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  • The S&P 500 has surged back to the north of the 3800 level, hitting highs around 3840.
  • Fiscal stimulus hopes, excellent vaccine news and strong earnings are all helping boost sentiment.

The S&P 500 has surged back to the north of the 3800 level, printing highs of the day above the 3840 mark. Bulls will have their sights firmly set on last Tuesday’s all-time high at just above 3870. The Dow Jones and Nasdaq 100 are seeing similarly excellent gains.

Sentiment is receiving a boost from the banging of the fiscal stimulus drum in Washington DC and excellent vaccine news. Jitters related to last week’s surge in retail investor demand for a number of small-cap stocks, which dealt serious damage to a number of hedge funds that had been short these names, proved short-lived; talk is that most of these shorts in these stocks have now been covered. Looking ahead, Amazon and Alphabet (Google’s parent company) will be reporting earnings after the close. For the most part, this earning’s season has been a strong one so far, another factor boosting sentiment towards the S&P 500.

Stimulus

US President Joe Biden met with the 10 Senate Republicans who made a $618B fiscal stimulus proposal on Monday. Though their offer falls far short of the $1.9T package that Biden is asking Congress to pass, talks were constructive (according to both sides) and will continue. The Senate will soon be voting to begin the budget reconciliation process which will be used to pass the next round of fiscal stimulus.

Vaccine news

Russia’s Sputnik V Covid-19 vaccine was 91.6% effective in a Phase 3 trial and caused no serious adverse events, according to a peer-reviewed paper published in the Lancet. Moreover, the vaccine is equally effective in those over the age of 60. Tuesday’s data suggests the vaccine is likely to be able to gain regulatory approval in the EU and access to this jab might help the country speed up its lagging vaccination efforts; though the EU has expressed a preference for vaccines made domestically or in the UK or US, EU member state Hungary has already approved and begun distributing the Sputnik vaccine and other member states are likely to follow suit.

Elsewhere, according to an Oxford Academics pre-print paper, the Oxford University/AstraZeneca vaccine showed efficacy of 76% after a single dose from day 22 to 90 following vaccination. Modeling analysis reportedly showed that the protection provided by the jab did not wane during this initial three-month period. Meanwhile, efficacy was boosted to 82.4% with 12 or more weeks to the second dose. The paper suggested that the vaccine is likely to have a substantial effect on the transmission of the virus with a 67% reduction in positive swabs among those who had been vaccinated. Oxford Academics conclude that giving a large proportion of the population a single dose of the vaccine with a second dose after three months is an effective strategy for reducing disease.

Earnings

It has been a stronger than expected earnings season so far; according to Refinitiv, of the 203 S&P 500 companies that have already reported earnings, 84% have beaten consensus expectations, better than the average 65% beat rate since 1994. Analysts now see aggregate fourth-quarter S&P 500 earnings falling just 1.2% YoY, significantly above expectations that earnings would have fallen 10.3% YoY at the start of January.