Wall Street Opens Mixed as Virus Surge Hits Cyclicals

By Geoffrey Smith 

Investing.com -- U.S. stock markets opened mixed on Monday as tightening restrictions on economic and social life across the U.S. sent the great rotation trade of the last few weeks into reverse – if only temporarily.

With no major progress over the weekend on a possible fiscal relief bill, it was the ‘long duration’ tech stocks in the NASDAQ Composite which advanced, rising to a new record high with a gain of 0.3%.

By contrast, the Dow Jones Industrial Average fell 99 points, or 0.3%, to 30,119 points, while the S&P 500 fell 0.2%.

While many economic indicators have stayed resilient to the latest wave of the pandemic in the U.S., the labor market report on Friday showed a clear slowdown in the pace of hiring in November. That coincided with fresh signs that the pandemic is worsening in the short run, as the state of California imposed a stay-at-home order for most of its regions, including Los Angeles, in order to stave off a looming crisis in its hospitals. 

Nationwide, the number of deaths reported on Sunday was almost unchanged from the previous week at 1,138, according to the Covid Tracking Project. However, the past five weekdays, when statistics are updated with greater urgency, all showed over 2,400 deaths. 

Deaths are typically a lagging indicator, and the market has chosen to look through the short-term statistical drama, in anticipation of the widespread distribution of vaccines next year. The optimism generated by recent news flow has led to a massive skew in favor of call options over put options, various analysts noted over the weekend. Charles Schwab (NYSE:SCHW)'s Randy Frederick noted that the skew hadn't been greater since 2009 - but that was at a time when the market was recovering from a crash. By contrast, all three indices hit record highs last week.

On a day without major economic data or earnings releases, attention is sticking with Capitol Hill, where Fox News reported earlier that the $908 billion stimulus package crafted by a bipartisan group of Senators is likely to get the blessing of Senate Leader Mitch McConnell. 

Turnover was also hit by reported outages at a number of online brokers, including  Robinhood and Interactive Brokers (NASDAQ:IBKR).

 Among individual movers, Kodak stock rose nearly 70% after a Department of Justice investigation found no evidence of wrongdoing in the extension of a government loan to the company earlier in the fall. Vivendi (OTC:VIVHY) ADRs fell 0.2% after news that its subsidiary Universal Music Group had an unspecified amount - believed to be over $100 million - for the rights to the song catalog of Bob Dylan.

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Elsewhere, Exxon Mobil Corp (NYSE:XOM) stock fell 2.0% after The Wall Street Journal reported that the company is coming under pressure from a newly formed activist investment group that wants it to accelerate its shift away from traditional oil and gas plays toward more renewable forms of energy.  The company, which like the rest of its sector had profited from last week's surge in oil prices, was also suffering from profit-taking in crude futures, which fell 0.9% to $45.86 a barrel.