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In the Global Week Ahead, it looks like still more positive COVID-19 vaccine news will propel markets.
Zacks #3 Rank (Hold)-rated Moderna (MRNA - Free Report) shares rose from around $89 last Friday to trade at $102 a share (+15%) before the market opened on Monday.
On top of that, shares in Switzerland’s Zacks #2 Rank (Buy)-rated Lonza Group (LZAGY - Free Report) — which has a strategic deal with Moderna — added around $1 in the pre-market (+1.5%).
Moderna said in a Phase 3 trial, which enrolled 30K patients, its vaccine demonstrated 94.5% efficacy. The trial included “many high-risk or elderly” people.
Furthermore, their vaccine can be stored a temperatures a commercial freezer can likely supply, easing distribution concerns.
The Financial Times wrote that the vaccine could be shipped and stored for up to six months at minus 20 Celsius. And then remain stable once thawed for 30 days, if refrigerated at between 2 Celsius and 8 Celsius.
The USA, Canada and Japan have pre-booked orders, while the E.U. is negotiating a supply deal.
In response to the news, DJIA futures were up 400 points (+1.4%). S&P 500 futures lifted +1.4% and Nasdaq futures were up only +1.0%.
That’s what we have seen tactically from stock traders: Sell the growth tech stocks for a handsome profit, and rotate to ‘mobility’ stocks.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Back to Discussing Recovery Alphabet Soup (V, U, W)
The world economic outlook is suddenly a little bit brighter after upbeat news on the Pfizer COVID-19 vaccine.
Hopes of a strong “V” or even a “U”-shaped recovery faded after a second wave of infections forced major economies to lock down again, setting them up for a double-dip “W” growth path.
Upcoming readings on Chinese and U.S. industrial output will show whether a speedy economic rebound is still possible.
But even if a vaccine rollout happens sooner than expected, pandemic damage won’t be easily undone. W, V, or whatever the shape of recovery, central bank stimulus will stay in place.
(2) Where Do U.S. Treasury Rates Go from Here?
After months of slumber, U.S. Treasury yields have sprung to life, and Wednesday’s record-sized auction may show which way they might head.
Pfizer’s encouraging update on its COVID-19 vaccine sent 10-year borrowing costs to the highest since March and drove the yield curve to its steepest in more than two years. Those moves have since been offset by the resurgent coronavirus and doubts the Federal Reserve will permit yields to rise too far.
Demand at the Treasury’s Nov 12th sale of $27 billion in 30-year bonds was below this year’s average. Unexceptional results at the upcoming $27 billion in 20-year bonds could become another factor pushing yields higher.
(3) Will We See a Mainland China Debt Default Wave?
Bubbling fears of debt defaults in the Chinese public sector are tempering some of the euphoria felt towards Chinese markets after the U.S. election.
With debt running at three times annual GDP, this market is prone to letting off steam.
This time, as monetary reins tighten and the pandemic impact starts to show, companies such as property developer Evergrande and BMW’s state-backed parent Huachen Automotive Group are in the crosshairs.
China's new 'three red lines' indebtedness rules may to a degree help alleviate solvency concerns. But the latest jitters and the extent of government support may give pause to investors thronging to the world's second-biggest bond market.
(4) European Earnings for Q3 Look Dismal, Relative to U.S. Earnings
The summertime easing of lockdown restrictions allowed a chunk of European and U.S. companies to post better-than-expected Q3 earnings, but U.S. hegemony remains in place.
European companies are expected to report a -23.8% year-on-year decline in Q3 earnings, compared to -50.8% tumble in Q2, according to Refinitiv I/B/E/S data.
But the U.S. Q3 profit drop is expected at just -7.8%.
That’s because of the larger European exposure to cyclical sectors such as travel or luxury or banks, which are more closely tied to the state of the economy.
The upside is that a credible vaccine could help Europe Inc. roar ahead. Indeed, recent vaccine news induced investors to up forecasts for Europe to 30% for the first 2021 quarter — double the S&P 500's rate.
(5) Turkish Lira in Trouble
Just some days back, the lira slump was threatening to propel Turkey into full-blown crisis, but following a change of finance minister and central bank governor, the currency has enjoyed its best week in nearly two decades.
On Thursday Nov 19th, the central bank must show that its policymaking really has changed as much as President Tayyip Erdogan’s recent moves suggest. What it means is that new central bank chief Naci Agbal has no choice but to deliver what markets want — a 400-575 basis points interest rate hike.
Anything below 350 may seen as a cop-out. More importantly, any rate hike needs to stick — and for that investors need to see proof Erdogan has overcome his oft-stated hostility to high borrowing costs.
Top Zacks #1 Rank (STRONG BUY) Stocks
I will put up three hot large-cap stocks this week.
