Taking stock of a record November

11/30/20
  • Best November for US market in decades, Dow tops 30,000
  • Small caps, energy sector continue their runs
  • This week: December kick-off—jobs report

If December wants to outshine November in terms of stock-market performance, it’s got its work cut out. For a third-straight week, US stocks tagged new highs amid news of success on the COVID vaccine front, putting the market on track for its best month since April.

If the market bucks history and rallies today, the S&P 500 (SPX) could post its best November since at least 1980 and possibly since 1957—in fact, after last week’s more-than-solid gain, the index has a shot at logging one of its 10 best months, period, of the past six decades.

The big push came last Tuesday—the day after AstraZeneca (AZN) released successful vaccine results—but the SPX squeezed in another record high on Friday despite a shortened trading day:

Chart 1: S&P 500 (SPX), 9/23/20–11/27/20. S&P 500 (SPX) price chart. Three weeks, three vaccines.

Source: Power E*TRADE


The headline: Market winds down November on the upswing amid more vaccine news.

The fine print: So why did AstraZeneca (AZN) fall nearly 5% last week? There may be a few reasons. First, the vaccine’s 70% average success rate was less gaudy than the 90%-plus levels reported by both Pfizer-BioNTech and Moderna. Second, the fact that it was the third vaccine announcement in as many weeks may have deprived it of some of its psychological impact. Finally, news that AZN’s vaccine would likely undergo further trials because its most successful dosage was administered by accident1 may have given market watchers pause—and fueled rallies in other vaccine makers, such as Novavax (see below).

The number: 30,000. Yes, the Dow Jones Industrial Average (DJIA) topped this threshold last week, but it still trails far behind other US stock gauges in terms of year-to-date gain.

The move: 22.5%, COVID-vaccine maker Novavax’s (NVAX) rally on Friday.

The scorecard: The Russell 2000 notched its third week at the top of the index rankings:

US stock index performance table for week ending 11/27/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE


Sector roundup: The strongest S&P 500 sectors last week were energy (+7.9%), financials (+3.7%), and materials (+2.5%). The weakest sectors were real estate (-1%), consumer staples (-0.1%), and utilities (0.3%).

Highlight reel: Switchback Energy Acquisition Corp. (SBE) jumped 30.28% to $34.08 on Monday, while Gap (GPS) fell 20% to $21.60 on Wednesday.

Futures action: January WTI crude oil (CLF1) broke out to a nearly nine-month high of $46.26/barrel last  Tuesday, closing Friday at $45.52. But December gold (GCZ0) broke down decisively below support around $1,850/ounce last Monday, and fell to a 22-week intraday low of $1.770.70 by Friday.

Last week's biggest futures up moves: January RBOB gasoline (RBF1) +8.9%, January Brent crude oil (BF1) +8.8%, January WTI crude oil (CLF1) +8.5%. Biggest down moves: December VIX (VXZ0) -6.8%, December bitcoin (BTCZ0) -6.8%, December silver (SIZ0) -5.8%.

Coming this week

Friday’s jobs report headlines a busy top-of-the-month economic calendar:

Monday: Chicago PMI, Pending Home Sales

Tuesday: Markit Manufacturing PMI, ISM Manufacturing Index, Construction Spending, Vehicle Sales

Wednesday: ADP Employment, Fed Beige Book

Thursday: Challenger Job Cuts, Markit Services PMI, ISM Non-Manufacturing Index

Friday: Employment Report, Balance of Trade, Trade Balance, Factory Orders

This week’s earnings include:

Monday: Autohome (ATHM), Zoom Video (ZM), Guess (GES)

●Tuesday: Box (BOX), Momo (MOMO), NetApp (NTAP), Salesforce.com (CRM)

Wednesday: Five Below (FIVE), Crowdstrike (CRWD), PVH (PVH), Verint Systems (VRNT), Zscaler (ZS), Okta (OKTA), RH (RH)

Thursday: Ulta Beauty (ULTA), Dollar General (DG), Kroger (KR), DocuSign (DOCU), Marvell Technology (MRVL)

Friday: Big Lots (BIG)

Go to the E*TRADE market calendar for an up-to-date earnings schedule and complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs and economic report times each morning.

Can the Russell continue to hustle?

The fact that the small-cap Russell 2000 (RUT) closed out a third-straight week as the strongest major US stock index may not seem all that interesting—unless you’re aware that it hasn’t done that in more than three years.

The RUT has also outperformed the Nasdaq 100 (NDX) tech index by a wide margin over the past three weeks (12.6% to only 0.2%). But there’s some evidence that while this red-hot small-cap performance isn’t necessarily in danger of imminent collapse, the RUT may lose some of its relative strength vs. the NDX over the next couple of weeks. Since 1987, after the RUT had a three-week (Monday-Friday) win streak of 10% or more:

1. It had positive average returns the next two weeks.

2. But those average returns were smaller than the NDX’s.2

In other words, it's a reminder that even if the recent market rotation turns out to be a longer-term phenomenon, there's plenty of room for momentum shifts on a week-to-week basis.  

 

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1 Nature. COVID vaccine excitement builds as Moderna reports third positive result. 11/16/20.

2 Reflects Russell 2000 (RUT) and Nasdaq 100 (NDX) daily closing prices, 9/1/87–11/27/20. Supporting document available upon request.

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