S&P 500 hits 4700, pumped by strong US data, Pfizer pill, falling yields

The S&P 500 bull run continues, with the index hitting the 4700 for the first time ever amid broad-based gains across equity sectors. A positive close on Friday would mark seven consecutive sessions in the green and would mean the index has only fallen in two out of the last 18 sessions. The S&P 500 is now up more than 2.0% on the week, its best such run since June and is on course for five straight weeks in the green, the best run since August 2020. Whilst earnings has underpinned much of the recent rally, attention has switched elsewhere in the latter part of this week, with broadly dovish central bank vibes from the likes of the Fed, ECB, RBA and BoE all seemingly helping.

US economic data has also been very strong this week. US labour market data for October was released on Friday and showed the economy adding 531K jobs, more than the 425K expected, with the previous month’s payroll number also getting a hefty more than 100K upwards revision. The rest of the labour market report was also strong, with the Unemployment Rate falling to 4.6% and Average Hourly Earnings rising to 4.9%. Rather than triggering any worries about an earlier move to hike interest rates from the Fed, Friday’s strong US jobs report (and the rest of the strong US data out this week) appears to have instead injected a dose of optimism in the pace and health of the US economic recovery. A drop in long-term US government borrowing costs at the end of the week is also helping to underpin the price action.

Stocks have also been getting a boost from the news that Pfizer stopped a trial of an experimental anti-viral pill after early results showed the drug cut the chances of hospitalisation and death in at risk adults by 89%. The company said it would submit the findings to the US FDA to get emergency use authorisation as soon as possible. Some analysts are framing the latest news from Pfizer as a “game-changer” and “the end of the pandemic”, which may be a bit of an overstretch, but with vaccines already significantly reducing the death toll of the virus and now the added confidence that death rates can be reduced by a further 90%, it is likely that confidence in public health will be drastically better in 2022 versus 2021 and 2020.

Unsurprisingly, pandemic-hit equity sectors such as travel stocks are surging. The S&P 1500 Airlines Index is up 6.5% on the day, and major cruise stocks (like Carnival and Royal Caribbean Cruises) are up by just shy of 10%. On the flip side, stocks that have benefitted from lockdowns and the transition to home working like Zoom and Netflix suffered. There has also been a lot of attention on Pelaton Interactive’s share price, which is down over 30% on Friday, though this is due to poor earnings more than anything else.