One is a major player in autos, another is a player in chips, and a third is involved with medical instruments.
That is a surprisingly diverse set of industries.
(1) BMW (BAMXF - Free Report) : The German automaker is on our #1 list this week. I see an $84 share price and a market cap of $50.2B. The Zacks Value score is A, the Zacks Growth score is C, and the Zacks Momentum score is C.
(2) NXP Semiconductor (NXPI - Free Report) : The Dutch chipmaker is on our #1 list this week too. I see a $146 share price and a market cap of $41B. The Zacks Value score is F, the Zacks Growth score is F, and the Zacks Momentum score is F.
(3) IDEXX Laboratories (IDXX - Free Report) : This is a Medical instrument maker. I see a $453 share price and a market cap of $38.7B. The Zacks Value score is F, the Zacks Growth score is B, and the Zacks Momentum score is D.
Two of the picks have Zacks Value scores of F. That should be cause for trader concern.
Key Global Macro
Keep an eye on U.S. housing data out this week. This domestic market has been recording strong gains.
On Monday, Mainland China’s retail sales should be up +5.0% y/y.
Japan’s industrial production growth for September should be down -9.0%. That is backward looking data.
Fed Vice Chair Richard Clarida gives a speech.
On Tuesday, U.S. retail sales ex-autos should be up +0.6% y/y in October. This is a key to strong consumption growth.
U.S. industrial production for October should be up +1.0% y/y.
On Wednesday, the Eurozone core CPI should be up +0.2% in October.
U.S. housing starts should be up +1.455M and building permits should be up +1.56M. Both of those are quite strong.
On Thursday, U.S. initial jobless claims look steady (and high) at 707K.
On Friday, there is a G20 meeting. This is the first post-US election gathering.
The Jibun Bank Japan manufacturing PMI for November should be 48.9. That is below the 50 Rubicon.
Baker Hughes U.S. oil rig counts come out. I see a low 236 rigs reported last week.
Conclusion
So, it is the ‘mobility’ stocks to own now. Not the ‘stay-at-home’ suite. It looks like the ‘stay-at-home’ names share prices peaked and rolled over in midsummer.
This always happens.
Traders have to own the next hot stock suite much sooner than a slow-footed person might think. News that sends them soaring usually arrives faster than expected.
Have a great trading week!
Regards,
John Blank
Will you retire a millionaire? One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.” Click to get it free >>
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Vaccine Data Propels Stocks: Global Week Ahead
In the Global Week Ahead, it looks like still more positive COVID-19 vaccine news will propel markets.
Zacks #3 Rank (Hold)-rated Moderna (MRNA - Free Report) shares rose from around $89 last Friday to trade at $102 a share (+15%) before the market opened on Monday.
On top of that, shares in Switzerland’s Zacks #2 Rank (Buy)-rated Lonza Group (LZAGY - Free Report) — which has a strategic deal with Moderna — added around $1 in the pre-market (+1.5%).
Moderna said in a Phase 3 trial, which enrolled 30K patients, its vaccine demonstrated 94.5% efficacy. The trial included “many high-risk or elderly” people.
Furthermore, their vaccine can be stored a temperatures a commercial freezer can likely supply, easing distribution concerns.
The Financial Times wrote that the vaccine could be shipped and stored for up to six months at minus 20 Celsius. And then remain stable once thawed for 30 days, if refrigerated at between 2 Celsius and 8 Celsius.
The USA, Canada and Japan have pre-booked orders, while the E.U. is negotiating a supply deal.
In response to the news, DJIA futures were up 400 points (+1.4%). S&P 500 futures lifted +1.4% and Nasdaq futures were up only +1.0%.
That’s what we have seen tactically from stock traders: Sell the growth tech stocks for a handsome profit, and rotate to ‘mobility’ stocks.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Back to Discussing Recovery Alphabet Soup (V, U, W)
The world economic outlook is suddenly a little bit brighter after upbeat news on the Pfizer COVID-19 vaccine.
Hopes of a strong “V” or even a “U”-shaped recovery faded after a second wave of infections forced major economies to lock down again, setting them up for a double-dip “W” growth path.
Upcoming readings on Chinese and U.S. industrial output will show whether a speedy economic rebound is still possible.
But even if a vaccine rollout happens sooner than expected, pandemic damage won’t be easily undone. W, V, or whatever the shape of recovery, central bank stimulus will stay in place.
(2) Where Do U.S. Treasury Rates Go from Here?
After months of slumber, U.S. Treasury yields have sprung to life, and Wednesday’s record-sized auction may show which way they might head.
Pfizer’s encouraging update on its COVID-19 vaccine sent 10-year borrowing costs to the highest since March and drove the yield curve to its steepest in more than two years. Those moves have since been offset by the resurgent coronavirus and doubts the Federal Reserve will permit yields to rise too far.
