S&P futures hit record as Pfizer says vaccine effective Futures tracking the S&P 500 hit a record high on Monday after Pfizer said its experimental vaccine was more than 90% effective in preventing COVID-19 based on initial data from a large study.
The companies said they have so far found no serious safety concerns and expect to seek U.S. emergency use authorization later this month. (…) Positive trial results could lead to shot being available for use by end of the year
Bloomberg:
(…) The findings are based on an interim analysis conducted after 94 participants contracted Covid-19. The trial will continue until 164 cases have occurred. If the data hold up and a key safety readout Pfizer expects in about a week also looks good, it could mean that the world has a vital new tool to control a pandemic that has killed more than 1.2 million people worldwide. (…)
The data do have limits. For now, few details on the vaccine’s efficacy are available. It isn’t known how well the shot works in key subgroups, such as the elderly. Those analyses haven’t been conducted. And it isn’t known whether the vaccine prevents severe disease, as none of the participants who got Covid-19 in this round of analysis had severe cases, Gruber said.
However, the strong reading from the first large-scale trial to post efficacy results bodes well for other experimental vaccines, in particular one being developed by Moderna Inc. that uses similar technology. Its big trial could generate efficacy and safety results in weeks. If that study succeeds as well, there could be two vaccines available in the U.S. by around year-end.
Pfizer expects to get two months of safety follow-up data, a key metric required by U.S. regulators before an emergency authorization is granted, in the third week in November. If those findings raise no problems, Pfizer could apply for an authorization in the U.S. this month. (…)
So far, the trial’s data monitoring committee has identified no serious safety concerns, Pfizer and BioNTech said. (…)
Fall in Jobless Rate Shows Healing Labor Market Economy added 638,000 jobs in October and the jobless rate fell a percentage point to 6.9%
The job market has now recovered 12.1 million of the 22 million jobs lost in March and April, when the shutdown of businesses led the jobless rate to soar to a post-World War II high of 14.7%.
October’s job gain would have been higher without the release of temporary census workers from public payrolls. Private-sector employers added 906,000 jobs last month, a pickup from September, more than offsetting a drop of 268,000 jobs in the public sector. Industries that hired the most workers last month included leisure and hospitality—particularly restaurants—retail and construction.
Actually, 271k, 30% of new private jobs, were in leisure and hospitality, not particularly buoyant sectors as the pandemic continues.
This chart plots total employment levels and private and local government employment all indexed at 100 in February, all still down about 7% and swooshing:
The Payrolls Index (employment x hours x wages) is closely correlated with growth in consumer expenditures. Down 6.9% YoY, weak labor income could weigh heavily on Holiday spending.
Revolving credit is down $90 Billion (-10.7%) since February and is down 10.6% YoY. Weak labor income, declining credit demand…who’s really betting on a sharp decline in the savings rate to save Christmas?
Deloitte’s holiday retail report reveals that 38% of Americans intend to spend less during this holiday season than last year with 40% aiming at boosting their savings. In total, shoppers expect to spend $1,387 per household during the holiday season this year, down -7% YoY:
Still, job growth has slowed each month since June. And optimism about Friday’s report—which was derived from surveys in mid-October—was tempered by more recent data showing falling employment at small businesses and slower hiring in service industries overall.
(…) temporary workers accounted for one in six new jobs last month, a sign employers remain cautious about the outlook.
In October, 3.7 million Americans said they were unemployed due to a permanent job loss, the Labor Department said. That exceeded the number who said they were on a temporary layoff, at 3.2 million, for the first time since February. That suggests that while millions of Americans have been recalled to jobs they lost this spring, most of those still unemployed will need to find new work, a challenging prospect at time when the economy appears to be downshifting into a slower phase of the recovery. (…)
The labor market faces several potential obstacles that could slow the expansion. The rise in virus infections could prompt cities and states to shut down businesses again and consumers to stay at home, cutting their spending on services.
Winter weather could also hurt industries such as restaurants that have been serving patrons outside. And the looming expiration of emergency jobless benefits could cause consumers to reduce spending, in turn pressuring employers to reduce costs by laying off employees.
