LIVE MARKETS-Might stocks face yet another double-digit hurdle in 2021?

* Major U.S. averages rise: Nasdaq snapping back around 2%
* Tech leads major S&P 500 sector gainers; materials weakest
group
* Dollar, NYMEX crude up; spot gold falls

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MIGHT STOCKS FACE YET ANOTHER DOUBLE-DIGIT HURDLE IN 2021?
(1340 EST/1840 GMT)
Jessica Rabe, Co-Founder of DataTrek Research, is out with
some commentary this week on the S&P 500's year-to-date
performance and how things look for 2021.
The S&P 500 is up around double digits year-to-date
(now 10.6%). This, after a total return of 31.2% last year. This
leads Rabe to ask "what are the odds we can get another
two-digit return in 2021?"
Rabe thinks the S&P 500 could be up 10% at year-end, now
that a vaccine may be in reach and U.S. elections have passed.
She also notes the market is moving into a traditionally good
seasonal period.
According to Rabe, history shows that a third year of
double-digit returns is rare, and typically comes amid easing
financial conditions and improving earnings such as during the
bull run of the 1990s or after the Financial Crisis.
She also notes that U.S. equities rallied so strongly last
year largely due to Fed Chair Jerome Powell’s pivot to lower
rates, while this year’s solid returns were underpinned by not
only an easy central bank, but meaningful fiscal stimulus. She
says expecting a repeat of this next year may be a stretch,
although not impossible given that the latest recession was so
deep.
Rabe believes next year’s performance will largely hinge on
how the market discounts 2022’s economic growth and US corporate
earnings. On the plus side, the Fed has signaled it will keep
rates low, helping support equity valuations.
However, she also says that profit margins were already at
record highs given the Trump tax cuts so it may be hard for
public companies to show much of an earnings leverage bump
relative to 2019.
DataTrek's bottom line is that as much as positive double
digit returns in 2020 would be a welcomed development after a
volatile year, they would come after an already very strong year
for US equities.
Rabe adds "history shows it would not be unprecedented for
that to repeat for a third consecutive year, but it’s important
to manage expectations as returns are typically more muted after
this sequence of events."

(Terence Gabriel)
*****


CHIP RALLY IS BACK ON AFTER A TWO-DAY BREAK (1231 EST/1731
GMT)
U.S. chipmakers are rebounding strongly on Wednesday after a
two-day selloff, with the Philadelphia Semiconductor Index
jumping 3.5% and once again approaching a record high,
lifted by sharp gains in Qualcomm and Nvidia.
Qualcomm is adding 5.6% after satellite TV provider
Dish Network said the chipmaker would help build out
its 5G network.
Nvidia is jumping 4.3%, extending its 2020 gain to
over 125%.
Chip manufacturing equipment maker Applied Materials
is popping 3% ahead of its quarterly report due late on
Thursday. Analysts on average expect a 23% jump in revenue to
$4.60 billion and net income up 52% to $1.06 billion, per
Refinitiv.
"Overall, we expect more stability in equipment stocks going
forward as the election risk is eliminated and the China risk
muted for the time being," Citi analyst Atif Malik wrote in a
preview to Applied Materials' report.
With Wednesday's rally, the semiconductor index is up nearly
9% since the Nov. 3 presidential election, and it remains down
less than 1% from its record high close last Friday.

(Noel Randewich)
*****

STOXX 600 BREAKS OUT OF RANGE-BOUND MARKET (1138 EST/1638
GMT)
Turbocharged by the vaccine/U.S. election combo, Europe's
STOXX 600 is currently set for its biggest monthly percentage
advance since at least 1987!
Today's session ends with a 1.2% gain but more crucially,
out of November's eight trading days so far, seven landed in
positive territory.
The 13.6% surge since the beginning of November has lifted
the pan-European index out of the range-bound market it has been
lingering for the last five months.
The great rotation to value has also changed the landscape
with a great comeback from banks which have pulled off their
biggest bounce back since the great financial crisis.
Year-to-date, the STOXX 600 is now down only 6.5%, that's
about three times less in comparison with late October when a
new round of lockdowns across the continent ignited fears of a
double-dip recession.
Here's the STOXX 600 breaking out of its range-bound market:



