The S&P futures fell more than 1% this morning after COVID-19 cases hit a new all-time high in the U.S. Health officials now warn of an “exponential spread across the country.” There’s no way around this. I am keeping a close eye on market momentum, especially with so much uncertainty around a new stimulus package in Washington. We’re not a week behind the self-imposed deadline between Nancy Pelosi and Lego Batman Movie producer, Steven Mnuchin, who is also the Secretary of the Treasury.
The Rundown: Today’s Top Market Stories
- The VIX is up about 7.6% this morning thanks to the greater uncertainty around stimulus and rising COVID cases. But let’s be very candid around what’s happening this week and why it’s important. With optimism fading around a stimulus, this could be a rocky week for the S&P 500. About one-third of S&P 500 companies will report earnings this week. That roster will include leaders like Amazon.com (AMZN), Apple (AAPL), and Facebook (FB). We could see some very big moves in these stocks all week. I am looking for an opportunity to buy into some companies this week, so I’ll be using cash secured puts or low-ball orders to pick my entry points.
- A week after ugly news in the vaccine space, Astrazeneca (AZN) finally stepped up with a positive development. The company has partnered with Oxford University. Today, it said that its latest COVID-19 vaccine triggered a similar immune system response between older and younger adults. It also said that adverse effects in older humans were lower.
COVID-19 Updates
This morning, the key COVID story driving the market is the latest warnings from White House Chief of Staff, Mark Meadows. Over the weekend, Meadows said that the U.S. is “not going to control the pandemic.” This is a sharp departure from the positive sentiment typically offered by White House leaders. Over the weekend, Johns Hopkins reported that average seven-day cases hit 68,787. That has fueled a rise in hospitalization over the last week.
Today’s Top Stocks to Watch: DNKN, ZM, EBC
DNKN: I’m not surprised by the news that Dunkin’ Brands (DNKN) is looking to go private. According to various reports, Inspire Brands – which owns Arby’s and Jimmy John’s – is looking to expand its portfolio of sugary pastries and watered-down coffee. But who can blame them, given that Dunkin might be cheap given the COVID disruption. The company recently said that same-store sales fell by 18.7% during the second quarter. The company has done well thanks to drive-thru sales, and that channel could be expanded to multiple windows in the future.
ZM: Zoom Technologies (ZM) is up another 4% on Monday morning on expectations that the work-from-home trend becomes a work-from-home law. That might be an aggressive stance, but with COVID cases rising, Zoom remains the leader in corporate meetings right now. I am looking at my schedule today. Zoom calls represent nearly half my day.
EBC – Eastern Bankshares (EBC) are sitting at around $12, and banking stocks remain under pressure. That said, the company just went public on the NASDAQ, and it feels like this company is going to be a very significant winner in the future. Younger investors are throwing a lot of money into environmental, social, and governance (ESG) stocks. And while Nio and Tesla have been big beneficiaries in the ESG market, Eastern Bankshares is one of the big investors into this space. Their slogan is “Join Us for Good.” The stock’s tangible book value is $16, so do the math there. I expect that the Tangible Book Value will jump to around $18 by 2022, which represents 50% upside if it just closes that gap. This is a bit of an esoteric space, but it’s certainly cheap according to simple metrics.