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End of Day Briefing - Recap of Friday Dec. 18, 2020

Stocks close lower as COVID-19 cases continue to rise and investors await a stimulus deal

Stock futures were mixed in early trading with modest moves following record high closes on Wall Street yesterday, although the major averages all finished in the red. Hope remains that Congress will pass a stimulus bill by year end, though time is running out. The ongoing climb in infections and hospitalizations continues to weigh on the immediate term outlook for the economy, while vaccines hold out the promise of a return to normal activities later next year. Tesla ($TSLA) joins the S&P 500 on Monday, which could prompt a flurry of activity as index funds adjust positions to track the index.

ECONOMIC EVENTS: In the U.S., the current account deficit widened $17.2B to $178.5B in Q3, which was not quite the jump that was expected. The leading economic indicators index rose 0.6% to 109.1 in November, which was little above the consensus forecast reported by Bloomberg. In energy news, Baker Hughes reported that the U.S. rig count is up 8 from last week to 346 with oil rigs up 5 to 263.

Data from the Johns Hopkins Whiting School of Engineering shows there are now 75.2M confirmed cases of COVID-19 worldwide, including 17.2M in the U.S., and 1.67M deaths due to the disease, including about 311,000 in the U.S. In New York State, Governor Andrew Cuomo reported 12,697 positive cases yesterday, or 5.09% of total tests.

TOP NEWS: Moderna ($MRNA) confirmed last night that the FDA's Vaccines and Related Biological Products Advisory Committee recommended that the FDA grant an Emergency Use Authorization, or EUA, for the company's COVID-19 vaccine candidate, mRNA-1273. 20 VRBPAC members recommended for an EUA, no members voted against, and one abstained. Following the news, President Donald Trump tweeted that the vaccine was "overwhelmingly approved" and that distribution would "start immediately," though an FDA spokesperson told Bloomberg that the vaccine's emergency use authorization remains under review and that it is not yet authorized.

In M&A news, BioTelemetry ($BEAT) agreed to be acquired by Philips ($PHG) for $72 per share in cash. This represents a 16.5% premium to BioTelemetry's closing price on December 17, with an implied enterprise value of $2.8B, inclusive of BioTelemetry's cash and debt. Shares of BioTelemetry jumped 16.9% higher after the deal news.

On the earnings front, FedEx ($FDX) shares fell 5.7% despite the company reporting better than expected second quarter results. Looking ahead, the company said it aims to increase earnings per share by 10%-15% per year over the long-term, but did not issue formal guidance for FY21 beyond stating that it expects earnings growth in the second half of the fiscal year.

Meanwhile, Palantir Technologies ($PLTR) shares slid 4.6% after Credit Suisse analyst Brad Zelnick downgraded the stock to Underperform from Neutral, saying the stock's valuation is "disconnected from fundamentals," trading over 50% above a "previous blue sky scenario."

MAJOR MOVERS: Among the noteworthy gainers was Winnebago ($WGO), which rose 5.3% after reporting quarterly results. Also higher was Curo Group ($CURO), which surged 88.7% higher after the company announced that it is positioned to benefit from the announcement that Katapult Holding, a company approximately 40% owned by Curo, and FinServ Acquisition Corp. ($FSRV), a publicly traded special purpose acquisition company, or "SPAC," have agreed to merge.

Among the notable losers was U.S. Steel ($X), which fell 9.1% after reporting quarterly results.

Reviewing Friday's economic data:

  • The Conference Board's Leading Economic Index increased 0.6% m/m in November ( consensus 0.4%), marking the seventh straight month of positive readings. The index for October was revised to 0.8% from 0.7%.
    • The key takeaway from the report is the ongoing deceleration since May in the pace of growth for the leading indicators, which, according to the Conference Board, suggests a significant moderation in growth as the U.S. economy moves into 2021.
  • The current account deficit for the third quarter totaled $178.5 billion ( consensus -$190.0 billion). The second quarter deficit was revised to $161.4 billion from $170.5 billion.

Investors will not receive any notable economic data on Monday.

  • Nasdaq Composite +42.2% YTD
  • Russell 2000 +18.1% YTD
  • S&P 500 +14.8% YTD
  • Dow Jones Industrial Average +5.8% YTD

Market Snapshot
SP 5003709.42-13.07(-0.35%)
10-yr Note -1/320.950
NYSEAdv 1339 Dec 1745 Vol 3.1 bln
NasdaqAdv 1631 Dec 2003 Vol 7.0 bln

Industry Watch
Strong: Consumer Staples, Materials, Industrials, Health Care
Weak: Real Estate, Energy, Utilities

Moving the Market

-- Market takes a breather at end of record-setting week

-- Stimulus headline volatility

-- Quarterly rebalancing of S&P 500, annual reconstitution of the Nasdaq 100, Tesla (TSLA) inclusion into S&P 500 after the close, quadruple-witching options expiration

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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