(Julien Ponthus)
*****


THE ROARING 20s ALL OVER AGAIN: GOLDMAN RAISES ITS S&P 500
TARGETS (1000 EST/1500 GMT)
In a note titled "2021 US Equity Outlook: Roaring '20s
Redux," Goldman Sachs' Equity Strategist David Kostin is lifting
his S&P 500 targets.
The year-end 2020 target has been raised to 3,700 from
3,600. The new target is about 4% above current SPX levels.
Goldman now forecasts that the S&P 500 will rise around 16%
to 4,300 at year-end 2021, and tack on another 7% or so to hit
4,600 by the end off 2022.
Of note, Goldman sees rebounding profits a driver. The bank
is raising its S&P EPS forecasts to $175 in 2021 (from a prior
level of $170), and to $195 in 2022.
Goldman believes a falling equity risk premium will support
higher valuations. Their SPX year-end 2020 target implies a
forward P/E of 21x, expanding to 22x by the end of 2021, and
remaining stable in 2022.
In terms of strategies, Kostin recommends "tactical
positions in deep value stocks that benefit from the vaccine and
economic normalization." Additionally, he favors stocks with
"long-term secular growth prospects that have high investment
ratios," as well as stocks that are "well-positioned on ESG
investing criteria."
As for sectors, Goldman recommends overweights in tech,
healthcare, industrials, and materials.

(Terence Gabriel)
*****


CATCHING A EUROPEAN FALLEN ANGEL (0925 EST/1425 GMT)
A number of fallen angels have populated the European market
this year, as rating agencies have rushed to downgrade companies
as the world faced the economic damages from the COVID-19
pandemic.
Roland Kaloyan, head of European equity strategy at Soc Gen,
told us that he has been advising investors to keep their eyes,
and money, on some of these companies in the hope that once the
pandemic is out of the way, these businesses will return to
shine.
"As no one knows when a (final) vaccine will be announced,
it is something we recommend to keep in the strategy, because
they're quality names."
Those fallen angels include some hotels, restaurants,
aircraft makers, and some beverage companies, Kaloyan says.
"Companies with strong brand, good balance sheet, good
growth outlook. Companies for which you would pay a premium at
the beginning of the year."
After losing about 30% of its value since the beginning of
the year, the European STOXX 600 travel and leisure index
jumped up on Monday, cutting some of its annual losses,
as U.S. drugmaker Pfizer and German partner BioNTech
released data showing that their vaccine
proved 90% effective in trials.


"If the world has a vaccine in two or three years, and we
can travel again, and we can book hotels during holidays, we can
go back to the movies and restaurants, etc., we can see some
rebounds," Kaloyan predicts.

(Joice Alves)
*****


SMALL CAPS: OUT OF THE SHADOWS (0900 EST/1400 GMT)
U.S. small caps have definitely taken on a bigger role over
the past month.
Indeed, in November alone, the small-cap Russell 2000
has advanced about 13%. This compares to an 11% gain for the Dow
Industrials, 8%-8.5% gains for the S&P 500 and the
large-cap Russell 1000, and a 6% rally for the Nasdaq
Composite.


Of note, on a relative basis, the RUT/RUI ratio has thrust
above a weekly resistance line from its 2018 high. This can
suggest a more significant turn in favor of small caps is
underway.
In any event, U.S. equity index futures are higher on
Wednesday, with the Nasdaq 100 e-mini's pointing to a
snapback in the tech laden index.
Meanwhile, given the premarket strength, the Dow and the
Russell 2000 can attempt to establish new record-high closes.
The Dow's February closing peak was at 29,551.42 and the RUT's
August 2018 closing high was at 1,740.7531.
Here is your premarket snapshot:



(Terence Gabriel)
*****


FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE:







(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)