10), (VEEV) (0.63), (VMW) (1.44)
(Boeing, AbbVie, Apple and Walmart are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
