Optimism Turns To Pessimism

By Nicholas Jasinski | Thursday, November 12

About Face.  Yesterday and today have been a near-perfect reversal of Monday's and Tuesday’s trading: Defensive and growth pockets have outperformed cyclical and value areas. The early week’s vaccine optimism turned to pessimism on the pandemic and economic fronts. It’s a moody market.

Earlier this week, stocks roared higher on the news that a highly effective Covid-19 vaccine appeared to be just on the horizon. But there’s still plenty of economic damage the pandemic can cause between now and when such a vaccine is distributed to a meaningful proportion of the population.

Another day of record coronavirus cases and hospitalizations and several countries, states, and localities responding with activity restrictions seems to have served as a reminder of that. Chicago issued a stay-at-home advisory. New York is closing bars and restaurants at 10 p.m. and limiting gatherings. School districts across the country have gone online-only. And widescale lockdowns in Europe have been extended.

Despite the efforts, experts worry that transmission of the virus is still likely to increase during the winter months, as more people spend their time indoors, colleges across the country send students home, and families gather for the Thanksgiving and December holidays.

The greater appreciation of the challenges facing the economic recovery with a resurgent pandemic recalled pre-election hopes for fiscal stimulus legislation. Remarks today from Federal Reserve Chairman Jerome Powell echoed his earlier calls for Congress to spend more. And Bloomberg reported that the White House was backing away from negotiations on a bill, leaving it up to Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi. Those two are reportedly farther apart from a deal than Pelosi had been with Treasury Secretary Steven Mnuchin.

Technology, health care, consumer staples, and communication services sectors closed down only slightly today, while financials, materials, industrials, and energy were among the biggest losers. Reopening-sensitive stocks bore the brunt of the declines: Carnival dropped 7.9%, AMC Entertainment Holdings fell 6.2%, and United Airlines Holdings lost 4.3%.

The stay-at-home crowd was better off, after falling at the beginning of the week: Zoom Video Communications stock gained 3.7%, while Activision Blizzard stock also rose. Alphabet, Microsoft, and Facebook each slipped by barely half a percent.

Gold prices climbed and Treasury yields fell, as the prices of the securities rose.

Major indexes closed near their lows of the day today. The Dow Jones Industrial Average ended down 1.1%, the S&P 500 dropped 1%, and the tech-heavy Nasdaq Composite fell 0.7%, giving up its morning gain.

DJIA: -1.08% to 29,080.17
S&P 500: -1.00% to 3,537.01
Nasdaq: -0.65% to 11,709.59

The Hot Stock: Bio-Rad Laboratories +2.9%
The Biggest Loser: Carnival -7.9%

Best Sector: Health Care -0.4%
Worst Sector: Energy -3.2%