Among the hardest hit could be restaurants, which were among the first to rehire but could be the first to lay people off if the economy deteriorates. Restaurant hiring accounted for some of the biggest overall job gains last month. (…)
Goldman Sachs, naturally, sees the glass half-full:
The spike in unemployment during the pandemic reflected a sharp increase in temporarily laid off workers, a pattern which has historically been associated with a rapid labor market recovery. Indeed, the recall of workers—most of whom never searched for new employment—to their prior jobs drove the labor market recovery in the first few months. Even after the significant rehiring reported in the household survey of today’s employment report, over 43% of the newly unemployed workers since the virus shock still report being on temporary layoff.
But the lines have crossed (see chart above) and 57% are now permanently unemployed. Moreover, 59% of remaining laid-off employees are actually looking for a job, meaning they are not hopeful the be recalled.
Private job openings have been falling since January 2019. They fell 9.6% since February 2020 and are 12.3% below their February 2019 level.
Manufacturing employment has fared better but remains almost 5% below February’s level compared with 7% for services. Unfortunately, manufacturing only employs 12 million people, ten times fewer than services. Restaurants and bars employ 10.2 million people, down 2.1 million since February, or 23% of all service-providing job losses.
If people opt to use their savings, consumption (some 70% of the economy) could be sustained but this might be asking much with the enduring pandemic and other worries such as
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Tighter Municipal Budgets Shrink Retiree Health Benefits Some city and state retirement programs are swapping in health stipends for medical plans or cutting back benefits, saying they can’t afford to keep them as the pandemic crushes sales-tax income and tourism dollars.
For all 50 states combined, revenue declines for 2020 and 2021 could reach 13% cumulatively, according to Moody’s Analytics projections, while the average cost of an employer health-care plan for an individual increased 4% in 2020 to $7,470, according to the Kaiser Family Foundation nonprofit. (…)
While state governments have legal protections for their workers’ pension plans, not all have protections for retiree health plans. (…)
For those prospective retirees who have yet to qualify for Medicare, medical-benefit cuts can mean working longer hours for more years, or even picking up another job. (…)
Could a President-elect Biden save Christmas? So far, there are no signs of any cooperation from Trump. And since the Senate, for now at least, remains Republican, we can only hope for a small deal, if any, but likely not in time for this Christmas.
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McConnell: Signs of economic recovery point to smaller COVID-19 stimulus U.S. Senate Majority Leader Mitch McConnell said on Friday that economic statistics, including a 1 percentage point drop in the unemployment rate, showed that Congress should enact a smaller coronavirus stimulus package that is highly targeted at the pandemic’s effects.
The Republican senator told a news conference in Kentucky that the fall to a 6.9% jobless rate, combined with recent evidence of overall economic growth, showed the U.S. economy is experiencing a dramatic recovery.
“I think it reinforces the argument that I’ve been making for the last few months, that something smaller – rather than throwing another $3 trillion at this issue – is more appropriate,” McConnell told reporters. (…)
But his call for a narrow package was quickly rejected by House of Representatives Speaker Nancy Pelosi, a Democrat, who has been working to broker a COVID-19 stimulus deal near the $2 trillion mark with Treasury Secretary Steven Mnuchin.
“It doesn’t appeal to me at all, because they still have not agreed to crush the virus. If you don’t crush the virus, we’re still going to have to be dealing with the consequences of the virus,” Pelosi told a news conference on Capitol Hill.
“That isn’t anything that we should even be looking at. It wasn’t the right thing before,” she added. (…)
Pelosi insisted that any agreement must include effective support for testing, tracing and vaccine development, as well as aid to state and local governments. Trump and his Republican allies have balked at Democratic demands for state and local aid, calling it a bailout for Democratic-run states and cities.
China Car Sales Go From Strength to Strength as Virus Eases
Retail sales of cars, SUVs and multiple-purpose vehicles increased 8% from a year earlier to 2.02 million units in October, the China Passenger Car Association said Monday. Wholesales of new energy vehicles, which includes electric cars, more than doubled to 144,000 units. (…) Annual passenger-vehicle sales will still show a decline of about 7% this year, PCA predicted, after large drops during the height of the pandemic. That’s better than the 11% decline PCA projected in July. (…)
Germany Considers Delaying a $4 Billion Tariff Strike on the U.S.
