SP 500 Index firming off from the lows

• US stocks dived below record highs on Tuesday as investors take a more cautious approach.
• The spread of the coronavirus and immediate economic outlook dilutes the positiveness of vaccine hopes. 

At the time of writing, the S&P 500 Index is trading down 0.27% at 3,616.95, off some 9.77 points having travelled between a range of 3,588.68 and 3,621.12.

US stocks are off their lows despite a poor US Retail Sales outcome and worries over the near-term economic outlook.

Stocks have been under pressure on Tuesday and gave back territory from the start of the week's risk-on gains as investors monitor the spread of COVID-19 cases.

The third wave has raised concerns over fresh lockdown measures in the US which has superseded the optimism over a vaccine, despite the second successful trial in progress. 

On Monday, the biotech company Moderna Inc. said that its experimental vaccine was 94.5% effective in preventing disease, according to an analysis of its clinical trial.

The welcomed news followed that of Pfizer and BioNTech exactly one week earlier that said their vaccine was more than 90% effective.

The combination of earnings and the vaccine news has propelled stocks to all-time highs, but on Tuesday, investors are treading more cautiously. 

Worse before better

Instead, US economic data is what is on investor's radars considering that a new fiscal stimulus package remains absent.

Expectations are that the economy will filter without one before vaccines can be distributed. 

Given the velocity in the spread of the third wave, things could be about to get worse before they can get better.  

In a warning of things to come, the data on Tuesday showed Retail Sales increased less than forecast in October, with the potential for even further slowing for November and December, spelling out tougher periods for US businesses.

October US retail sales rose 0.3% month-on-month versus 0.5% expected while September was revised down to 1.6% from 1.9%. Meanwhile, factory production accelerated but remained well below levels prior to the pandemic.  
Besides data.

Eyes on the Fed and the Senate

Investors will be keeping a stern eye on the Federal Reserve in the hope of unprecedented stimulus measures, as well as the progress of the President-select Joe Biden's economic plan. 

Considering that the Federal Reserve still has no assurance that fiscal stimulus will be as big and ambitious as the Democrats have hoped for, analysts at Standard Chartered said that the Fed might consider it necessary to ease in coming weeks, even ahead of the next FOMC meeting in December.

The risk is that Biden might not be able to get as big a package through Congress depending on the outcome of the two special election runoffs in January deciding who will win the Senate majority. 

If the Democrats do not win both seats, the Republicans will continue to have the majority and hence we expect only a small relief package (as the Republicans then can block it in Congress). 

Performers

Reuters notes that ''Financials SPF, industrials S5INDU and energy SPN stocks gave back some gains made over the last week as positive updates from US vaccine trials encouraged investors to diversify into value stocks on hopes they will benefit from a pickup in the economy.''

''Amazon.com Inc AMZN rose 0.6% after it launched an online pharmacy for delivering prescription medications in the United States.'' 

''Drug retailers such as Walgreens BootsAlliance Inc WBA tumbled 9%, while CVS Health Corp CVS fell 8% on the news.'' 

''Walmart Inc WMT posted a bigger-than-expected increase in quarterly same-store sales.''

''Home improvement chain Home Depot Inc HD also beat quarterly sales and profit estimates.''