Market Review: November 26, 2021

Closing Recap

Friday, November 26, 2021

Index

Up/Down

%

Last

DJ Industrials

-903.40

2.52%

34,900

S&P 500

-106.46

2.26%

4,595

Nasdaq

-353.57

2.23%

15,491

Russell 2000

-85.54

3.67%

2,245


 

Equity Market Recap

·     A brutal day on Wall Street as stocks tumble across the board in aggressive style, with every little bounce met with selling pressure amid uncertainty into the weekend. Today’s market action was macro based, with coronavirus fears returning to rattle markets as investors were worried that the variant, dubbed B. 1.1.529, could set back months of effort to revive the world economy. The U.K., Israel and Singapore were among the countries to restrict travel from Southern Africa (with more announcing during the day) which raised the alarm over a fast-spreading strain of the coronavirus. While stock selling was broad-based, the energy, financials, travel, and leisure and Smallcaps (Russell down over 4% below key technical levels) were the biggest market drags on rising restriction fears, plunging oil and Treasury yields and general market concern. Recall on November 22nd, Barron’s had noted that the S&P 500 hasn’t’ moved 1% or more in 25 trading days, the longest streak in 2 years – rising 6% over that same period – that came to a screeching halt today! The CBOE Volatility index (VIX), or fear index surged as much as 50% to its highest levels since September and biggest one day gains since January. Haven plays such as gold, Treasuries, and currencies including the Japanese yen and Swiss Fran were some of the few places to hide. Overall, a rough return after Thanksgiving Day for investors.

 

Variant Related Movers:

·     Many countries restricted travel to and from South Africa and neighboring nations to contain a fast-spreading new B.1.1.529 variant of the coronavirus as the scientists predicts it to be more contagious and could render the current crop of Covid-19 vaccines less effective. Vaccine maker PFE/BNTX says they expect data from lab tests on new variant in 2-weeks. JNJ closely monitoring newly emerging covid-19 virus strains with variations in the sars-cov-2 spike protein.

·     Vaccine makers rally behind a new Covid-19 variant with many mutations in the key spike protein that is reported to be spreading rapidly in South Africa – shares of MRNA, PFE, BNTX, NVAX, VIR among movers; MRK with some disappointing news after saying updated data from the study of its experimental COVID-19 pill showed lower efficacy in reducing the risk of hospitalization and deaths than an earlier interim analysis, cutting them by 30% in the study in 1,400 study (down from a roughly 50% reduction in hospitalizations and deaths in 775 patients prior)

·     Energy and Financials crushed: U.S. bank stocks tumble, BAC, C, WFC, JPM, XLF as fears that the new coronavirus strain may slow global economic growth weighed on sentiment, pressuring Treasury yields, which were down more than 10bps across the board early, crimping net interest margin concerns for financials; energy stocks crushed (OXY, PXD, FANG, APA) behind a 10% drop in oil prices mid-morning on slowing global demand growth fears.

·     Travel and Leisure stocks as expected among the hardest hit names on the new variant and restrictions being set in place in some parts of the world: airlines AAL, DAL, UAL, especially those with international exposure hit the hardest along with; hotels such as MAR, H, HLT; casinos LVS, WYNN, MLCO, MGM; cruise lines CCL, RCL, NCLH; theme parks DIS, SIX, SEAS, FUN; restaurants and retailers a swell; energy names hit on slowing demand fears with oil plunging.

 

Commodities, Currencies and Treasury’s

·     Crude oil drops to the lowest level since late September, falling as much as 12% to below $68 per barrel at its lows ($67.40), and posting its 5th straight weekly loss for the first time since Mar 27, 2020, while Brent crude drops below $74 first time since late September and gasoline futures hitting 7-month lows. Slowing demand fears on the virus fears (and the potential effects on travel and oil demand), in addition to the recent global coordinated effort of releasing inventories from storage units to help soaring prices weighed on sentiment. The dollar was mixed falling vs. haven currencies such as the yen and Swiss franc, while treasury yields tumble from long/short end of the curve with the 10-yr dropping below 1.5% after topping 1.7% just a few days ago.

·     Defensive currencies saw strength; News of a new coronavirus variant potentially resistant to current vaccines sent investors seeking the safety of the Japanese yen and the Swiss franc while the possible unwinding of U.S. rate hike bets weighed on the dollar. The variant, which is detected in South Africa, Botswana, and Hong Kong, sent the South African rand down. Canadian dollar hit 2-month lows vs. the buck amid the plunge in oil prices denting energy related currencies as news of a possibly new vaccine-resistant coronavirus variant spooked global financial markets. Touches its weakest level since Sept. 29 as oil falls 11%.

