S&P Futures Surge Above 3,600, Nasdaq Jumps 1%

US equity futures surged out of the gate following the 6pm ET reopen. There was some debate as to the catalyst: according to some the Moderna covid vaccine may hit as early as tomorrow, and a favorable outcome would have a similar result to last Monday’s Pfizer surprise which sent the S&P as high as 3,668 before fading much of the losses.

As JPMorgan said over the weekend when discussing the likelihood of a continuation of the “value” stock rotation, “this makes the forthcoming vaccine announcement by Moderna particularly important as a comparable vaccine effectiveness to that of the Pfizer earlier this week “would help to sustain this week’s value rotation trade. At the same time, an announcement of vaccine effectiveness by Moderna that would be seen as significantly weaker could prompt some further reversal of the value rotation trade.”  

Another explanation for the spike in early risk sentiment floated by Bloomberg is that contrary to expectations, two of Joe  Biden’s coronavirus advisers said they oppose a nationwide U.S. lockdown as too blunt.

“There is certainly elevated chatter that potential shutdowns in the U.S. will weigh more in the near-term and maybe so, but investor sentiment is the most elevated since 2017,” Pepperstone head of research Chris Weston said.

Meanwhile, in an indication that the rally is not merely on the back of value stocks, the Nasdaq jumped even higher, and rose as much as 1% in early trading, which in turn would be a bet on continued deflation, and may be a result of growing trader convictions that in the absence of a sizable fiscal stimulus ($1 trillion or more), the Fed will likely step in with more QE, especially since the Treasury is facing net issuance of over $2.4 trillion in 2021 with less than $1 trillion currently monetized by the Fed under the current $80BN Treasury/month schedule.

Whatever the reason, on Friday both the S&P 500 and small caps (Russell 2000), rallied to new all time highs, and if the early euphoria is any indication…

… tomorrow we should see new records across the board, especially with the S&P is now poised for an upside breakout, a key technical according to Morgan Stanley’s Michael Wilson.