Monday, September 14, 2020
We start a new trading week with an opportunity for reflection. (This is a nice way of saying there are no major news or economic reports are influencing market sentiment.) By the end of this week, we’ll have seen new results from the Empire State Index, Import Prices, Industrial Production & Capacity Utilization, Retail Sales, Housing Starts & Building Permits, the Philly Fed survey and, of course, Initial and Continuing Jobless Claims. Markets are up strongly, indicating bullish sentiment remains in the air.
In addition, this the Federal Open Market Committee (FOMC) reconvenes this Wednesday, which marks Fed Chair Jay Powell’s first progress report since the FOMC’s historic policy shift towards enticing inflation into the U.S. economy. Zacks Chief Strategist John Blank goes into more detail on this today in his Global Week Ahead piece. It contains insightful quotes such as this one:
“Fed purchases of more than $1.5 trillion of shorter-dated bonds during the pandemic have pinned down front-end borrowing costs. Investors will watch for a shift towards the long end.”
So the Fed is ensuring no locking gears in the near-term economy; there are enough dollars to grease the wheels for now. What investors ought to keep an eye on is how this policy may be affecting economic realities down the road.
Big Monday Pharma Moves
During the course of writing this article, we have now seen a $1 billion stake put into Seattle Genetics (SGEN - Free Report) by Merck (MRK - Free Report) , leading to 9% gains in the cancer-focused biopharma company. There’s also news that Gilead (GILD - Free Report) is buying Immunomedics (IMMU - Free Report) for a huge premium at $21 billion, sending that stock up over 100% this morning. So scratch what I was saying earlier about there being no news onto which the market can hang its hat.
Further, on the Covid-19 front, Eli Lilly (LLY - Free Report) has come out with news that its coronavirus treatment drug, co-developed by Incyte (INCY - Free Report) , has shown to reduce Covid recovery time when used in combination with Gilead’s remdesivir. This treatment “cocktail” allows patients to leave the hospital at least a day earlier than presumed, according to Lilly CEO David Ricks.
Twenty minutes ahead of Monday’s opening bell, the Dow is up 200 points, the Nasdaq is +120 and the S&P 500 +33. Buying back into a market recently sold off appears to be the move to start the new week, with other news events to potentially augment expectations going forward.
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