 

 

Macro

Up/Down

Last

WTI Crude

-9.87

68.50

Brent

-8.39

73.80

Gold

3.20

1,787.50

EUR/USD

0.0087

1.1293

JPY/USD

-2.10

113.25

10-Year Note

-0.139

1.506%

 

 

Sector News Breakdown

Consumer

·     Retailers; normally one of the better sentiment days for retailers heading into Black Friday sales and Cyber Monday – but today a different picture as a possibly vaccine-resistant coronavirus variant in Europe and Africa pressured markets. Big-box retailers such as WMT, TGT, BBY, KSS were pressured early, while those that are more focused online fared better such as CHWY, AMZN, SHOP, OSTK, Wluxury names extend losses after JWN disappointing earnings results on Wednesday sunk shares of RL, TPR

·     Consumer Staples & Restaurants; defensive sectors such as food seeing early strength such as grocers like KR, as well as CPB, HSY, CAG and others; consumer products makers like CLK, KMB, also among early winners; in restaurant news, QSR the owner of Burger King, is said to have held informal talks to purchase Subway Restaurants earlier this year. The talks ended at least partly over disagreement on price, according to a New York Post report. https://bit.ly/3ladhGC

·     Casinos, Gaming, Lodging & Leisure sector; absolutely hammered sectors early with the casino sector reeling after a new COVID-19 variant that was detected in South Africa, while cruise lines, online travel, lodging, theme parks and others all falling. The variant carries an unusually large number of mutations associated with increased antibody resistance and is "clearly very different" from previous incarnations according to reports as South African scientists have already detected 30 mutations to the spike protein, which play a big role in how the virus enters the body.

 

Energy

·     Energy stock movers; an absolute bludgeoning of oil related stocks as oil prices crumble more than 10% mid-morning to lowest levels since late September and posting its worst trading day of 2021 as the concerns about a new COVID-19 variant raising questions about global growth. Energy was the worst-performing S&P sector followed closely by declines in financials on declining Treasury yields – shares of OXY, DVN, APA, MRO, VLO were among the biggest S&P 500 decliners behind the cruise lines, airlines, and other travel. It was also the worst day for the USO since it went negative in April 2020.

 

Financials

·     Bank movers: seeing broad weakness in bank, insurance stocks amid the tumble in Treasury yields (10-yr falls below 1.5% after hitting its best levels since the summer of 1.7% last week. Crypto assets were not immune to the mass “risk-off” selling pressure this morning with Bitcoin (BTC) dropping more than 20% from its all-time high of almost $69K earlier this month, touching below $53,500 before bouncing. After reaching its record high on Nov. 9 of ~$68.8K on Nov. 10, bitcoin has been drifting lower. But it got an extra push down, falling 8.0% to $54.3K in the past 24 hours as investors turned to safer haven investments after news of a worrying new COVID variant from South Africa. Ethereum prices dropped more than 11% below $4,000 before rallying off lows while other crypto such as Cardano, Dogecoin, Litecoin falling; stocks leveraged to crypto also volatile today (MARA, RIOT, COIN, MSTR, SI, BTBT).

 

Healthcare

·     Vaccine makers rally behind a new Covid-19 variant with many mutations in the key spike protein that is reported to be spreading rapidly in South Africa – shares of MRNA, PFE, BNTX, NVAX, VIR among movers; MRK with some disappointing news after saying updated data from the study of its experimental COVID-19 pill showed lower efficacy in reducing the risk of hospitalization and deaths than an earlier interim analysis, cutting them by 30% in the study in 1,400 study (down from a roughly 50% reduction in hospitalizations and deaths in 775 patients prior)

·     Healthcare related stock movers: OCGN falls after saying the FDA issued a clinical hold on its application seeking clearance to begin clinical trial of its COVID-19 vaccine candidate BBV152, also known as Covaxin outside the U.S.; telehealth names saw a jump in shares early such as TDOC on the renewed travel restriction fears; SELB dropped as the FDA has placed a clinical hold on its Phase 1/2 clinical trial of SEL-302, (which consists of MMA-101 plus ImmTOR, for the treatment of patients with methylmalonic acidemia, or MMA); QGEN rises after saying all its PCR tests remain accurate and effective in detecting new COVID-19 variant, B.1.1.529

 

Industrials & Materials

·     Metals, Industrial & Machinery; GE said it expects to achieve $80 billion in gross debt reduction between the end of 2018 and the end of 2021, up from its $75 billion projection made on Nov. 10. The company said it’s on track to achieve deleveraging targets and deliver high-single-digit free cash flow margins in 2023; gold miners seeing strength early (NEM, AEM, GOLD, AUY) as investors flee to safe-havens such as gold prices

·     Transports; airline stocks AAL, DAL, UAL, JBLU, LUV pressuring the broader transport index on the virus variant concerns leading to several European and Asian countries enacting travel restrictions to some countries; package delivery names FDX, UPS active ahead of Cyber Monday for retailers

 

Technology, Media & Telecom

·     Technology names that to tend to benefit from “stay/work-at-home” outperform broader markets on fears of more lockdown restrictions due to the virus variant in parts of Asia, Africa and Europe; seeing online retailers perform better, but overall markets weak; PDD shares tumble after posted quarterly revenue that missed market estimates on Friday, hurt by stiff competition from rivals BABA and JD amid the pandemic-driven online shopping boom; AAPL to launch AR headset in late 2022, long-term goal is to replace iphone with AR in ten years according to reports; Chinese Internet stocks slipped into in sympathy with DIDI following reports that the Beijing government wants the ride-sharing company to delist from U.S. stock exchanges.

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Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.