Stimulus Hopes are Alive and Well – Try the Pork Chop Pizzaiola

By KENNY POLCARI

Things you need to know:

  • The Biotechs surge as Trump sings their praises
  • REGN & LLY applying for emergency FDA approval
  • Pence and Harris go at it… but did they really say anything?
  • Futures higher this morning as stimulus hopes remain alive and well
  • Try the Pork Chop Pizzaiola

So stocks took off yesterday after a couple of headlines hit the tape… the complete turnaround by Donald – encouraging Nancy to come back to the table – after he told her to go away – but has since decided that she needed to send him separate bills on airline relief, PPP relief and stimulus checks for everyone… saying that the money is available and he is ready to sign… Airline stocks getting a boost with JETS (Airline ETF) surging 2.8%… This sent a message to the markets that his sudden cancellation was maybe just his way of putting pressure on her to do something – and it did… she was on ‘The View’ with Joy Behar and the others taking the time to wish Joy a Happy Birthday – that was nice – I’m glad there isn’t anything going on that is more important… she did then make time to have two phone calls with Treasury Secretary Stevey Mnuchin to discuss what those separate plans might look like – but in the end – still nothing got done – but there is HOPE.

Next – was all the excitement around covid therapeutics – Trump calling out or rallying behind the Biotech industry – Regeneron – REGN, Gilead – GILD and the others… claiming in tweet yesterday that the cocktail of REGN drugs ‘saved his life’ and made him all better… which is now causing REGN to apply for EMERGENCY USE status from the FDA. Eli Lilly – LLY also in the news claiming to have a cocktail of two antibodies that are also supposedly as effective as the REGN formula – although the jury is still out on this… Either way both LLY and REGN are surging in the pre-market – up 2% and 4% respectively.  The XBI – Biotech ETF also enjoying the mood – rising by 3.2% as investors plowed money into this sector…

And then there was the anticipation of the VP debate… and all of the chatter surrounding the recent polls… Biden taking a double digit lead – sending the message that the market and investors – are pricing in a Biden win… the next part to consider is just how much of win it may be. Will they sweep or not? Because the extent of the ‘win’ will dictate the ‘extent’ of the ‘re-pricing’ (read correction).  And not to be left out of the conversation – our friends at Goldman making sure to stand up and be heard as Jan Hatzius positions himself for a role in the Biden cabinet.

Everything rallied yesterday… Industrials, XLI, Consumer Discretionary, XLY, Basic Materials, XLB, all showing the best performance up 2.2%, 2.3% and 2.5% respectively. Retail – subsector of Consumer Discretionary XRT surging 2.8%. Part of the excitement in these groups being driven by the latest Goldman report suggesting that a Blue Wave will – in the end – be better for the economy… the other part is that these sectors have been underperforming – so it is a game of catch-up.

The worst performer yesterday? Utilities XLU (which makes sense – they are boring, not sexy and are more defensive) – they only rose 0.6%.  – but Utes are up 10% in the last month as the market prices in a Biden (Democratic) win… and there is the ‘defensive’ argument… And Value stocks?  Take a look at the SPYV – the S&P Value ETF – it surged 1.6%  and is now up 7% in the last month – also a Biden ‘defensive’ play… and for those looking for safety and yield – take a look at the SPYD – the S&P Dividend ETF – this product seeks to imitate the price and yield performance of the S&P 500 High Dividend Index… It tracks the 80 of the highest yielding companies in the S&P – (12-month yield of 5.3%). While these 3 stocks are not the FANG names – as they are not wild and sexy by any stretch – they do provide a value – in any type of ‘barbell’ approach to designing a portfolio. Just food for thought…

And we’re off – surely you watched the debate last night – if for no other reason than entertainment… expectations ran high – so many of us expecting a more controlled (it was) more informative (it was not) debate. Twitter posts alone suggest the disappointment… as neither candidate chose to answer the hard questions… Harris saying that the Biden economic plan would not raise taxes on anyone making less than $400k/yr… (that is not really true – because while income taxes may not go up – other taxes that affect that demographic will surely go up – so it’s all in the interpretation… Just sayin’…) She refused to answer the ‘packing the supreme court question’ and she stayed away from anything to do with the ‘Green Deal’ and she said that we lost the trade war with China… REALLY? We lost that war? I must be living in a different world. Pence on the other hand chose not answer questions surrounding ‘super spreader’ events and climate change events. Neither candidate wanted to wade into a woman’s right to choose, how to create jobs, what jobs they could create, and they both chose not to answer questions about succession planning – which is an appropriate question this time around considering the age of both Trump & Biden… but was a curious question anyway – because the constitution is clear – we have a process for succession in the event of a tragedy. The reason it is so important is because there is a better than 50% chance that Harris becomes President in the next 4 years… she knows it and the country knows it – there is plenty of speculation and articles discussing this very concern… In the end – while it was better than last week’s presidential election – it left so many questions unanswered… Expect both sides to claim victory…

And US futures are up again this morning –Dow + 150 pts, the S&P is up 11, the Nasdaq is up 60 and the Russell is up 8. Talk of a stimulus deal continue to dominate the news… which only tells you how desperate investors are for Congress to do something real… Trump’s push to get the FDA to approve his treatment is also adding to the excitement this morning. And chatter about the debate will surely be part of the conversation this morning.

Eco data today includes: Initial jobless claims of 820k and Continuing claims of 11.4 million.

But – remember – the market is not focusing on the macro data right now… it’s all about the virus, the therapeutics and the election.

The S&P closed at 3419 after testing as high as 3426- bringing us back to the September highs… before backing off a bit to re-group. With futures UP again this morning – the next move is in Nancy’s court (again). What will we hear today? Look for the algo’s to take stocks up and thru 3425-ish as the news continues to be positive… but again – be careful – it feels a bit ahead of itself – once again… Remember – while Goldman may tell us that a Blue Wave will be good for the country at some point – the reality is that stocks are ahead of themselves… as the algo’s go all in… but we’ve seen what happens when reality hits… and that reality is a Blue Sweep – while Goldman may tell us it will be fine – it will be fine AFTER stocks re-price lower. Talk to your advisor – tweak your plan if you are nervous… be bit more defensive and re-balance based on the most recent moves…

Take good care –

Kp

Send your feedback here: AskKenny@sevenfigurepublishing.com

Follow me on Twitter: @KennyPolcari

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