- Vaccine news gets even better and boosts stocks, although full relief is still months away
- Oct U.S. retail sales growth expected to slow due to pandemic surge that started in late-Oct
- U.S. manufacturing production expected to improve but remain in recessionary territory
- U.S. homebuilder confidence expected to remain at a record highÂ
Vaccine news gets even better and boosts stocks, although full relief is still months away — U.S. stocks rallied sharply on Monday due to positive vaccine news from Moderna, which rallied +9%. The S&P 500 index closed the day up +1.16%, and the Nasdaq 100 closed the day up +0.63%. Airline and hotel stocks also rallied Monday on the positive Covid vaccine news, with Delta Airlines up more than +4% and Marriot International up more than +3%.
The Moderna vaccine news was even better than last Monday’s Pfizer news. Moderna reported that its vaccine is 94.5% effective, which is slightly better than the 90% efficacy rate that Pfizer reported last Monday.
Perhaps more importantly, the Moderna vaccine is much more practical because it doesn’t require special freezers. The Moderna vaccine can be kept in regular freezers and can then be kept in regular refrigerators for up to 30 days. The Pfizer vaccine, by contrast, must be kept at dry-ice temperatures in special freezers and only lasts for about five days after it is unfrozen. On the downside, both vaccines require two separate shots.
Many more vaccines are on the way. There are currently ten vaccines in Phase 3 trials and more than 50 other vaccine candidates in earlier stages of testing, according to the New York Times.
The Moderna and Pfizer vaccines are expected to be approved and be available for use by late December. Initial vaccinations are expected to be reserved for medical workers and high-risk individuals and are not expected to be available to the general public until around April, according to Dr. Fauci.
The vaccines are desperately needed since there is no peak yet in sight for the current pandemic surge. The current surge seems to be mainly seasonal in nature and shows no signs of slowing down as yet. The number of new daily Covid infections has doubled in just the past 2-1/2 weeks and seems destined to continue on its hyperbolic rise until restrictions start slowing the infection rate.
In the worst case, new infections may not slow until a natural seasonal peak is reached, much like the flu typically reaches a seasonal peak around January to February. In the case of Covid, however, restrictions and vaccinations starting in December will hopefully produce a permanent peak much sooner.
Oct U.S. retail sales growth expected to slow due to pandemic surge that started in late-Oct — The consensus is for today’s Oct retail sales report to increases of +0.5% and +0.6% ex-autos, down from Sep’s strong increases of +1.9% and +1.5% ex-autos.
On a year-on-year basis, retail sales recovered to +5.2% y/y in September, which was the best year-on-year rate since December 2019. That shows that U.S. retail spending has largely recovered as consumers catch up from the pandemic trough seen this past spring.
However, retail sales likely began suffering again in late October when the pandemic surge began. The pandemic surge then went hyperbolic in November, suggesting that there is likely to be a significant pull-back in spending in November as state restrictions kicked in and as people voluntarily stayed home to stay safe. Many consumers in November were likely alarmed by the pandemic spike and curbed their spending, hunkering down in case there is another round of widespread business shutdowns and new threats to the U.S. labor market.
U.S. manufacturing production expected to improve but remain in recessionary territory — The consensus is for today’s Oct U.S. manufacturing production report to show a solid increase of +1.0% m/m, recovering after Sep’s weak report of -0.3% m/m. In the broader report, Oct industrial production is expected to show an increase of +1.0%, more than recovering from Sep’s decline of -0.6% m/m.
The U.S. manufacturing sector so far remains in a recession with a year-on-year growth rate of -7.3% y/y in September. The U.S. manufacturing sector was already in a recession in late-2019 and early 2020 due to trade tensions, weak overseas economic growth, and a generally strong dollar. The U.S. manufacturing was then decimated by the pandemic-related business closures this past spring and the worst recession in post-war history. The U.S. manufacturing sector is still trying to climb out of that hole.
U.S. homebuilder confidence expected to remain at a record high — The consensus is for today’s Nov NAHB housing market index to be unchanged from October’s record high of 85. That means that U.S. homebuilder confidence is expected to remain at a record high for the series that has history back to 1985.
U.S. homebuilders are extremely bullish due to record-low mortgage rates combined with the strong demand for new homes from people looking to escape from apartments or move to larger homes. The current 30-year mortgage rate of 2.84% is just 6 bp above the record low of 2.78% posted in early November.
Meanwhile, U.S. homebuilder stocks remain in very strong shape. The S&P SPDR Homebuilders ETF (XHB) is currently trading just mildly below October’s record high. XHB is currently up +25% on a year-to-date basis, which is twice the +12% year-to-date gain in the S&P 500 index.
