USA TODAY International Edition
Dow surges 800 points on Pfizer vaccine news
Markets also react positively to Biden win after uncertainty over the election
U. S. stocks catapulted to levels just shy of records Monday after Pfizer reported the first successful late- stage clinical trial for an experimental COVID- 19 vaccine, a potentially huge boost to world health after the pandemic battered the global economy in the spring and led to more than one million deaths.
Global financial markets also got a boost following Democrat Joe Biden’s defeat of incumbent Donald Trump in the U. S. presidential election over the weekend. Wall Street followed, seeming relieved that the limbo created by the long, market- bruising battle for the White House was finally ending.
The Dow Jones industrial average vaulted up as much as 1,610 points on Monday to a new intraday high of 29,933.83, topping its previous record on Feb. 12 before the pandemic rattled financial markets around the world. The blue- chip average, however, lost steam near the close and ended the day up 834.57 points, or 3%, to 29,157.97, its biggest percentage gain since June.
The S& P 500 index, the heart of many 401( k) accounts, jumped 1.2% to 3550.50, finishing just below its Sept. 2 record. It notched its best day since Thursday when stocks were buoyed by prospects that more gridlock in Washington would prevent Democrats from pushing through stiffer regulations and higher taxes. The broad index had posted its best week since April on Friday following an election- fueled rally.
Stocks staged a stunning turnaround propelled by Big Tech over the summer as trillions of dollars in stimulus aid from the Federal Reserve and Congress helped support an American economy gripped by recession. Despite recent volatility on a spike in coronavirus cases, the S& P 500 has climbed nearly 60% since hitting its March 23 low after the shutdown brought the global economy to a near standstill in the spring.
Industries tied to the possibility of the economy reopening, including airlines, casino and restaurant companies, rallied following the vaccine news. High- flying technology shares that have thrived in a stay- at- home economy fell. That kept a lid on the gains for the Nasdaq Composite, which fell 1.5% to 11,713.78.
With the stock market back near record highs, investors who sat on the sidelines during the turbulence of 2020 would have lost out on gains.
If an investor had put $ 10,000 in an S& P 500 index fund on Dec. 31, 2019, it would have been worth roughly $ 11,335.84 with dividends through Friday’s close, according to Sam Stovall, chief investment strategist at financial-research company CFRA.
Investors shouldn’t try to time events, but rather invest for the long haul, analysts say.
“Time, not timing, makes money in the markets. There was little question that an effective vaccine will come to market,” Michael Farr, president of the money management firm Farr, Miller & Washington, said in a note.
“What does an investor do now? Be patient, stay diversified, don’t get emotional. It makes a difference,” he added.
Global markets were buoyed on Monday after Pfizer and German partner BioNTech released early study results Monday indicating that their vaccine, prevented more than 90% of infections from the virus that causes COVID- 19.
Pfizer is the first drug company to release data from a large, Phase 3 trial as it and several other companies are working to produce a COVID- 19 vaccine that is safe and effective. Shares rallied 7.7%.
Still, analysts caution that several risks remain that could trip up the market’s big recent gains. Any economic recovery depends on checking the pandemic, and investors pounced upon the news. Pfizer’s data is only preliminary and does not mean a vaccine is imminent. Getting the vaccine to billions of people will be a massive undertaking, even if it is approved.
“For the first time we can see a light at the end of the tunnel and a return to ‘ normalcy’ seems likely within 2021,” Steven Seedhouse, an analyst at Raymond James, said in a note. “It all depends on scaling manufacturing for this and subsequent vaccines that we expect to work.”
The vaccine news comes as the country’s new coronavirus cases are setting records once again. The U. S. recorded 126,742 cases Saturday, the third day in a row the total exceeded 120,000, according to data from Johns Hopkins.
Global markets were jolted higher in Asia and Europe overnight as investors breathed a sigh of relief after days of U. S. presidential limbo ended with Biden declared the president- elect. Stocks had rallied last week on the prospect for more gridlock in Washington.
The upside of a split Congress for markets is that it may prevent Democrats from approving some of the measures investors feared, such as higher tax rates and tougher antitrust policies for big technology companies.
“The election outcome is arguably the most favorable scenario for investors. A split congress or even a blue sweep with a very marginal majority implies that neither large tax hikes nor major changes in regulation are likely,” Seema Shah, chief strategist at Principal Global Investors, said in a note.
Many analysts expect trade tensions to de- escalate under a Biden presidency. Still, not all trade tensions are expected to vanish even if Biden rolls back some of the tariffs imposed by Trump on U. S. trading partners, especially China, in the past several years.
On Monday, a 11.6% surge for Chevron and a nearly 12% jump for Disney amid hopes that people will start driving and flying to theme parks again helped drive the Dow’s gains.
Cruise operators, airlines and mall owners also were among the market’s biggest winners. Carnival surged 39%, though it’s still down by more than half for 2020 so far. Delta Air Lines surged 17% and Las Vegas Sands jumped 9%.
The Big Tech companies that drove the market higher earlier in the pandemic, in large part because they didn’t need a “normal” economy to succeed, were lagging.
Zoom Video slumped 17%. Netflix and Amazon fell 8.6% and 5.1%, respectively.
“We want to go back to work, school and socializing in business and family life and this means a slow down for most stay- at- home stocks,” James McDonald, CEO and chief investment officer of investment manager Hercules Investments, said in a note. “Stocks like Zoom and Netflix will be long- term winners, but will lose in the short term as their valuations ran ahead of actual earnings.”
Treasury yields and oil prices burst higher as the vaccine news allows investors to feel confident about a stronger economic recovery. The yield on the 10- year Treasury shot up from 0.81% before the announcement to 0.95%, a very big move for the bond market and one that shows stronger confidence in the economy. The key rate touched its highest level since March earlier in the morning, according to Tradeweb.
Stock markets across Europe jumped more than 4%. In Asia, many markets rose more than 1%.