Stocks, Vaccine Data Anticipate Return To ‘Normal’ For Consumers
The rally has legs.
To that end, stocks opened the week at new highs on two events that may signal game changers for the U.S. — and businesses: The news that Joe Biden has secured victory in the presidential election, and, in addition, that Pfizer announced what seems to be encouraging data on a COVID-19 vaccine.
Pre-market trading on the broader S&P 500 futures were up more than 3 percent.
Pfizer announced Monday (Nov. 9) that its clinical trials showed more than 90 percent efficacy in preventing the coronavirus in those who had not previously had the virus, according to reports.
Eying Stimulus On The Hill
On the Hill, as noted by Yahoo Finance, Goldman Sachs chief economist Jan Hatzius wrote that a stimulus plan may be on the horizon — in the range of as much as $1 trillion (though below the $2 trillion to $3 trillion range of recent stimulus negotiations).
Hatzius wrote, “Assuming a Biden White House and Republican-majority Senate, we would expect such a package to include (1) expanded eligibility for and extended duration of unemployment insurance, along with a partial extension of the $600/week payment (we expect this to drop to $400/week); (2) new funding for the Paycheck Protection Program (PPP) to allow for a second round of loans for some businesses, and other business support and tax incentives; (3) aid for state and local governments, much of which could come as additional funding for schools; (4) additional funding for COVID-19 public health efforts, and (5) another round of payments to individuals, though the outlook for these payments is less clear than the other components.”
All of this adds up what seems to be a positive runway for stocks, which of course look ahead for the way earnings will trend. And the Biden news, coupled with the hopes that we are much closer to a vaccine deployment than we were even recently, may bode well for earnings.
In broad strokes, here’s how it may play out: Stimulus will go at least some ways toward keeping payrolls intact (at least somewhat). As noted in this space last week, jobless claims for the week that ended Oct. 31 stood at 751,000, down 7,000 from the previous week, and the eighth consecutive week that unemployment filings declined since the pandemic began in March. Things are improving, but the recovery is fragile.
Stimulus would give companies some breathing room until the return to normalcy that may be part of a vaccine rollout. As recent PYMNTS studies have noted, consumers want to see a COVID-19 vaccine in place before they get back to normal.
Some 38 percent report the primary thing they’ll need to see to get back to normal will be a vaccine’s wide availability. That compares with only 6 percent who said that an easing of government restrictions would be their primary cue to resume their old habits — particularly in commerce.
Verticals such as travel could desperately use such a return to normalcy. Thus, shares of American airlines were up by more than 25 percent in pre-market trading, and Delta was up 17 percent.
Looking into the payments realm, the implication is that consumers will continue to spend, yes, but the drags on cross-border spend that had been hallmarks of recent earnings — including Visa and Mastercard — will lift. Shares of Mastercard were up about 9 percent in pre-market trading. Shares of Fiserv were up a bit more than 5.7 percent.
On Monday, at least, optimism reigns.