The market is being whipsawed between hopes for a successful vaccine against the coronavirus and fears over a surge in cases across the U.S. and the prospect of stricter containment measures. That dynamic is likely to continue to dictate market sentiment in the coming week with investors caught in a push-pull between growth and value stocks. Market watchers will also be closely watching some big-name retail earnings this week, along with data on U.S. retail sales as the holiday season draws nearer. There will also be a flurry of appearances by officials from the Federal Reserve, the European Central Bank and the Bank of England to parse. Here is what you need to know to start your week.
- Virus surge
The number of new cases across the U.S. rose on Friday to a daily record of over 177,000, the fourth straight day an all-time high was set, according to a Reuters tally of figures from U.S. public health agencies.
The number of COVID-19 patients in U.S. hospitals rose to an all-time high 68,141 on Friday.
Governors in several states, including California, Oregon and Washington have urged residents to avoid travelling out of state, amid concerns that the coming holiday travel season would accelerate already alarming spikes in infections and hospitalizations.
Since the pandemic began, the virus has infected 10,690,665 people in the U.S., killing 243,580 of them, according to a Reuters tally.
- Value vs. growth
Investors are suddenly more optimistic on the global economic outlook after upbeat news on the Pfizer (NYSE:PFE) vaccine early last week.
The vaccine breakthrough ignited a rally in shares of energy companies, banks, industrials and other value stocks – usually defined as stocks that trade at discounts to their projected intrinsic worth. At the same time, have investors booked profits in technology stocks, which have benefited from a stay-at-home environment.
But investor optimism may be overdone, particularly as Fed officials have been warning about the potential damage rising virus cases could do to the economy, particularly in the absence of a fresh economic stimulus package.
Investors may also be underestimating the amount of time it takes to widely distribute the vaccine and whether the breakthrough reduces incentives for lawmakers to provide fiscal stimulus.
- U.S. retail sales figures
Figures on U.S. retail sales for October, due out on Tuesday, are expected to show a rise of 0.5% after a larger-than-forecast increase of 1.9% the previous month. That would indicate that the U.S. went into the fourth quarter with consumer spending still on a solid footing despite growing headwinds from the pandemic.
Housing starts are also forecast to tick higher in October, mirroring an uptick in new-home sales as buyers take advantage of record low mortgage rates. The U.S. will also release data on existing home sales for October.
Meanwhile, Thursday’s weekly data on initial jobless claims will be closely watched amid lingering concerns over the strength of the recovery in the labor market.
- Retail earnings
Investors will be closely watching earnings reports and forecasts from U.S. retailers to gauge how consumer demand is faring in the midst of the worst public health crisis in decades.
On Tuesday Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Kohl’s (NYSE:KSS) are all due to report before the market open. On Wednesday, Target (NYSE:TGT), Lowe’s (NYSE:LOW) and TJX (NYSE:TJX) will report earnings ahead of the open and NVIDIA (NASDAQ:NVDA) will release its earnings results after the market close. Macy’s (NYSE:M) will report on before the market open on Thursday and Foot Locker (NYSE:FL) is set to report ahead of the open on Friday.
- Central bankers
Several Fed officials are scheduled to speak this week including Vice Chair Richard Clarida on Monday, New York Fed President John Williams on Tuesday and Chicago Fed President Charles Evans on Wednesday.
Meanwhile, central bankers in Europe will also be attempting to provide some guidance as the continent navigates a second wave of the pandemic.
European Central Bank President Christine Lagarde is set to make two virtual appearances during the week. Bank of England Governor Andrew Bailey, Deputy Governor David Ramsden and Chief Economist Andy Haldane are also due to make appearances on Monday and Tuesday.