Stocks rally on hopes for ‘normal’ after Covid vaccine announcement
By Stan Choe and Damian J. Troise | The Associated Press
Brimming hopes that people will again return to office buildings, shopping centers and normal life sent markets rallying worldwide on Monday, following encouraging data about a potential coronavirus vaccine.
The S& P 500 rose 41.06, or 1.2%, to 3,550.50 after Pfizer said an early peek at its vaccine data suggests the shots may be 90% effective at preventing COVID-19, though that doesn’t mean its release is imminent. The index at the heart of many 401(k) accounts had been up as much as 3.9% earlier in the day, though it pared its gain in the last hour of trading amid drops for the Big Tech stocks that dominate the market.
Markets worldwide also got a boost from a resolution to the long, market-bruising battle for the White House. Democrat Joe Biden over the weekend clinched the last of the electoral votes needed to become the next president. Investors say they just wanted a clear winner to emerge, instead of rooting for one of the two, but a Biden administration constrained by a Congress under split control will likely offer a balance of more predictable policies.
Treasury yields and oil prices burst higher as the vaccine news allowed investors to feel confident about a stronger economic recovery on the way. The yield on the 10-year Treasury shot up from 0.81% before the announcement to 0.93%, a big move for the bond market. The key rate touched its highest level since March earlier in the morning, according to Tradeweb. U.S. oil jumped 8.5%.
Stocks of companies that most need the economy and the world to return to normal for their profits to heal led the way. An 11.6% surge for Chevron and 11.9% jump for The Walt Disney Co. amid hopes that people will start driving and flying to theme parks again helped the Dow Jones Industrial Average climb 834.57 points, or 2.9%, to 29,157.97.
“People are buying those because they see a light at the end of the tunnel,” said Todd Morgan, chairman at Bel Air Investment Advisors.
The Big Tech companies that earlier drove the market higher in the pandemic, in large part because they didn’t need a “normal” economy to succeed, lagged behind. Apple fell 2%, for example, and Microsoft lost 2.4%.
Their losses accelerated at the end of trading, which helped drag down the S& P 500’s gains. They also sent the Nasdaq composite to a loss of 181.45 points, or 1.5%, to 11,713.78.
If a vaccine for COVID-19 does indeed pan out, analysts say it’s a “game changer” and just what the market had been waiting for. It underscores again how the coronavirus and its effect on the economy are the dominant concerns for investors, much more than who wins what in Washington.
Coronavirus counts continue to rise at troubling rates across much of Europe and the United States, so much that several European governments have brought back restrictions on businesses. In the U.S., confirmed coronavirus cases topped 10 million on Monday, the highest in the world.
In Washington, markets are banking on control of Congress remaining split between Democrats and Republicans, which can keep low tax rates and other probusiness policies the status quo in Washington, but that hinges on the result of run-off elections in Georgia in January.
Potential gridlock also makes any potential rescue package for the economy from Congress likely to be smaller than if Democrats had swept control of all of Washington. President Donald Trump, meanwhile, has refused to concede the election.
Late in the trading day, Senate Majority Leader Mitch McConnell said Trump is “100% within his rights” to question election results and consider legal options.
For now, though, euphoria about a possible return to normal is the dominant force across markets, particularly as it layers on top of the tremendous aid the Federal Reserve has already put in place for the economy.
Stock trader Thomas Ferrigno arrives to work at the New York Stock Exchange, on Monday. World markets rocketed higher after Pfizer said early data show its coronavirus vaccine is effective. That added to investor relief that results from the U.S. presidential election were finally decided, with Joe Biden the president-elect. MARK LENNIHAN - THE ASSOCIATED PRESS
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