(…) “We need a large and broad industrial tariff deal between the U.S. and the EU,” German Economy Minister Peter Altmaier said on Monday. “Such an offer is on the table, and it is more than fair that we give the U.S. administration the opportunity to prepare itself for it once it is in office,” he said Monday on Deutschlandfunk radio.
German Foreign Minister Heiko Maas said over the weekend that his government would make “concrete proposals” to Washington on how to improve the relationship and that a “new deal” was needed. (…)
The decision on the timing of any tariffs will ultimately be made by the European Commission, the bloc’s executive authority. Valdis Dombrovskis, the EU’s trade chief, said they would move ahead with their plans.
“The U.S. has imposed their tariffs following the WTO ruling in the Airbus case, now we have a WTO ruling also in the Boeing case allowing us to impose our tariffs and that’s what we are doing,” Dombrovskis said on Monday before the trade ministers’ video conference, adding that the EU could suspend or withdraw the tariffs at any time. (…)
Not all EU members agree with Germany’s position. France, which has been suffering under American tariffs since last year, is pushing for a quick retaliation. French Finance Minister Bruno Le Maire said over the weekend that a Joe Biden administration would likely take a less aggressive stance in the Boeing dispute, but that Europe should not drop its guard. (…)
“The U.S. remains in a confrontation with China, and Europe must therefore assert its economic and political sovereignty in this power game.” (…)
To date, the U.S. has refrained from applying the maximum tariff level in the $7.5 billion damages award from the WTO last year. A lame duck Trump administration could raise those import taxes to 100%, which for many European products would effectively block their entry into the U.S. marketplace. (…)
Imports affected by export demand from Covid-19 outside China
China’s imports grew 4.7% YoY though contracted by US$24 billion from September to October, which is equivalent to an 11.8% MoM fall. Almost every import item experienced a contraction on a monthly basis. Integrated circuits, the single biggest reported import item, contracted by 15% MoM, which also reflects that the strong growth of smartphone exports may not be sustained in the coming months.
This change could be the start of a new trend, rather than just a single data point, as export demand has been strongly affected by the return to Covid-19 lockdowns in some major contries outside China. It is possible that this will weaken Chinese export orders for Christmas.
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France Posts Record New Virus Cases as Minister Warns of ‘Violent’ Second Wave
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Denmark Covid-19 Virus Mutation Leads to New Restrictions
EARNINGS WATCH
Rebounding Profits Fortify Stock Rally U.S. companies have trounced expectations this earnings season, potentially laying the foundation for the next leg of the market’s rally, which has been led by tech companies including Apple.
With most of the companies in the S&P 500 reporting, analysts are projecting third-quarter profits fell 7.5% from a year earlier, according to FactSet. That is a sharp improvement from the 21% decline they forecast at the end of September. (…)
But the earnings beats are widespread, with 86% of reporting S&P 500 companies having exceeded estimates. Analysts have lifted third-quarter expectations for all 11 S&P 500 sectors.
Among the groups to see major shifts, the communications services group, which includes Facebook and Alphabet, is projected to record a 2.3% increase in profits from a year earlier, compared with expectations at the end of September for a drop of 21%. Buoyed by stay-at-home trends, both companies reported strong earnings last month.
The consumer staples group is expected to see an earnings increase of 4%, a reversal from an anticipated decline of 4.9%.
Analysts expect earnings will decline 11% year over year in the fourth quarter before beginning to climb again in the first quarter of 2021. (…)
The facts from Refinitiv:
Through Nov. 6, 445 companies in the S&P 500 Index have reported earnings for Q3 2020. Of these companies, 85.4% reported earnings above analyst expectations and 11.5% reported earnings below analyst expectations. In a typical quarter (since 1994), 65% of companies beat estimates and 20% miss estimates. Over the past four quarters, 73% of companies beat the estimates and 21% missed estimates.
In aggregate, companies are reporting earnings that are 19.5% above estimates, which compares to a long-term (since 1994) average surprise factor of 3.5% and the average surprise factor over the prior four quarters of 8.7%.
