U.S. equities continued to push to new highs this past week as optimism on traction toward additional stimulus in Congress overshadowed decelerating momentum in U.S. economic data in the wake of worsening coronavirus trends and tightening restrictions. For the week, the S&P 500 tacked on 1.7% while the Dow Jones and Nasdaq Composite gained 1.0% and 2.1% respectively. Equity markets closed out November with the highest monthly return since April as expected volatility around the presidential and Congressional elections never materialized and a series of positive vaccine developments provided a boost to the economic outlook and investor sentiment. The S&P 500 rose nearly 11.0% in November led by cyclical sectors like energy and financials as the equity rally broadened out, and small cap equities posted even larger gains with the Russell 2000 surging a record 18.4% on the month. Meanwhile, industrial metal prices have continued to climb higher as copper gained 3.8% last week and is approaching an 8-year high after gaining over 25% this year, signaling growing confidence in the economic recovery on the back of vaccine developments and stimulus progress.

 

The prospect for a near-term Senate compromise on additional fiscal stimulus has gained momentum following the announcement of a bipartisan proposal totaling $908 billion that leaders in both parties would like included as part of an omnibus government-funding bill within the next two weeks. The largest components of the bill would include additional funding for enhanced unemployment benefits through March as well as aid for small businesses in hard hit areas of the economy. Hurdles still remain though as Democrats and Republicans seek to iron out areas of disagreement such as funding for state and local governments and liability protections. 

 

Slowing momentum in recent economic data has added to the sense of urgency for lawmakers with fiscal aid waning as restrictions increase to reign in the coronavirus resurgence. November’s employment report, released on Friday, showed that employers added just 245k jobs last month, down from 610k jobs in October and short of the consensus expectation for 475k net payrolls added. The unemployment rate ticked down to 6.7% from 6.9% in October, though that decrease partly reflected fewer citizens seeking work. The number of employed Americans is still 9.1 million (5.7%) lower than it was in February. The employment landscape continues to follow consumer demand as nearly 300k jobs have been added in the couriers & messengers and warehousing & storage industries over the last year to handle increasing e-commerce demand and shipments. Meanwhile, the leisure & hospitality sector, which includes restaurants, is one of the hardest hit, losing over 3.3 million jobs over the past year.

 

In the week ahead, market participants will get a clearer picture of the impact of Thanksgiving travel and gatherings on Covid-19 dynamics and will monitor news on the vaccine front. The Food and Drug Administration will hold a hearing on the Covid-19 vaccine developed by Pfizer and BioNTech on Thursday, which could lead to the country’s first emergency authorization of a vaccine candidate. It is anticipated that the U.S. will have about 20 million vaccine deliveries in December focused on front-line medical workers and long-term care residents. Meanwhile, the U.K. became the first country in the world to begin administering the Pfizer and BioNTech vaccine to the public on Monday, focusing on highest risk citizens with the first 800k doses. On the geopolitical front, negotiators from Britain and the E.U. will try to break the deadlock in Brexit talks ahead of a year-end deadline to sign a trade deal, with the outcome having significant implications for the British economy in the years to come.