Vaccine hopes give stocks shot in the arm

  • Market gets bump from vaccine tests
  • Small-caps go big: Russell 2K soars nearly 8%
  • This week: GDP, more retail earnings, housing data

US stocks head into the final week of May coming off an up week—thanks mostly to a vaccine-fueled surge last Monday—as states continue to relax lockdown restrictions and attempt to restart their economies.

But even though the market edged to a slightly higher high mid-week, that initial bullish burst was pretty much the entire story for the week, as the S&P 500 (SPX) coasted into the holiday weekend almost exactly where it closed on Monday:

Chart 1: S&P 500 (SPX), 2/28/20–5/22/20. S&P 500 (SPX) price chart. Jumped on vaccine report.

Source: Power E*TRADE

The headline: Market rides vaccine hopes, reopening optimism.

The fine print: News of Moderna’s (MRNA) successful coronavirus vaccine test lifted the entire stock market at the start of last week (SPX +3.2%), but the euphoria may have worn off a bit as traders digested some of the details, including the fact that the study included only eight people and that a market-ready vaccine is unlikely to be available until the fall at the earliest.1

The move: 30.5%, MRNA’s intraday rally last Monday. The stock sold off 25% by Thursday, but closed the week with a 2.9% Friday rally.

The number: 4.33 million—the number of existing home sales in April, down 18% from March, the biggest monthly drop since 2010. Home prices, however, remained high because many sellers have pulled their houses off the market.

The scorecard: Small-caps were on fire last week, with the Russell 2000 (RUT) racking up its third-best week of the past three years:

US stock index performance table for week ending 5/22/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE

Sector roundup: The strongest S&P 500 sectors last week were industrials (+7.2%), energy (+6.1%), and real estate (+5.6%). The weakest sectors were health care (-0.8%), consumer staples (0.3%), and utilities (3%).

Highlight reel: On Monday Aurora Cannabis (ACB) jumped +52% to $17.1, while Forescout Technologies (FSCT) tumbled 24% to $22.57.

Futures action: June WTI crude oil (CLM0) pulled back more than 3% intraday on Friday but still gained 14% last week, closing Friday at $33.56/barrel. June gold (GCM0) hit its second-highest contract price on Monday, but retreated to close the week down 1.2% at $1,734.70/ounce.

Last week's biggest futures up moves were July WTI crude oil (CLN0) +14%, June E-Mini Russell 2000 (RTYM0) +8.8%, and July Brent crude oil (BN0) +8.5%. Last week’s biggest futures down moves were June VIX (VXM0) -7.2%, July coffee (KCN0) -3% and May bitcoin (BTCK0) -2.3%.

Coming this week

The earnings cupboard is well stocked this week, with more retail names sharing space with several key tech stocks:

●Tuesday: Autozone (AZO), Heico (HEI), Keysight Technologies (KEYS)

●Wednesday: Autodesk (ADSK), Box (BOX), Ralph Lauren (RL), HP (HPQ), Workday (WDAY), NetApp (NTAP), Toll Brothers (TOL), PVH (PVH)

●Thursday: Ulta Beauty (ULTA), Burlington Stores (BURL), Dollar General (DG), Costco (COST), Dell Technologies (DELL), Dollar Tree (DLTR), Marvell Technology (MRVL), Williams-Sonoma (WSM), Nordstrom (JWN), Zscaler (ZS), Okta (OKTA), Salesforce.Com (CRM), VMware (VMW)

●Friday: Big Lots (BIG), Genesco (GCO)

The second estimate of Q1 GDP is due on Thursday, but more housing numbers loom large on the economic calendar:

●Tuesday: Chicago Fed National Activity Index, S&P Case-Shiller Home Price Index, FHFA Housing Price Index, Consumer Confidence Index, New Home Sales

●Wednesday: Fed Beige Book

●Thursday: Durable Goods Orders, GDP (2nd estimate), Corporate Profits, Jobless claims, Core capital goods orders, Pending Home Sales

●Friday: Personal Income and Spending, PCE Price Index, Trade Balance in Goods, Wholesale Inventories, Chicago PMI, Michigan Consumer Sentiment

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

Tech, rotation, and May goes away

As noted here a week ago, tech stocks have driven the US market’s rebound off the March lows. When the Nasdaq 100 (NDX) hit 9,515.06 on Thursday, the tech index was only 2.3% from its all-time high—which, given the extent of the February-March collapse, some traders would say is close enough to call a complete recovery.

Also, many people would probably be surprised to find out that the NDX’s 7.8% year-to-date gain as of Friday was bigger than its 30-year average of 5.7% going into Memorial Day weekend (although it’s only around half of the NDX’s 13.2% average return for years that were positive at the holiday break).2

But despite those mini milestones, the NDX surrendered its leadership position last week to the small-cap Russell 2000. One week isn’t a trend, but it is a reminder to stay on top of developments that could signal a changing of the guard—namely, diminishing bullish momentum in the sector that has fueled an exceptionally strong two-month rally for the entire market.

And a final seasonal-pattern note: In trading days of yore, the four days after Memorial Day tended to be more bullish than average—perhaps owing something to general enthusiasm about the unofficial beginning of summer—but the good vibrations appear to have been less common lately. Since 2010, the S&P 500 has posted a net loss for this period six years out of 10, including a 2.6% drop last year.3


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1 MIT Technology Review. Moderna’s latest vaccine results are promising—but it’s still too early. 5/18/20.

2 Based on Nasdaq 100 closing prices, 1990–2019. Supporting document available upon request.

3 Based on S&P 500 closing prices, 2010–2019. Supporting document available upon request.

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