Vaccine Approval, Stimulus Hopes May Lead To Initial Strength On Wall Street

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Vaccine Approval, Stimulus Hopes May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher opening on Monday after stocks closed mixed for two consecutive sessions.

Early buying interest may be generated in reaction to news of the approval of the coronavirus vaccine developed by Pfizer (PFE) and BioNTech (BNTX).

The CDC signed off on the vaccine following the Emergency Use Authorization issued by the FDA. Pfizer has commenced the first shipments of the vaccine to distribution centers across the country.

Traders also remain optimistic about a new fiscal stimulus bill, with a report from Reuters detailing efforts to pass a previously unveiled $908 billion bipartisan relief plan.

A person briefed on the matter told Reuters the package will be split into two proposals that could be voted on separately in order to win approval.

Reuters said one bill would be a $748 billion measure including money for small businesses, the jobless and COVID-19 vaccine distribution, while the other would include more controversial measures such as liability protections for business and aid for state and local governments.

Nonetheless, trading activity may be somewhat subdued ahead of the Federal Reserve’s monetary policy decision on Wednesday.

The Fed is widely expected to leave interest rates unchanged at near-zero levels, although traders are optimistic the central bank will announce additional stimulus measures.

Reports on industrial production, retail sales, homebuilder confidence and housing starts may also attract attention in the coming days.

Following the mixed performance seen during trading on Thursday, the major U.S. stock averages once again closed on opposite sides of the unchanged line on Friday. The Dow recovered from an early slide to close modestly higher, while the Nasdaq and S&P 500 remained in negative territory.

While the Dow rose 47.11 points or 0.2 percent to 30,046.37 after falling by nearly 180 points in early trading, the Nasdaq dipped 27.94 points or 0.2 percent to 12,377.87 and the S&P 500 edged down 4.64 points or 0.1 percent to 3,663.46.

For the week, the Dow and the Nasdaq slid by 0.6 percent and 0.7 percent, while the S&P 500 slumped by 1 percent.

The uptick by the Dow was partly due to a strong gain by shares of Disney (DIS), with the entertainment giant spiking by 13.5 percent.

The jump by Disney came as the company forecast strong subscriber growth for Disney+ and announced an increase in the price of the streaming service.

The modestly lower close by the broader Nasdaq and S&P 500 came as lawmakers in Washington remain at an impasse over a new fiscal stimulus bill.

The Senate managed to pass a temporary spending bill to prevent a government shutdown on Saturday, but the lack of a breakthrough on a new relief package has raised concerns among traders.

Despite prolonged negotiations, Republicans and Democrats remain at odds over issues such as aid for state and local governments and unemployment assistance.

Selling pressure was relatively subdued, however, as traders also reacted to more upbeat news regarding a potential coronavirus vaccine.

On Thursday, an FDA advisory committee voted in support of the coronavirus vaccine developed by Pfizer (PFE) and BioNTech (BNTX).

FDA Commissioner Stephen Hahn subsequently said the agency will rapidly work toward finalization and issuance of an emergency use authorization.

In U.S. economic news, the University of Michigan released a report showing an unexpected improvement in consumer sentiment in the month of December.

The report said the consumer sentiment index climbed to 81.4 in December from 76.9 in November. The increase surprised economists, who had expected the index to edge down to 76.5.

Surveys of Consumers chief economist Richard Curtin said the unexpected improvement in consumer sentiment was due to a partisan shift in economic prospects.

“Following Biden’s election, Democrats became much more optimistic, and Republicans much more pessimistic, the opposite of the partisan shift that occurred when Trump was elected,” said Curtin.

Curtin called it “surprising” that the recent resurgence in coronavirus infections and deaths was overwhelmed by partisanship.

Airline stocks turned in some of the market’s worst performances on the day, resulting in a 2.9 percent nosedive by the NYSE Arca Airline Index.

Significant weakness was also visible among oil service stocks, as reflected by the 1.7 percent drop by the Philadelphia Oil Service Index. The index ended the previous session at its best closing level in nine months. The pullback by oil service stocks came amid a modest decrease by the price of crude oil.

