LIVE MARKETS-Wall St gains on prospect of Yellen in Treasury, vaccine progress

* Major averages close higher: Dow leads, Nasdaq lags
* Soaring energy leads S&P sector gains; real estate falls most
* Dollar, U.S. crude up; gold slides; U.S. 10-year yield ~0.86%

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WALL STREET GAINS ON PROSPECT OF YELLEN IN TREASURY, VACCINE PROGRESS (1605
EST/2105 GMT)
Wall Street's major averages finished higher on Monday as investors, already
happy with the latest progress on vaccines, read reports that former Fed Chair
Janet Yellen was President Elect Joe Biden's pick for the U.S. Treasury
Secretary role. The Dow lead gains while Nasdaq's move was much
more muted.
Investors listed multiple reasons to recommend Yellen - the first woman who
would hold the position - for the job. A Yellen Treasury would improve chances
for a more sizeable COVID stimulus package, they said, also pointing to Yellen's
history as Fed chair as well as her understanding of markets and monetary
policy.
“Yellen’s appointment augurs well for the global economy and financial
markets - in bringing a consensus-driven and business friendly approach to the
role, she is well-placed to negotiate a fraught political landscape and deliver
more stimulus spending," said Karl Schamotta, chief market strategist at
Cambridge Global Payments, Toronto.
"This should weaken the threat environment and push investors further out
along the risk curve - directing flows into higher risk currencies and away from
the dollar.“
On the stocks side, Robert Pavlik, senior portfolio manager at Dakota Wealth
in Fairfield, Connecticut said: “She seems a dovish individual as far as Fed
policy is concerned and the markets like dovish policy. That’s why we saw a
quick market reaction in the past 40 minutes.”
Among the S&P's 11 major sectors, seven gained ground with energy,
up 7%, leading the charge. The biggest laggard was real estate, down
0.3%.
The S&P value index, finished up 1.3%, outperforming growth
which registered a barely there 0.08% gain.
Here is your closing snapshot:




(Sinéad Carew, Saqib Iqbal Ahmed, Stephen Culp)
*****


EVERYTHING'S GREAT? (1515 EST/2015 GMT)
Though COVID-19 cases and deaths are rising, and lockdowns are once again
being imposed, investors in U.S. equities appear to be looking beyond the
pandemic - albeit not without some choppiness in trading.
According to Mizuho Securities U.S. chief economist Steven Ricchiuto,
looking ahead is warranted, given the prospects for several COVID-19 vaccines -
including from AstraZeneca, which on Monday said that its
late-stage trial data showed up to 90% efficacy.
"Equity markets appear focused on the post COVID-19 economy and, now that
there appears to be not just one vaccine but several, discounting the recent
spike in cases makes sense," Ricchiuto wrote on Monday.
Ricchiuto also noted that the Federal Reserve's monetary support, including
low overnight rates and the expansion of its balance sheet, has helped put the
U.S. economy on track to return to pre-crisis levels before the end of 2021.
That's about 12 months earlier than was expected back in April, he said.
Moreover, analyst estimates call for a 23.2% bounce back in operating
earnings in 2021, he wrote.
There may be some compression in mutiples next year, Ricchiuto said, since
the market currently trades at 25x-26x forward earnings. But in his view, that
is not enough to keep the benchmark S&P 500 from rising 8% to 10% next
year to the 3800-4000 range.
Even so, he added, gains in 2021 may be gradual as investors examine
President-elect Joe Biden's policies and priorities, which he expects to be less
market-friendly than Trump's.

(Sinéad Carew)
*****

LOOK OUT FOR FINANCIALS IN 2021 (1318 EST/1818 GMT)
After issuing a bullish outlook for US equities last week, Jonathan Golub,
chief U.S. equity strategist at Credit Suisse Securities, delved a little deeper
into why he upgraded the financial sector to 'overweight'.
"Our enthusiasm for financials is based on an accelerating economy, higher
rates, and improving credit conditions," the strategist wrote. "Along with ample
reserves, this should lead to an increase in profitability and the return of
capital to shareholders (dividends and buybacks) in coming quarters."
Golub also mentioned "an unusual disconnect between ISM New Orders and
yields" which he sees favoring Financials more than other economically-sensitive
groups.
And last but not least, Golub addresses the sector's downtrodden valuations:
"Not only does the sector look cheap versus the market, each sub-group looks
extremely attractive."
Year-to-date the S&P 500 financial sector index is down more than
10% compared with the S&P 500's 10% gain.
The sector was up 1.6% for the day vs the S&P's 0.36% gain in Monday's
trading, as economically sensitive sectors were outperforming growth sectors
after news of COVID vaccine progress.
Here is a comparison of financial valuations vs S&P 500:




