If you remember Bill Murray’s famous star turn as weather forecaster Phil Connors in the movie Groundhog Day, you’ll know how I feel today:
Is it this Monday, or last Monday?
Before the markets opened this morning, in what felt like a Deja-vu moment, we got good news about a leading Covid-19 vaccine candidate. This time it was from Moderna Inc. (MRNA).
Last Monday, the same thing happened, except then the news was about the vaccine being developed by Pfizer Inc. (PFE) and BioNTech SE (BNTX).
Even the actual news feels the same. Pfizer announced that preliminary data showed their vaccine was effective in preventing “more than 90%” of Covid-19 cases.
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Moderna says their preliminary data shows an effectiveness of 94.5%. The technology behind the two vaccines is similar, too – based on mRNA modeling. This new tech allowed these companies to be ahead of their competitors who are using more traditional vaccine development pathways.
Of course, it wouldn’t be Groundhog Day if the world didn’t react the same way. Here, stock markets have been very obliging.
Much like last Monday, the good vaccine news has sent the stocks victimized by the stay-at-home trend up. Cruise lines, casinos, and oil stocks were all up as much as 6-7% this morning. Financial and industrial stocks are up too, as the promise of a quick end to the Covid-19 crisis would mean a quicker recovery in demand and fewer loan losses.
But don’t worry, there are a few differences to last Monday that show us we’re not stuck in a time-loop.
For one, last Monday’s big winners in energy were the big oil companies, like ExxonMobil Corp. (XOM). They’re up again, but the really big winners today have been the smallest and worst-situated oil stocks.
Another difference is that last week’s good news from Pfizer and BioNTech sent those two stocks up – and had Moderna’s shares jumping, too.
Today, we’re once again seeing a rotation out of the Big Tech stocks such as Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL), Amazon (AMZN), and Facebook Inc. (FB). But one of this morning’s biggest losers in the premarket among the S&P 500 stocks was actually Pfizer, while the smaller BioNTech is down over 12%.
The reason for that is that this week’s news paints a picture of Moderna’s vaccine being better than Pfizer’s. Where Pfizer’s needs to be stored and shipped in ultra-cold and expensive conditions, Moderna’s can handle regular refrigeration for up to two weeks. The extra 4.5% effectiveness number helped, too.
Last week, tech ended up bouncing back up, and I expect we’ll see that happen again this week.
Because the Reality Gap here is the same as seven days ago. Yes, this news from Moderna is amazing, and it gets us that much closer to finally putting Covid-19 behind us. But this is still preliminary data, and the timeline is what it is. Moderna says it will have 20 million doses ready to be distributed in America by the end of this year. Much like Pfizer’s vaccine, Moderna’s takes two shots per person. So that’s 10 million Americans that can be immunized over December and January, let’s say. Still not enough for us all to jump on the next cruise to wherever.
This week’s euphoria seems to be hitting reality much faster than it did last week. Most of the stay-at-home victim stocks are popping less than half as much as they did last week. This more muted reaction suggests they will also fall down less than they did then. That’s because another viable vaccine candidate improves the timeline for all of us getting vaccinated, even if it still does take some time.
Because despite the hit to Pfizer’s share price, both vaccines will get made and used. There’s just not enough of any one of them to go around yet.
Today also marks the beginning of the earnings cycle for retailers, and we have some big ones reporting.
Three big box retailers all report this week, with Walmart Inc. (WMT) and Home Depot Inc. (HD) both tomorrow morning, and Target Corp. (TGT) following suit the morning after.
All three are among my favorites and should continue to do well. So should the big discount retailers TJX Cos. Inc. (TJX) and Ross Stores Inc. (ROST) which got a big boost from last week’s vaccine news, and are set to give a rosier outlook for the rest of the year. They report on Wednesday morning and Thursday evening, respectively.
Chip giant Nvidia Corp. (NVDA) reports on Wednesday after the close. I recommended the stock on Varney last week, and expect them to eat into Intel Corp.’s (INTC) server business. Buy any dip Nvidia may have this week.
Finally, two important Chinese companies report this week. The country’s second largest e-retailer that also does almost everything else you can imagine, JD.com Inc. (JD) reported this morning, beating on earnings but just missing revenue expectations.
Tomorrow after the market, Chinese electric car-maker Nio Inc. (NIO) will give its report. I like both these stocks, but beware the regulatory risk in China. Recent statements and actions by the government there suggests a heavier hand going forward.
Great trading, stay safe out there and God bless you,
D.R. Barton, Jr.