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Bears Blunted in Rout Attempt

12/02/2020 9:00 am EST

Focus: STOCKS

Jon Markman

Editor, Tech Trend Trader, The Power Elite, & Strategic Advantage

Stocks slipped lower to start the week without much conviction as investors wrapped up November by taking profits from the double-digit gains in a month stoked by optimism for a Covid-19 vaccine, notes Jon Markman, editor of Strategic Advantage.

The Dow shed 271 points, or 0.9%, while the S&P 500 fell 0.5%, the Nasdaq 100 finished flat, and the Smallcap 600 lost 2.3%. Breadth favored decliners by a 5-2 margin and there were 472 new one-year highs vs. just eight new lows.

It was actually a decent showing by bulls as bears had the upper hand early but failed to capitalize. Topping the new-high list were Costco (COST), MercadoLibre (MELI), Atlassian (TEAM), Moderna (MRNA), The Trade Desk (TTD), IHS Markit (INFO), Unity Software (U), Xilinx (XLNX), CrowdStrike (CRWD) and Chewy (CHWY). Starting to see more tech and cyber; the revenge of the “stay-at-home” trade.

Moderna said ahead of the opening bell that it would file for emergency use authorization with the US Food and Drug Administration for its Covid-19 vaccine candidate after it showed efficacy of more than 94% in its Phase 3 clinical trial.

Moderna's news follows announcements earlier this month from Pfizer (PFE) and BioNTech (BNTX) that they would seek FDA emergency approval for their possible vaccine. Moderna jumped 20%, Pfizer ticked up 2.9%, and BioNTech popped 13%.

Last week's rally "reflected a continuation of positive news on the possibility for a vaccine approval before the end of the year," and "progress moving toward a transition of administrations in DC," John Stoltzfus, strategist at Oppenheimer, said in a note Monday.

Energy led the decline, sinking about 5.4% as crude futures fell after the Organization of the Petroleum Exporting Countries and its allies discussed how to respond to spikes in coronavirus cases in the US and Europe. Chevron (CVX) lost 4.5%. Financials fell 1.9%, pushed down by Travelers' (TRV) 3.6% loss. Tech led advancing sectors, gaining about 0.7%. Apple (AAPL) rose 2.1% and Advanced Micro Devices (AMD) rose 6.3%.

IHS Markit climbed 7.4% on S&P Global's plan to take over the data and analysis firm in an all-stock deal valued at $44 billion. S&P Global added 3%. Two great franchises coming together; I like both a lot. Nikola (NKLA) sank 27% after the electric-vehicle maker said General Motors (GM) would supply its Hydrotec fuel-cell system for the startup's Class 7 and Class 8 semi-trucks. The non-binding memorandum of understanding replaces a September deal that was to have seen GM take an 11% stake in Nikola. 

Bottom Line: We got the start of the expected post-November smackdown, though it may not last long. Growth and tech have been under pressure recently and may be the best beneficiaries of the rebound out of whatever pullback the market gods intend to inflict. Looking for a ripple not a wave before the FOMO, Covid, and Fed trades conspire to sweep stocks higher into January.

Learn more about Jon Markman here.

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