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LIVE MARKETS-Chip rally is back on after a two-day break

Wed 11th November, 2020 5:38pm
* Major U.S. averages rise: Nasdaq snapping back nearly 2% * Tech leads major S&P 500 sector gainers; materials weakest group * European shares rise, +13% so far in November * Dollar, NYMEX crude up; spot gold falls Nov 11 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at 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 .SOX jumping 3.5% and once again approaching a record high, lifted by sharp gains in Qualcomm and Nvidia. Qualcomm QCOM.O is adding 5.6% after satellite TV provider Dish Network DISH.O said the chipmaker would help build out its 5G network.*:nL4N2HX2R6 Nvidia NVDA.O is jumping 4.3%, extending its 2020 gain to over 125%. Chip manufacturing equipment maker Applied Materials AMAT.O 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 .SPX 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 .SXTP jumped up on Monday, cutting some of its annual losses, as U.S. drugmaker Pfizer PFE.N and German partner BioNTech BNTX.O 22UAy.DE released data showing that their vaccine proved 90% effective in trials.*:nL1N2HV0TR "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.*:nL1N2GY12U Indeed, in November alone, the small-cap Russell 2000 .RUT has advanced about 13%. This compares to an 11% gain for the Dow Industrials .DJI , 8%-8.5% gains for the S&P 500 .SPX and the large-cap Russell 1000 .RUI , and a 6% rally for the Nasdaq Composite .IXIC . 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 NQcv1 pointing to a snapback in the tech laden index .NDX . .N 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:*:nL1N2HX16E <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ RUTRUI11112020 premarket11112020 travel and leisure index qsdf ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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