(Sinéad Carew)
*****

EUROPE'S VACCINE MONDAY AIN'T WHAT IT USED TO BE (1153 EST/1653 GMT)
We've had major COVID-19 vaccine updates for three Mondays in a row and it's
fair to say that this week's market price action in Europe has proved quite
underwhelming to say the least.
The STOXX 600 ended the day down 0.01%, which falls short of the +1.2% of
November 16th and of course of the whopping +4% reached on Monday November 9.
The session had started with the pan-European index hitting February highs
but the gains fizzled out gradually, a trend which also seems to be taking place
on Wall Street at the time of writing.
On the face of it, the session has many attributes of a typical risk-on day
in Europe with cyclicals like energy, miners, banks and travel stocks leading
the way while defensive like staples and healthcare lagged.
But as it's been flagged by many analysts, the immediate gloom of the
resurgent pandemic is proving a more compelling narrative than the mid-term
hopes of an effective vaccine.
You can see below how 'vaccine Mondays' have lost their magic within the
last three weeks:

(Julien Ponthus)
*****



MARKIT FLASH PMI: SINGIN' IN THE RAIN (1123 EST/1623GMT)
In the first release of post-election data, U.S. business activity is
expanding at an accelerated pace this month, evidence that the recessionary
economy continues to stumble toward daylight amid a surging pandemic.
Financial information firm IHS Markit released its advance "flash"
purchasing managers' indexes (PMI) for the month of November, which showed
growth in both the manufacturing and services sectors
unexpectedly gaining momentum.
Economists polled by Reuters expected the indexes to pull back a bit.
Manufacturing PMI rose 3.3 points to 56.7 - the quickest pace since September
2014 - while the hard-hit services sector showed a PMI reading of 57.7 - the
highest level in over five years.
A PMI reading over 50 indicates increased activity over the previous month.
"The upturn reflected a further strengthening of demand, which in turn
encouraged firms to take on staff at a rate not previously seen since the survey
began in 2009," writes Chris Williamson, Chief Business Economist at IHS Markit.
But while surging demand has prompted companies to hire workers at the
fastest pace in the survey's history, prices of supplies and wages have risen in
kind.
Still, the future looks bright to Markit's survey respondents.
"Expectations about the year ahead have surged to the most optimistic for
over six years, reflecting the combination of a post-election lift to confidence
and encouraging news that vaccines may allow a return to more normal business
conditions in the not too distant future," Williamson adds.

Encouraging vaccine news also appeared to be stoking investor risk appetite
in morning trading. It was deja vu all over again, the week starting out with
upbeat news on a potential COVID jab, which has turned attention back to
economically-sensitive cyclicals and small caps.
While the three major indexes opened higher they lost some ground in the
late morning. Dow was the best performer while the S&P was hanging on to a small
gain. From the start Nasdaq was underperforming and turned negative in late
morning as it was weighed down by leading percentage losers, communications
services and tech.
(Stephen Culp)
*****

U.S. STOCKS GAIN AS VACCINE HOPES FUEL RECOVERY BID (1021 EST/1521 GMT)
Wall Street's major indexes are starting the week off with gains as
investors bet on an economic recovery after news of progress on a third
potential COVID-19 vaccine, and bets that the first U.S. vaccines could be
available within weeks.
AstraZeneca said on Monday its COVID-19 vaccine could be around 90%
effective although the results showed the effectiveness of that vaccine depended
on the dosing, and fell to just 62% when given as two full doses rather than a
half-dose first.
Also encouraging was an estimate from a top official of the government's
vaccine development effort on Sunday that U.S. healthcare workers and others
recommended for the nation's first COVID-19 inoculations could start getting
shots within a day or two of regulatory consent next month.
And Dr. Moncef Slaoui, chief scientific adviser for "Operation Warp Speed"
also said "herd" immunity from the virus could be achieved by May, if, by then,
70% of the U.S. population of 330 million is inoculated.
Investors appear to be trading for a recovery, given that the most
economically sensitive of the S&P's 11 major sectors are outperforming with
energy up more than 3% followed by industrials, financials
and materials up more than 1%. Communications services
is the only sector in the red.
Here is your morning trade snapshot:




(Sinéad Carew)
*****

LAST CALL! WAITING FOR A DIP TO GET ON THE VALUE RIDE (1002 EST/1502 GMT)
Make no mistake, as spectacular as it was, the big rotation triggered by the
Pfizer vaccine on November 9 was a painful one for portfolio managers heavily
underweight on value and cyclicals stocks, Andrew Sheets, chief cross-asset
strategist at Morgan Stanley just told us.
There was little chance of beating the index on that day while heavily
overweight on tech and quality.
Now that the dust of the vaccine news has settled and expectations for the
market to sustainibly rebound have been pushed away to a few months, all eyes
are on the next opportunity to get on the rotation ride before it's too late.
While the next 6 to 12 months seem very promising for global equities and
particularly value stocks, the resurgent pandemic and poor economic data are
likely to weigh on the next couple of months, Sheets argues.
"I think that value will follow the overall market dynamic, if markets
struggle in the next couple of months, then value could also struggle", Sheets
also said adding that this could provide an interesting buy-the-dip opportunity
near term.
"Investors are very much not yet positioned towards value but if markets
sell off, it will represent maybe a last tempting opportunity for managers to
rotate their portfolio towards less overweight on growth and quality".
In the U.S. the S&P 500 value index was outperforming on Monday at
least with a 1% gain vs a 0.4% climb for the S&P growth index. On the day
the Pfizer vaccine data came out, Nov. 9, the value index rose 3.98% vs a 0.58%
drop for the growth index on the same day.
(Julien Ponthus, Sujata Rao and Dhara Ranasinghe)
*****



WHY ASTRAZENECA'S VACCINE IS A BIG DEAL FOR EUROPE? (0931 EST/1431 GMT)
AstraZeneca shares may be weaker as traders focus on its COVID-19
vaccine's headline efficacy rate falling short of peers, but for Deutsche Bank
the British drugmaker's trial results are truly a big deal, especially for
Europe.
AstraZeneca said on Monday its COVID-19 vaccine could be around 90%
effective although the results showed the effectiveness of AstraZeneca's vaccine
depended on the dosing, and fell to just 62% when given as two full doses rather
than a half-dose first.
Strategists at the German bank say the good AstraZeneca result has brought
forward herd immunity by at least one quarter in the EU, meaning that the region
will reach that threshold "over the summer".
North America, the UK and Japan will get there before, likely "by early
summer", they say, but AstraZeneca is going to give them even more comfort.
"We are now on track for the majority of the developed world to immunize its
vulnerable population to COVID by the spring and the entire population by
midyear," DB strategists say.
"Depending on the pace of vaccine distribution there may even be upside to
this estimate with some countries achieving herd immunity before summer... . By
spring, things should be looking much closer to normal," they conclude.
(Danilo Masoni)
*****


NASDAQ COMPOSITE: SOON TO DIAL DOWN? (0900 EST/1400 GMT)
The Nasdaq Composite ended Friday less than 2% from its September 2
record-high close. Meanwhile, the Nasdaq's daily advance/decline line, a breadth
measure, is continuing to trend up. In fact, this internal measure of strength
has now pushed to its highest level since early October 2008.
However, with this, another Nasdaq internal measure appears severely
overheated. Thus, the Composite's ability to sustain its upward energy may soon
be in question.
Indeed, the daily New High/New Low (NH/NL) Index ended Friday at 90.2%, or
its highest reading since early June. Of note, over the past 3 years, 91.4% has
marked a top in this measure.
That said, the most severe Nasdaq declines over this period occurred in the
wake of NH/NL index divergence, or when the internal measure waned against
higher IXIC highs.
In any event, the Nasdaq NH/NL index's overheated reading is happening just
as the S&P 500, by another measure, is also hot to the touch.




(Terence Gabriel)
*****


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