Steel stocks also gave back ground after moving sharply higher on Thursday, with the NYSE Arca Steel Index falling by 1.4 percent after ending the previous session at a two-year closing high.

Banking, natural gas and semiconductor stocks also saw notable weakness on the day, while some strength emerged among networking and software stocks.

Commodity, Currency Markets

Crude oil futures are climbing $0.73 to $47.30 a barrel after slipping $0.21 to $46.57 a barrel last Friday. Meanwhile, after rising $6.20 to $1,843.60 an ounce in the previous session, gold futures are sliding $13.90 to $1,829.70 an ounce.

On the currency front, the U.S. dollar is trading at 103.61 yen versus the 104.04 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.2163 compared to last Friday’s $1.2112.

Asia

Asian shares ended mixed on Monday even as risk appetite improved after the U.S. approved a COVID-19 vaccine developed by Pfizer and BioNTech for emergency use and commenced first shipments of the vaccine to distribution centers across the country. News that Britain and the European Union have agreed to continue Brexit trade talks beyond Sunday’s deadline also boosted sentiment.

Chinese shares ended higher, while Hong Kong shares dropped after China’s market regulator imposed fines of 500,000 yuan each on Alibaba, Tencent-backed China Literature, and Shenzhen Hive Box Technology for their failure to make proper declarations about their past acquisitions for antitrust reviews.

The benchmark Shanghai Composite Index climbed 21.93 points or 0.7 percent to 3,369.12, while Hong Kong’s Hang Seng Index fell 116.35 points or 0.4 percent to 26,389.52.

Japanese shares advanced after the Pfizer-BioNTech coronavirus vaccine was approved in the U.S. and the Bank of Japan’s Tankan survey showed that business sentiment improved for the second straight quarter in the fourth quarter of 2020.

The benchmark Nikkei 225 Index added 79.92 points or 0.3 percent to close at 26,732.44. The broader Topix rose 8.50 points or 0.5 percent to 1,790.52.

Market heavyweight SoftBank Group rose 2.2 percent after falling sharply in the previous session on profit taking. Fast Retailing added 0.3 percent.

Kawasaki Heavy Industries climbed 11 percent after the company signed a memorandum of understanding with Australian mining company Fortescue Metals to develop a supply chain of “green” hydrogen.

Australian markets rose after two straight days of losses, as gains by banks and tech stocks offset weakness in the mining sector.

The benchmark S&P/ASX 200 Index rose 17.60 points or 0.3 percent to 6,660.20 and the broader All Ordinaries Index edged up 13.90 points or 0.2 percent to 6,900.30.

The big four banks – Commonwealth Bank, ANZ Banking, National Australia Bank and Westpac – ended higher in a range of 0.4 percent to 1.9 percent.

In the tech sector, Afterpay gained 8.8 percent and WiseTech Global added 0.2 percent, while Appen declined 0.8 percent.

Mining heavyweights Fortescue Metals fell 3.4 percent, Rio Tinto lost 1.8 percent and BHP declined 0.2 percent.

Biotechnology giant CSL dropped 1.7 percent, extending losses after shelving the University of Queensland vaccine project.

Flight Centre Travel Group slid 2.1 percent following news that it has been taken to court by five of its former employees for allegedly being underpaid by the company.

A fresh class action has been filed against Crown Resorts that accuses the casino giant of misleading investors over possible anti-money laundering breaches. However, shares of Crown Resorts added 0.7 percent.

Seoul stocks closed lower amid worries about the surge in coronavirus cases in South Korea. The country’s new COVID-19 cases topped the 1,000 mark for the first time on Sunday and crossed 700 on Monday. The benchmark Kospi retreated 7.86 points or 0.3 percent to 2,762.20.

Automaker Hyundai Motor dipped 0.5 percent and Internet portal giant Naver slid 1.4 percent. Pharmaceutical giant Samsung Biologics and Celltrion Inc. declined 1 percent each.

