- S&P 500 ends the week firmly and above Wednesday’s high at 3576, despite news of more states going into lockdown.
- Aside from the psychological 3600 level, no significant resistance areas separate the index from its all-time high at 3668.
The S&P 500 closed Friday’s session with gains of 1.3% or nearly 50 points at 3585, with the index managing to recover all of Thursday’s losses and some to trade above Wednesday’s 3776 highs.
S&P 500 steady as US slides back towards lockdown
Since the US cash equity open, the S&P 500 has traded with a firm positive bias despite further negative news flow regarding the state of the Covid-19 pandemic in the US and more evidence that the country is sliding back into lockdown.
Most recently, the Governor of New Mexico announced that all citizens will have to shelter-in-place from Monday and all nonessential businesses must close. Meanwhile, the Governor of the State of Oregon is reportedly set to order a two-week “freeze” for the entire state. Additionally, the Governor of New York said that the governors of six North-eastern states will hold an emergency meeting to address the recent, ongoing spike in Covid-19 cases. Finally, California, Oregon and Washington all issued public advisories to avoid all nonessential travel in or out of their states.
On which note, the latest daily Covid-19 numbers were released earlier in during the US session; a stunning 194K cases of the virus were found over the last 24 hours, a more than 50K one day jump. Meanwhile, daily deaths dropped to a little more than 1.1K, but most expect that the daily deaths count will soon rise back above the 2K mark, tracking the recent spike in new infections.
But US equity markets are for now opting to look through short-term risks to the economic outlook; Monday’s news from Pfizer and BioNtech regarding the success of their vaccine in preventing Covid-19 infection, which many analysts and institutions see as a turning point in the fight against the virus, has kept sentiment, for the most part, underpinned.
True, the Pfizer/BioNtech vaccine needs to be stored at freezing temperatures, complicating distributional logistics. But markets seem to have nonetheless significantly revised forward its expectations for a global return to normality following the successful mass vaccination of the majority of the world’s population, perhaps in anticipation of good news regarding the efficacy of other vaccine candidates (such as the one being developed by AstraZeneca/Oxford University, which only needs to be refrigerated).
Also notable today has been the fact that US equity markets have been rallying in unison. The Nasdaq 100 was an underperformer earlier on in the week amid weakness in tech names that have benefitted from lockdown (now the assumption that Monday’s vaccine news brings a “return-to-normality” sooner). The Nasdaq 100 closed with gains of roughly 1.0%, and the Dow Jones with gains of 1.4%.
S&P 500 eyes a run at all-time highs above 3600
To the upside, there is very little by way of significant levels of resistance separating the S&P 500 from its all-time high, set on Monday in the wake of Pfizer/BioNtech’s vaccine announcement, at 3668.
With equity markets seemingly focused more on longer-term positives – sooner than expected mass vaccinations and global economic re-opening and a move towards more favourable global trading conditions under a less protectionist Biden administration – it seems likely that the steady grind higher can continue into next week. For the S&P 500, the next immediate hurdle to the upside is the 3600 level.
To the downside, significant buying interest has been seen this week around 3510-3520 and this is likely to continue to be the case. Further levels of note to the downside are the 21-day moving average (DMA) at 3437 and the 50DMA at the psychological 3400 level.
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