Markets rally worldwide as vaccine hopes rise
NEW YORK — Brimming hopes that people will again return to office buildings, shopping centers and normal life sent markets rallying worldwide on Monday, after encouraging data about a potential coronavirus vaccine.
The S&P 500 rose 41.06, or 1.17%, 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 rose as much as 3.9% early in the day, though it pared its gain in the last hour of trading amid drops for the technology stocks that dominate the market.
Stocks of companies that most need the econo
my and the world to return to normal 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 2.95%, to 29,157.97. The Dow had jumped more than 1,600 points before giving back nearly half those gains.
The big technology companies that earlier drove the market higher amid 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.
“I think the 90% success rate in trials is on the high end of street expectations given the 40-60% success for seasonal flu vaccines,” Wayne Wicker, chief investment officer at Vantagepoint Funds, said in an email to The Washington Post. “This is going to give a real boost to a broader range of stocks beyond technology as shown by the outsize gains in the Dow pre-market. With greater clarity on both political and health issues, this should provide additional momentum in the short run.”
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 earlier in the morning touched its highest level since March, according to Tradeweb. U.S. oil jumped 8.5%.
Scientists have cautioned against hyping early vaccine results before long-term safety and efficacy data has been collected, and no one knows how long the vaccine’s protection might last. It’s also likely to be months before Pfizer’s vaccine or any other is able to substantially curb the coronavirus outbreak, which is picking up steam around the world.
WINNERS, LOSERS FLIPPED
That caution did not extend to investors, who rushed into investments that would benefit from a world returning to some semblance of normalcy, and out of stocks that have become winners in the pandemic.
Cruise operators and owners of office buildings and shopping centers were among the market’s biggest winners on expectations that people will feel comfortable again riding elevators to a desk or shopping in enclosed stores.
Carnival surged 39.3%, though it’s still down by more than half in 2020. It led a resurgence for what are called “value stocks,” ones whose prices look cheap and had gotten left behind by the rest of the market through the pandemic.
“People are buying those because they see a light at the end of the tunnel,” said Todd Morgan, chairman at Bel Air Investment Advisors.
Companies whose fortunes soared directly because the pandemic kept everyone hunkered at home fell sharply.
Zoom Video Communications, whose online meetings allow millions of remote students and workers to communicate, sank 17%. Grubhub, which benefited from people ordering in for dinner, dropped 10.9%. Etsy, whose online marketplace rode a wave of popularity for homemade masks, lost 17.1%.
FOCUSED ON PANDEMIC
If a vaccine for covid-19 pans out, analysts say, it’ll be a “game changer” and just what the market has 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 elections.
Building on last week’s gains, the S&P 500 is up 8.6% in November. Still, analysts caution that several risks remain that could trip up the market’s big recent increases.
Coronavirus counts continue to rise at troubling rates across much of Europe and the United States, and several European governments have brought back restrictions on businesses.
Joe Biden, the projected winner of the presidential election, applauded Pfizer’s breakthrough in a statement earlier Monday, but he warned that the end of the battle against covid-19 is still months away. “Today’s news does not change this urgent reality,” he said. “Americans will have to rely on masking, distancing, contact tracing, hand washing and other measures to keep themselves safe well into next year.”
Public health experts warn that the nation is entering the pandemic’s worst phase. The United States surpassed 10 million coronavirus cases Monday, just 10 days after hitting 9 million.
WASHINGTON GRIDLOCK
In Washington, markets are banking on control of Congress remaining split between Democrats and Republicans, which can keep low tax rates and other pro-business policies in Washington, but that hinges on the result of runoff elections in Georgia in January.
Potential gridlock also likely makes a rescue package for the economy smaller than if Democrats had swept control of all of Washington.
Democrat Joe Biden over the weekend was projected to clinch the last of the electoral votes needed to become the next president. President Donald Trump, meanwhile, is contesting the results of the election.
Investors say they just want a clear winner to emerge, instead of rooting for one of the two, but a Biden administration constrained by a Congress under split control would likely offer a balance of more predictable policies.
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 aid the Federal Reserve has already put in place for the economy.
Pfizer jumped 7.7% as its announcement indicates the company and its German partner, BioNTech, are on track to file an emergency-use application for their covid-19 vaccine with U.S. regulators later this month.
In markets around the world, stocks strengthened amid expectations that a Biden-led White House could tamp down trade tensions that had built under Trump’s administration. Stock markets across Europe jumped more than 4%. In Asia, many markets rose more than 1%.