Europe

European stocks have advanced on Monday following news that the United States will start Covid-19 vaccinations today after regulators approved the Pfizer- BioNTech’s COVID-19 vaccine.

The U.S. Centers for Disease Control and Prevention gave the approval for Pfizer- BioNTech’s COVID-19 vaccine following the Emergency Use Authorization issued by the U.S. Food and Drug Administration. Pfizer commenced first shipments of the vaccine to distribution centers across the country.

Investor sentiment also reflected hopes for a post-Brexit trade deal after the European Union and the U.K. extended negotiations beyond the Sunday deadline. U.K Prime Minister Boris Johnson and EU Commission President Ursula von der Leyen agreed to “go the extra mile” in the coming days to reach a deal.

While the U.K.’s FTSE 100 Index has inched up by 0.1 percent, the French CAC 40 Index and the German DAX Index are jumping by 1 percent and 1.2 percent, respectively.

In economic news, figures released by Destatis revealed that Germany’s wholesale prices declined 1.7 percent year-on-year in November, slower than the 1.9 percent decrease logged in October. On a monthly basis, wholesale prices rose 0.1 percent, the first monthly increase in four months.

Further, Dutch exports rose for the second straight month and imports declined in October, figures from the statistical office CBS showed on Monday.

CureVac N.V. shares have jumped after the German biotechnology company said it has initiated a Covid vaccine trial by enrolling the first participant in the pivotal Phase 2b/3 study of its mRNA vaccine candidate, CvnCoV. The study is expected to include more than 35,000 participants at sites in Europe and Latin America.

Vivendi has also moved higher after it entered into exclusive negotiations with Gruner + Jahr/Bertelsmann to acquire Prisma Media, a French press publishing group.

Arkema S.A has risen after it reached a deal with Trinseo to sell polymethyl methacrylates and activated methyl methacrylates businesses in about $1.36 billion deal.

Codemasters Group Holdings PLC’s has spiked after Electronic Arts Inc. agreed to a recommended acquisition of the U.K.-based game developer and publisher in a deal with an enterprise value of $1.2 billion. Codemasters said it intends to unanimously recommend the Electronic Arts offer.

Capita plc’s shares have also jumped after the company agreed to sell its Education Software Solutions business in a deal that values ESS at up to 400 million pounds.

Shares of sustainable water and climate management solutions provider Polypipe Group plc have also surged higher after the company said its performance in November and the likely outcome of December exceeded expectations again.

On the other hand, Novartis shares have dipped after the Swiss drug major, along with Incyte Corp., announced that their RUXCOVID Phase III study of ruxolitinib for hospitalized patients with COVID-19 failed to meet its primary endpoint.

AstraZeneca Plc shares has also slumped despite two positive decisions by the European Union. AstraZeneca and Daiichi Sankyo’s trastuzumab deruxtecan has been recommended for conditional marketing authorization in the EU as a monotherapy to treat metastatic HER2-positive breast cancer.

Further, Trixeo Aerosphere has been approved in the EU for maintenance treatment in moderate to severe chronic obstructive pulmonary disease.

U.S. Economic Reports

No major U.S. economic data is due to be released today, although reports on industrial production, retail sales, homebuilder confidence and housing starts may attract attention in the coming days along with the Federal Reserve’s monetary policy meeting

Stocks In Focus

Shares of Alexion Pharmaceuticals (ALXN) are soaring in pre-market trading after the biopharmaceutical company agreed to be acquired by AstraZeneca (AZN) in a cash and stock deal valued at $39 billion or $175 per share.

TCF Financial (TCF) and Huntington Bancshares (HBAN) are also likely to see initial strength after announcing an all-stock merger with a total market value of approximately $22 billion to create a top 10 U.S. regional bank.

Meanwhile, shares of Virgin Galactic (SPCE) are likely to come under pressure after the space travel company said a recent test flight failed to reach space as planned.

Real estate investment trust Apartment Investment and Management (AIV) may also move to the downside on news the company’s stock will be replaced by Tesla (TSLA) in the S&P 500.

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