More Stimulus?

By Nicholas Jasinski |  Tuesday, December 15 Awaiting Stimulus. The imminent approval of a second Covid-19 vaccine and a big step toward a fiscal stimulus package lifted stocks today, despite the latest tougher restrictions amid rising cases in the U.S. and Europe. The Dow Jones Industrial Average rose 1.1%, the Nasdaq Composite added 1.2%, the S&P 500 gained 1.3%, and the Russell 2000 jumped 2.4%. Both the Nasdaq and the Russell closed at record highs. All 11 sectors in the S&P 500 closed in the green, and value-oriented groups led the market higher. Investors were once again left weighing the near term against the medium and long term. As over most of the past month, optimism and hope over the unfolding vaccine rollout faces the conflicting reality of surging infections now, with tighter measures crimping economic activity in more areas. Coronavirus-related hospitalizations in the U.S. are nearly double what they were during the spring and summer peaks, increasing the likelihood of still more lockdowns and restrictions on nonessential businesses in the coming weeks. The first Americans received the vaccine from drugmaker Pfizer and its partner BioNTech yesterday, as the U.S. virus death toll hit 300,000. More than a million Americans a week are contracting Covid-19. Canada and the U.K. are among the other countries that have begun to administer the Pfizer/BioNTech vaccine. Moderna is expected to secure emergency use approval from the U.S. Food and Drug Administration later this week for its Covid-19 vaccine. Investors expect billions of doses of vaccines to be distributed globally next year. Meanwhile, New York’s governor and mayor both warned that more expansive limits on activity were on the horizon. Large parts of California are under restrictive stay-at-home orders. The U.K. government said that London would move into tier 3—the toughest level of restrictions—tomorrow to combat surging cases in the capital. The Netherlands will enter a five-week lockdown, the country’s toughest restrictions to date. Germany will also tighten restrictions over Christmas, starting tomorrow. Bottom line, there is plenty on the Covid-19 front for investors to be hopeful about, but stricter measures being adopted across the globe serve as a reminder that the pandemic is far from over. As for fiscal stimulus, a bill appears to be nearing a compromise, with Congress motivated to act before leaving Washington for the holidays at the end of this week. The latest bipartisan proposal includes $748 billion in coronavirus relief spending, with contentious aid for state and local governments and liability protections left out of the bill. A spending package now could lessen the economic blow of the continuing wave of infections until widespread vaccinations allow the recovery to stand on its own. Congressional leaders were scheduled to meet on the bill this evening, and an announcement of a deal could come as soon as tonight or early tomorow. Expect cyclical stocks to rip higher tomorrow if that news arrives, and for Treasury yields to rise.

 

DJIA: +1.13% to 30,199.31 S&P 500: +1.29% to 3,694.62 Nasdaq: +1.25% to 12,595.06 The Hot Stock: Apartment Investment & Management +16.1% The Biggest Loser: Tyson Foods -2.2% Best Sector: Energy, Utilities +2% Worst Sector: Consumer Staples +0.2%