Demand at the Treasury’s Nov 12th sale of $27 billion in 30-year bonds was below this year’s average. Unexceptional results at the upcoming $27 billion in 20-year bonds could become another factor pushing yields higher.
(3) Will We See a Mainland China Debt Default Wave?
Bubbling fears of debt defaults in the Chinese public sector are tempering some of the euphoria felt towards Chinese markets after the U.S. election.
With debt running at three times annual GDP, this market is prone to letting off steam.
This time, as monetary reins tighten and the pandemic impact starts to show, companies such as property developer Evergrande and BMW’s state-backed parent Huachen Automotive Group are in the crosshairs.
China's new 'three red lines' indebtedness rules may to a degree help alleviate solvency concerns. But the latest jitters and the extent of government support may give pause to investors thronging to the world's second-biggest bond market.
(4) European Earnings for Q3 Look Dismal, Relative to U.S. Earnings
The summertime easing of lockdown restrictions allowed a chunk of European and U.S. companies to post better-than-expected Q3 earnings, but U.S. hegemony remains in place.
European companies are expected to report a -23.8% year-on-year decline in Q3 earnings, compared to -50.8% tumble in Q2, according to Refinitiv I/B/E/S data.
But the U.S. Q3 profit drop is expected at just -7.8%.
That’s because of the larger European exposure to cyclical sectors such as travel or luxury or banks, which are more closely tied to the state of the economy.
The upside is that a credible vaccine could help Europe Inc. roar ahead. Indeed, recent vaccine news induced investors to up forecasts for Europe to 30% for the first 2021 quarter — double the S&P 500's rate.
(5) Turkish Lira in Trouble
Just some days back, the lira slump was threatening to propel Turkey into full-blown crisis, but following a change of finance minister and central bank governor, the currency has enjoyed its best week in nearly two decades.
On Thursday Nov 19th, the central bank must show that its policymaking really has changed as much as President Tayyip Erdogan’s recent moves suggest. What it means is that new central bank chief Naci Agbal has no choice but to deliver what markets want — a 400-575 basis points interest rate hike.
Anything below 350 may seen as a cop-out. More importantly, any rate hike needs to stick — and for that investors need to see proof Erdogan has overcome his oft-stated hostility to high borrowing costs.
Top Zacks #1 Rank (STRONG BUY) Stocks
I will put up three hot large-cap stocks this week.
One is a major player in autos, another is a player in chips, and a third is involved with medical instruments.
That is a surprisingly diverse set of industries.
(1) BMW (BAMXF - Free Report) : The German automaker is on our #1 list this week. I see an $84 share price and a market cap of $50.2B. The Zacks Value score is A, the Zacks Growth score is C, and the Zacks Momentum score is C.
(2) NXP Semiconductor (NXPI - Free Report) : The Dutch chipmaker is on our #1 list this week too. I see a $146 share price and a market cap of $41B. The Zacks Value score is F, the Zacks Growth score is F, and the Zacks Momentum score is F.
(3) IDEXX Laboratories (IDXX - Free Report) : This is a Medical instrument maker. I see a $453 share price and a market cap of $38.7B. The Zacks Value score is F, the Zacks Growth score is B, and the Zacks Momentum score is D.
Two of the picks have Zacks Value scores of F. That should be cause for trader concern.
Key Global Macro
Keep an eye on U.S. housing data out this week. This domestic market has been recording strong gains.
On Monday, Mainland China’s retail sales should be up +5.0% y/y.
Japan’s industrial production growth for September should be down -9.0%. That is backward looking data.
Fed Vice Chair Richard Clarida gives a speech.
On Tuesday, U.S. retail sales ex-autos should be up +0.6% y/y in October. This is a key to strong consumption growth.
U.S. industrial production for October should be up +1.0% y/y.
On Wednesday, the Eurozone core CPI should be up +0.2% in October.
U.S. housing starts should be up +1.455M and building permits should be up +1.56M. Both of those are quite strong.
On Thursday, U.S. initial jobless claims look steady (and high) at 707K.
On Friday, there is a G20 meeting. This is the first post-US election gathering.
The Jibun Bank Japan manufacturing PMI for November should be 48.9. That is below the 50 Rubicon.
Baker Hughes U.S. oil rig counts come out. I see a low 236 rigs reported last week.
Conclusion
So, it is the ‘mobility’ stocks to own now. Not the ‘stay-at-home’ suite. It looks like the ‘stay-at-home’ names share prices peaked and rolled over in midsummer.
This always happens.
Traders have to own the next hot stock suite much sooner than a slow-footed person might think. News that sends them soaring usually arrives faster than expected.
Have a great trading week!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>