Market Rallies Higher As Vaccine Testing Makes Progress

The rally marches higher as optimism about the states reopening continues. That coupled with the potential for a vaccine to be ready by the end of the year, is adding steam to the market.  The WSJ reported that New York University and University of Maryland began testing individuals with four vaccine candidates from Pfizer (PFE) and BioNTech (BNTX), a German company.  More than 3.6 million people globally have been infected with Covid-19. These vaccines are just part of the efforts underway in search for a cure.

The three major indices have broken through the initial resistance, with the Nasdaq once again the best performer, up 1.8% to 8,870, the S&P 500 up 1.6% to 2,888 and the Dow up 1.3% to 24,064.  All the S&P sectors are in the green as Healthcare has taken over the top spot from Energy. However, WTI has been up 5 consecutive days, and is up 21% today alone to $24.68. 

Advancers, new highs and breadth are decidedly positive. 

Beef prices hit record high

Wholesale beef price soared to an all-time high of $410.05, almost doubling in less than a month. This comes as dozens of meat processing plans have been shuttered due to the coronavirus pandemic.

This news has added some pressure to the restaurant sector with most of the stock trading in negative territory. Yesterday, Shake Shack’s (SHAK) CFO said during the conference call that they’ve seen significant increases in beef prices, with the largest increase being over the last week. In addition, Stifel reported today that 5% to 10% of Wendy’s (WEN) restaurants are offering chicken-only menus.

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There have been concerns about meat shortages nationwide. Costco (COST) announced yesterday that is limiting the amount of meat customers can purchase. Also, Kroger (KR) put limits on the amount of pork and ground beef shoppers can buy at select stores. 

To see the map of US meat plant closures, click here.

ISM Services

The U.S. service economy plummeted in April.  The Institute for Supply Management’s survey of non-manufacturing companies crashed to 41.8% in April from 52.5% in March.  This comes on the back of 112 consecutive positive readings. A number below 50% is a sign of contraction or recession. Airlines, hotels, restaurants, retailers as well as other services related companies have suffered massive losses from Covid-19, causing the index to fall to levels from the Great Recession in 2007-2009. While one was expecting a good number for April, the abysmal reading was better than the consensus forecast.  

To see the chart, click here.

While a terrible report, this is last month’s data, and in May, we have begun to see green shoots of optimism as states and countries begin to reopen.  That, coupled with the boost some online retailers are seeing as a result of consumers being sheltered in place, should help some of the services business start to regain their footing.

As an example, today Wayfair (W) announced it is seeing a huge boost to its share price (up 24%) and its business.  The company’s net revenues increased 19.8% to $2.33 billion from the prior year. CEO Niraj Shah said, "Millions of new shoppers have discovered Wayfair while they shelter in place at home.”

Starbucks (SBUX) is up today, as it has unveiled plans to have 90% of its store open by June.  People are ready to get back out there.

Let’s see if we can continue to build on this momentum, especially into the close.