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Both the Dow and the S&P 500 could test all-time intraday highs this week as investors continue to bet that a near-term coronavirus vaccine will tame the global pandemic and power growth and markets early next year.

The Monday Market Minute

  • Global stocks extend gains, with Wall Street ready to test all-time highs this week, amid near-term vaccine hopes and stronger-than-expected economic data from Asia.
  • China’s October factory activity, as well as retail sales, add to recovery optimism while Japan notches its biggest GDP gain on record over the third quarter.
  • Comments from Biden transition team suggest no plans for a COVID-triggered lockdown, while markets look to updated vaccine developments from Pfizer and Moderna.
  • U.S. COVID cases continue to surge, with total infections passing the 11 million mark, as colder weather grips the northeast states.
  • Wall Street futures suggest a firmer open ahead of a busy week for retail earnings that includes updates from Walmart, Home Depot and Target.

U.S. equity futures extended gains Monday, with the S&P 500 powering towards a fresh record high, as markets look to more positive news on coronavirus vaccine development and react to stronger-than-expected economic data from recovering economies in Asia.

Market optimism was also supported by comments from officials in President Elect Joe Biden’s transition team, which suggested that the new administration would not impose a nation-wide lockdown next year even as new COVID cases continue to accelerate into the winter months. 

Hopes of a near-term vaccine — as well as stock market levels around the world — were boosted by Pfizer Inc.’s  (PFE) – Get Report breakthrough study of its messenger RNA-delivered vaccine last week, and investors are expecting both fresh data from that leading study as well as an update from Moderna Inc.  (MRNA) – Get Report, which is reportedly close to delivering a similar vaccine with an efficacy rate that matches the 90% recorded by Pfizer it its late-stage trials.

Investors also got a glimpse of economic strength in a post-COVID world, with data from Japan showing GDP rising 21.4% over the three months ending in September, the largest on record, while China’s industrial activity and retail sales rose at a faster-than-expected clip in October as the world’s second largest-economy continues to accelerate into the final months of the year following spring lockdowns and a summer recovery. 

That leaves Wall Street with a focus on both vaccine development and the spate of retail earnings this week as both the S&P 500 and the Dow Jones Industrial Average test all-time intra day highs despite the COVID infection resurgence.

Futures contracts tied to the Dow suggest a 270 point opening bell gain while those linked to the S&P 500, which is up 9.6% for the month and on pace for one of its best gains on record, suggest a 28.5 point advance. 

Nasdaq Composite futures, meanwhile, are priced for a more modest 63 point gain as large-scale investment funds continue to rotate out of tech stocks.

Big box retailers Walmart  (WMT) – Get Report, Home Depot  (HD) – Get Report and Target  (TGT) – Get Report will highlight this week’s corporate earnings slate as we head into the final throes of a stronger-than-expected third quarter earnings season.

With just over 92% of the S&P 500 reporting thus far, third quarter earnings are set to decline around 7.4% from last year, a much better tally than the 21.4% forecast prior to the start of the reporting in early October. The early estimate for fourth quarter earnings, meanwhile, suggests an 11% decline from the final months of 2019.

European stocks were also on the rise Monday, even as the euro jumped to a multi-week high against the U.S. dollar, as investors extended bets on a near-term vaccine and looked to signs of progress in late-stage talks between London and Brussels as the two hammer out their post-Brexit trade agreement.

The Stoxx 600 was marked 0.72% higher in the opening hours of trading in Frankfurt, with the euro pegged at 1.1839 against the greenback, while Britain’s FTSE 100 gained 0.75% in London.

Asia stocks, too, were captured by the bulls in Monday trading, with Japan’s Nikkei 225 adding 2.05% to close at a fresh 29-year high of 25,906.93 points following release of the third quarter GDP data.

The region-wide MSCI ex-Japan benchmark, meanwhile, jumped 1.4% to the highest levels since 1987 as China’s October data release, as well as near-term vaccine bets and a softer U.S. dollar, boosted regional stocks.

Oil prices were also given a lift by the factory output data in China, the world’s biggest energy market, as well as reports that suggest OPEC is prepared to cancel a planned increase in production that was scheduled for the end of the year.

WTI crude futures contracts for December delivery, the U.S. benchmark, traded 77 cents higher from their Friday close in New York and were changing hands at $40.90 per barrel in early European dealing, while Brent contracts for January delivery, the global benchmarked, edged 72 cents higher to $43.51 per barrel.