Day Traders Diary

11/13/20

The major averages rose on Friday as investors bet again on stocks that would benefit from a potentially effective vaccine and economic recovery next year. The Dow Jones Industrial Average traded up 452 points, or 1.6%. The S&P 500 gained 1.5%, while the techy-heavy Nasdaq Composite rose 0.8%. The Russell 2000, which tracks small-cap stocks, jumped more than 2% to an intraday record, and was on pace for its first all-time closing high since August 2018.

Shares of Disney gained 2%. Shares of Carnival Corp., United Airlines and Boeing all rose, capping big gains for the week. At the sector level, energy and industrials rose 3.9% and 1.9%, respectively, to lead the S&P 500 higher. Financials and materials were also up more than 1%.

The Dow gained 4% for the week after Pfizer's news on Monday that the vaccine it is developing with BioNTech was more than 90% effective in a trial. This caused a rotation into the cyclical stocks that would benefit from an economic comeback next year. Investors dumped technology shares which have held up during the pandemic.

However, the rotation paused midweek as traders worried that a rising number of coronavirus cases could hit the economy significantly before a vaccine gets here.

A CNBC analysis of data compiled by Johns Hopkins University showed average daily new cases are up by at least 5% over the past week in at least 47 states. Hospitalizations, meanwhile, rising in at least 46 states. On Thursday alone, more than 150,000 cases were confirmed in the U.S.

The resurgence in coronavirus cases has also led some parts of the country to re-adopt stricter social-distancing measures. In Chicago, Mayor Lori Lightfoot asked residents to cancel their Thanksgiving plans and stay indoors as cases rise in the city. In New York state, Gov. Andrew Cuomo said new curfews on bars, restaurants and gyms will take effect on Friday.

Phillip Colmar, partner at MRB Partners, wrote in a note that the global economic recovery "will be sustained, but the V-shaped portion is over, and we have already transitioned to a slower pace of two-steps forward and one back."

The Dow dropped more than 300 points on Thursday. The S&P 500 and Nasdaq also declined.

Federal Reserve Chairman Jerome Powell also said Thursday the country's economic outlook remained uncertain. "With the virus spreading, the next few months could be challenging," he said.

The 2-yr yield finished flat at 0.17%, and the 10-yr yield increased one basis point to 0.89%. The U.S. Dollar Index decreased 0.3% to 92.73. The CBOE Volatility Index dropped 8.9% to 23.10, as the bullish price action in equities continued to reduce hedging interest against a downturn in stocks.