Wall Street crumbled on mini-lockdowns despite hopes of COVID vaccinations and stimulus

calendar 18/11/2020 - 20:30 UTC

The U.S. stock market (Dow Jones Industrial Average: DJ-30) closed around 29783.35 Tuesday, stumbled almost -0.56% (-167 points) on hopes & hypes of early COVID vaccination and stimulus to avoid a double-dip recession. On late Wednesday, Dow again stumbled almost -300 points from the session high on increasing local mini-lockdowns across America including the NY city schools.

On early Wednesday, Dow jumped almost +150 points, eyeing the magic 30000 levels after Pfizer-BioNTech said that a final data analysis found their coronavirus vaccine is almost 95% effective in preventing Covid-19, also among adults and will apply for emergency US authorization of its vaccine (EUA) within days. The BioNTech CEO Dr. Sahin also promised further development of its mRNA vaccine so that there are no great logistical issues regarding -70 degree temperature storing/transporting requirement.

On early Tuesday, Dow Future crumbled over -400 points on the fact that despite an effective & safe COVID vaccine by Dec’20, the actual mass-vaccinations may start by April’21 and will take a minimum of one to three years (Q2-2021-24) for a significant population to get the required doses.

Dow was also under stress on soft U.S. retail sales data amid the resurgence of COVID-19 and partial lockdowns/restrictions across various U.S. states. Also, the risk trade sentiment was affected as Trump reportedly wanted to attack Iran last week (for election defeat revenge) based on a report by IEA that Iran is on the verge of the development of nuke. But Pence and Pompeo may have refrained Trump from such action, which may cause a widespread conflict in his last few weeks in the White House.

On Tuesday, Wall Street was also undercut by a plunge in healthcare stocks, such as CVS Health and Walgreens on the concern of business disruption as Amazon Prime launched a pharmacy business, which will deliver medicines without any shipping cost to its prime members.

But Dow recovered almost +300 points from the session low on hopes of Fed’s monetary as-well-as Congress’ fiscal stimulus (CARES Act 2.0) and upbeat report card from Home Depot, Kohl’s, and Walmart. Also, a virtual minority government by Biden (Democrats) may ensure the continuity of the present policy of tax cuts & deregulation (Trumponomics-Lite). This along with the Fed put (more QE in December), hopes of at least $2T CARES Act 2.0 (COVID fiscal stimulus).

Also, potential less hawkish China trade/cold war policy under Biden admin is boosting the risk trade sentiment, despite surging coronavirus infections and mini-lockdowns on both sides of Atlantic (U.S.-Europe) and the fact that actual mass-vaccinations (COVID) may take another 2-4 years (2022-24) in U.S./Europe-Asia/around the globe.

The risk sentiment was also undercut by Trump’s ongoing legal fight against election results and purge of various high levels Federal admin officials, who are not directly or indirectly supporting him. All these legal hurdles and demands of recounting, reelection by Trump may be simply designed to prevent Biden to get the official winning certificate from respective state election commission by 14th Dec. In that case, the issue will be eventually referred to U.S. SC and then the House of Representatives, who will choose the next President.

Trump may be expecting that if he can drag the election counting drama to U.S. Congress/House, he may win due to the very thin majority of Democrats in the House coupled with the possibility of any House Democrat vote for Trump. But at the same time, Trump's tantrum on election result may be making him more unpopular across America and the U.S. image of strong democracy & institutions is getting worse day-by-day. The U.S. is now looking more like a ‘banana republic’ and ‘joker state’ due to Trump’s ‘madness’ and Eurasia including China, Russia is emerging stronger post-COVID-19.

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In any way, on Tuesday, Dow recovered from the session low after the U.S. HoR (House of Representatives) led by Pelosi, Schumer (Democrats) issued a letter to Senate Republicans Leader McConnell, urging him ‘to come to the negotiating table this week to produce bipartisan, bicameral comprehensive COVID-19 relief agreement that meets the needs of country’.

On Tuesday, Fed’s Chair Powell also reiterated that the U.S. economy now desperately needs grants, not loans. Powell also warned that the US economy has a long way to go’ before it returns to pre-pandemic levels, adding that the next few months may be very challenging. Powell also pointed out about long-term damage to the U.S. democratic and independent institution's image due to the ongoing Trump election tantrum.

Bottom line:

The U.S. economy needs urgent economic relief/assistance to avoid huge car parking line at various free food banks. Many unemployed Americans are now looking for free food after losing their jobs. But the ongoing political and policy paralysis in the White House/Capitol Hill may continue to affect Main Street as-well-as Wall Street in the days ahead.

Technical Outlook: SPX-500, DJ-30, and NQ-100 (Futs):

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