CWS Market Review – November 9, 2020

I wanted to send you an update due to today’s dramatic stock market action. I’ve been at this game a long time and I’ve only seen a few days like today.

This morning, Pfizer said that its Covid-19 vaccine appears to be 90% successful.

From the New York Times:

If the results hold up, that level of protection would put it on par with highly effective childhood vaccines for diseases such as measles. No serious safety concerns have been observed, the company said.

Wall Street went bonkers. Some sectors exploded higher for gains of 10%, 20% or even more. Other areas fell sharply.

Let’s start with the indexes. The S&P 500 opened higher by 2.1%. It eventually ran up to a gain of 3.9% and touched a new all-time intra-day high. By the end of trading, the index had fallen back to close higher on the day by 1.17%.

Here’s a ten-day minute-by-minute chart of the S&P 500:

You can see how volatile today was. The gap between sectors was astounding. The Nasdaq Composite actually closed lower today by 1.53%.

At one point, the Dow was up over 1,700 points for a gain of 5.7%. It also made a new all-time intra-day high. The index closed off its high for a gain of 834 points, or 2.95%. The Dow did nearly three times better than the S&P 500. The indexes generally track each other pretty closely, but you rarely see divergences quite like this.

There was so much going on that it’s hard to summarize but I’ll give it a shot. Many of the sectors that were hit hard by the lockdowns soared. For example, Cinemark (CNK), the movie theater chain and former Buy List stock, was up over 45% today. Carnival (CCL), the cruise operator, soared 39%. Even Denny’s (DENN) gained 36%. Malls and airlines were also strong. United Airlines (UAL) was up 19%.

We saw evidence of this on our Buy List as Disney (DIS) jumped nearly 12% and Ross Stores (ROST) gained more than 15% today.

Banks and financials also had an outstanding day. AFLAC (AFL) rose 12% and Eagle Bancorp (EGBN) rallied over 16%.

The energy sector also had a strong day (we don’t have any energy stocks on our Buy List, which has largely served us well). The thinking seems to be that the world will get back to normal, and that will lead to a stronger economy. Therefore, that’s good for banks and energy stocks.

However, this also contends that interest rates may rise, and that led to a lot of weakness among housing stocks. It’s also a reminder that housing touches many different industries.

On our Buy List, Trex (TREX) fell by 14.5% and Sherwin-Williams (SHW) lost over 6%. Bear in mind, there was no news on these stocks. Traders are merely playing the assumed economic impact.

The S&P 500 High Beta Index rose 11.7% today while the S&P 500 Low Volatility was down 0.9%. I don’t even know what to say. That’s gigantic gap. The Russell 2000 Index of small-cap stocks gained 3.7% today. That index is usually skewed towards cyclicals.

Zoom (ZM), the superstar of the lockdown, was down 17% today. Peloton (PTON) was off 20%. Clorox (CLX) lost over 10%. On our Buy List, Church & Dwight (CHD) is in the cleaning biz. CHD fell 6% today.

The bond market got hit hard today. Remember, with rates so low, even a small move in rates can be a big loss in bonds. The 30-year Treasury yield rose by 15 basis points, up to 1.75%. The main Long-Term Treasury Bond ETF (TLT) lost 2.1% today. The average duration of that ETF is 19 years.

In the last five days, the S&P 500 has gained 7.3%. The S&P 500 Equal Weight Index (meaning if every stock was 0.2% of the index) was up 4.25%. The S&P 500 High Dividend Index rose over 10% and the S&P 500 Interest-Rate Sensitive Index rallied by 7.4%. S&P 500 Value gained 3.98% today while S&P 500 Growth fell 0.58%.

These moves are just incredible.

What to do now? For one, relax. Today is very good news, but we’re a long way from beating Covid. Markets are designed to react strongly in the near-term, and that’s what’s happening. While the news is encouraging, it will take several months before any vaccine is widely available.

Stick to our investment strategy and don’t do anything rash. We have good stocks. If you have free money to invest, look at our Buy List stocks and pay attention to our Buy Below prices. They’re there for your protection.

I’ll have the next regular issue for you later this week. Until then, let’s celebrate the good news and keep wearing your mask!

-Eddy

Posted by on November 9th, 2020 at 10:08 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.