The Close: Financials Carry Markets After Distressing News.
Oh no, not another shutdown! After the news of vaccine rollouts the world has found out distressing news. A new strain of the coronavirus has shut down travel within most Europenas countries, America has yet to make an announcement regarding that as of right now. The new strain is not as deadly as the current strain, yet it does have a much higher transmissible rate than the current one. This strain has a 70% higher transmission rate. This could be a factor that would shut our country down, yet again. The strain may not be scaring investors too much, though, as the markets rebounded from their massive early lows.
Photo: Financial Times
The Dow closed the day off 30,216 adding 37.40 points, or +0.12%. The S&P 500 closed the trading day off with a loss of -14.49 points, or -0.39%. The Nasdaq closed down today as well, dropping by -13.12 points, or -0.10%. As I had stated in my early post regarding the new strain, this current economic environment will be difficult to thwart. Between the new stimulus deal, Tesla entering the S&P 500 today, and booming IPOs, this new strain will be on the back burner for investors unless the problem persists.
Tesla, which saw one of the greatest single year runs by many stocks this year, was finally rewarded and moved into the S&P 500 today. Tesla, $TSLA, dropped on its new index debut today, decreasing by -45.14 points at it’s close, or -6.49%. Musk’s company has seen quite the increase this year, posting a 638% return YTD at this current close. Going into the company’s metrics, with a market cap of 605.5 billion, low EPS of 0.50, and an extremely large P/E ratio of 1287.62 this would be a company I certainly wouldn't invest in. Yet, sometimes metrics don’t determine the proper value of a stock. This stock has soared due to investors' future outlook. They believe this company will be the top country in the world at some point, and I can’t say I disagree.
Bank stocks pushed the markets higher today. The Federal Reserve announced today that they’re allowing banks to buy back shares, which will cause more demand in the market. This institutional buy back allowance will begin in 2021. “The new rules stipulate the sum of a bank's dividend payments and buybacks in the first quarter can't exceed the average quarterly earnings from the four most recent quarters”(Market Insider). Financial intermediaries like Morgan Stanley, $MS, was up by 6% today. Goldman Sachs, $GS was also up 6% today.