Stocks softer on virus angst and stimulus stalemate, GBP, Tesla, NFIB

Market optimism over Pfizer

Risk appetite is waning as the coronavirus continues to deliver staggering numbers across the US and as Senate Majority Leader McConnell continues to show no signs of warming up to a bipartisan USD908 billion stimulus package.  US stocks are softer, but optimism is sky-high that Pfizer’s vaccine will get the greenlight later this week, after the FDA staff report confirmed the vaccine is highly effective with no safety issues.  The report also showed that the vaccine starts to work 14 days after the first dose.  The UK also launched their vaccination campaign, marking a key turning point with the fight against COVID-19.  Wall Street will now focus primarily on vaccine execution and how soon countries will reach herd immunity.

Brexit drama continues

The UK is making progress towards reaching a trade deal with the EU after they withdrew a bill that was breaking international law.  The British pound pared most of its losses against the dollar following the UK’s small concession to the EU.  Today, the pound is weaker against all of its major trading partners as investors continue to pile on hedges against a no-deal Brexit.  Irish deputy PM Varadkar stated that he thinks PM Johnson wants a deal and that chances of one getting reached are 50:50.

Tesla takes a tumble

Tesla shares tumbled after the electric-vehicle company announced the sale of common stock, with the proceeds of up to USD5.0 billion.  Last week, Michael Burry, famously known for betting that the real estate bubble would collapse in 2007, said he was shorting Tesla and recommended that CEO Elon Musk issue more shares.  Tesla has become one of the favorite stocks for millennials and that has been the primary driver for the move above the USD500 level.  A key top could be in place for Tesla and this correction will truly test the will of the Robin-hood trader.

US business optimism slides

US small business optimism is fading faster as major uncertainties, including COVID-19 and how much aid the Biden administration is able to deliver, will weigh on the outlook.  The headline NFIB reading fell from 104 to 101.4, the sharpest decline in 7 months, and a big miss of the consensus estimate of 102.5.  Only 12% of employers feel it is a good time to expand, while 89% of companies who are hiring are finding few or no qualified employees.   The labor market recovery has hit a wall and the latest trends with capital spending, inventories, and credit conditions will likely continue to see hiring deteriorate over the coming months.  A dark winter due to the latest wave of COVID is crushing small businesses and the uncertainty of the Senate will weigh on how optimistic companies will be in expecting assistance.

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Ed Moya

Ed Moya

Senior Market Analyst - The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geopolitical events and monetary policies around the world. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC and Bloomberg, and is often quoted in leading publications including the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University.
Ed Moya