Daily Market Color

Equities Fall for a Second Day Despite Vaccine Developments

Rates traded in a tight range on Wednesday as virus concerns overshadow vaccine developments
Yesterday, Pfizer announced that its COVID-19 vaccine was even more effective than originally thought and became the first company in the race for a vaccine to apply for FDA approval.  Despite the company’s success, markets looked past the vaccine developments and remained focused on the latest virus data.  New York City shut its schools once again as “the city has now reached this threshold of test positivity citywide,” according to Chancellor Richard Carranza. 

Equities fell shortly after the announcement — the S&P 500 and DJIA both closed 1.2% lower.  Treasury yields and swap rates hovered in a narrow range throughout the day — the benchmark 10-year closed 2 bps higher.  UST yields are trading 1-2 bps lower across the curve this morning.
Fed officials have different views on the current economic outlook
During his speech on Wednesday, New York Fed President John Williams believes the US is currently in a “severe recession” and the pace of recovery remains dependent on virus infection rates falling.  St. Louis Fed President James Bullard had a more optimistic view, claiming that the economy has adapted well during the pandemic.  He added, “US monetary and fiscal policies have been exceptionally effective and were designed for a larger shock than the one that has occurred.”  Despite their differing opinions, the Fed officials did agree that the economy still requires additional government funds and that downside risks remain substantial.
Jobless claims rose to 742,000 last week
Initial jobless claims rose from 711,000 to 742,000 for the week ending November 14th.  Economists had expected claims to continue their downward trend after hitting a pandemic low a week earlier.  This is the first time claims have risen since early October, pulling the four-week moving average up to 742,000.

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