Of these companies, 78.6% reported revenue above analyst expectations and 21.4% reported revenue below analyst expectations. In a
typical quarter (since 2002), 60% of companies beat estimates and 39% miss estimates. Over the past four quarters, 61% of companies beat the estimates and 39% missed estimates.In aggregate, companies are reporting revenue that are 2.5% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.5% and the average surprise factor over the prior four quarters of 1.1%.
The estimated earnings growth rate for the S&P 500 for 20Q3 is -7.8%. If the energy sector is excluded, the growth rate improves to -3.7%. The estimated revenue growth rate for the S&P 500 for 20Q3 is -2.5%. If the energy sector is excluded, the growth rate improves to 0.7%.
The estimated earnings growth rate for the S&P 500 for 20Q4 is -11.1%. If the energy sector is excluded, the growth rate improves to -8.1%.
Full year 2020 estimates are now $136.23. 2021: $168.22.
Corporate Insider Buying Plummets: Bad Portent? Executives last month purchased lowest amount in four years.
(…) In October, only 396 executives bought their employer’s shares, the lowest level in four years. Purchasing last month lagged behind selling, which also has ebbed to a degree, by the most since January.
Last month, in dollar terms, US insiders purchased $74.3 million worth of shares, down 43% from September, Bloomberg says, after tabulating the Securities and Exchange Commission (SEC) filings. The group’s selling slid 29% to $1.67 billion. (…)
In March, when the market crashed, the execs’ buying exploded, with buyers more than doubling. There were 3,111 of them, versus 1,417 sellers—a reversal of their usual behavior toward employer stock. (…)
INK tallies companies with buy only transactions divided by companies with sell only transactions of direct ownership non-derivative equity
securities by officers and directors filed over the last 60 days. 100% = buyers = sellers; 50% = 1 buyer for every 2 sellers.
BTW, U.S. technology displays the lowest reading at 12%: 8.5 sellers for every buyer. Only 2 tech stock made INK’s top 50 insider buy lists (FUBO and IBM). Wanna know how many made the top 50 sell list? 19. Consumer cyclicals on the top 50 sell list? 6 (AMZN, AZEK, DKNG,TSLA, NKE, PTON).
The only 2 sectors with net positive buying: Financials (142%) and Energy (121%).
Chinese Property Giant Evergrande Drops Unit Listing China Evergrande, the heavily indebted property developer, scrapped plans to list a key unit after striking deals with co-investors that should avert a near-term cash crunch.
Georgia’s Two Runoff Races Become Focus for Senate Control Republicans want to maintain at least one Senate seat from the state to try to preserve the GOP’s majority in the chamber
The partisan breakdown in the Senate is currently a tie, with 48 Republicans and 48 Democrats. Four seats are still outstanding: In addition to the Georgia runoffs, Republicans are leading and expected to win in Alaska and North Carolina, but those races haven’t been called yet by the Associated Press because votes are still being counted.
If Republicans hold their seats in Alaska and North Carolina, Democrats would need to win both of the Georgia runoff races on Jan. 5 to control 50 seats in the chamber. That would give their party majority control since Vice President-elect Kamala Harris, in her role as president of the Senate, could cast any tiebreaking votes. (…)
A key question is whether Democrats will show up for the runoffs in the same numbers that they did in the general election. A nonpartisan study of the history of runoffs in Georgia found that, going back to 1988, there have been seven statewide runoff elections. Democrats won only one of them—and that was more than 20 years ago, in 1998. (…)
Divided Governments Are Supposed to Be Good for Stocks. The Data Don’t Support That.
(…) In the 45 years that the same party controlled Congress and the White House, the average return on the S&P 500 was 7.45%, according to Dow Jones Market Data. In the 46 years that power was split, the average return was 7.26%. (…)
Going back to 1929, the most common power structure in Washington has seen Democrats controlling the White House and both chambers of Congress. The S&P 500 rose an above-average 9.4% annually in those 34 years.
The next-most-common was a division in which Republicans controlled the White House and Democrats oversaw both houses of Congress. The market’s annual return in those 22 years was a below-average 4.9%. (…)
Interestingly, there has been no time frame when Democrats controlled the White House and House of Representatives and Republicans held the Senate. (…)
“The bottom line is that the sample size isn’t large enough to draw a firm conclusion,” Mr. McLoughlin said. “As a colleague said to me, ‘Come back in 500 years and we’ll talk.’”