Daily Market Color November 17, 2020Equities Reach Record Highs on Vaccine Success More positive vaccine news pushed equities to record highs on Monday Yesterday morning, Moderna announced the extremely positive results of their 30,000 participant COVID-19 vaccine trial. Notably, Moderna’s vaccine is said to be easier to distribute and store than Pfizer’s effective COVID-19 vaccine, and will be submitted for FDA approval “in the coming weeks”. Both the S&P 500 and DJIA closed at record highs as a result, rising 1.2% and 1.6% respectively. Treasury yields and swap rates traded in a tight range and ended unchanged– the 10-year Treasury yield closing flat. UST yields are 1-3 bps lower across the curve this morning following a moderation in retail sales figures, while equities are also pulling back slightly following yesterday’s blockbuster news. Fed officials continue to advocate for more stimulus funds Fed Chairman Richard Clarida believes the US is making “solid” progress and that the vaccine announcements from Pfizer and Moderna will increase the pace of the rebound. Despite his optimism, Clarida believes that the “enormous quantity of pent-up saving” in bank accounts currently acts a safety net but will not be sufficient in shielding people and businesses from the impacts of new COVID restrictions. Though the Fed “will continue to make adjustments as needed,” the coming weeks could be “a challenging time” if new government support programs are not rolled out soon. Former Fed Chair Janet Yellen disagreed with some of Clarida’s statements, commenting, “‘There is a glut of savings and a shortage of investment,” which is the core problem facing developed countries’ economies. We have to have fiscal policy, structural policy other than just relying on central banks to achieve healthy growth.” During the last FOMC announcement, Fed Chair Jerome Powell said the central bank still has a multitude of monetary policy tools at its disposal, but Yellen believes, “they’re doing about all they can do.” Retail sales rose 0.3% in October Despite a dramatic drop in the pace of growth, retails continued to rise for the sixth month in a row. The report noted, “Nonstore retailers were up 29.1 percent (±1.6 percent) from October 2019, while building material and garden equipment and supplies dealers were up 19.5 percent (±2.3 percent) from last year.” Retails sales rebounded to pre-pandemic levels in June (currently 8.5% higher than last year), but the retail report excludes spending on services like air travel and entertainment, which have not yet fully recovered.
