Monday November 9th

9-11-2020

The Dow is set to surge 5% to a record as Pfizer says Covid-19 vaccine is more than 90% effective

Investors cheered on Monday after drugmakers Pfizer and BioNTech said trial data indicated their Covid-19 vaccine is 90% effective. Many on Wall Street applauded the announcement as a sign that the pharmaceutical industry may soon have a viable way to control a disease that has derailed the U.S. economy for much of 2020 and has killed more than 230,000 Americans. Futures on the Dow Jones Industrial Average surged 1,537 points, or 5.4%, implying an opening gain of more than 1,500 points. The Dow’s previous intraday record was 29,568.57, about 1,245 points from Friday’s close. S&P 500 futures jumped 4%. Russell 2000 futures rallied 7%, triggering upside limits set by the CME Group to prevent highly volatile trading moves. Tech-heavy Nasdaq 100 futures fell 0.5% as traders left crowded growth and stay-at-home stocks in favor of cyclical companies that could outperform if the Pfizer vaccine is approved for widespread use. Stocks were already set to continue their big post-election rally Monday as Democrat Joe Biden defeated incumbent Donald Trump in the U.S. presidential race to become president elect, according to NBC projections. Dow futures were up about 400 points before the vaccine news. The 90% effective rate from Pfizer and Germany’s BioNTech was better than what the market was expecting. Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, has said that a vaccine that was 50% to 60% effective would be acceptable. “Amazing news from Pfizer with 90% efficacy. This hopefully is the beginning of the end of our fight against Covid,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in an email. “As I’ve been saying on the hopes of this, we need to shift our attention to those parts of the market that have been the most hammered because of Covid and away from the work from home stocks that have had such an incredible year because Covid is not forever,” he added. Travel, restaurant and hospitality companies that saw their equities swoon in the spring as Covid surged saw some of the strongest rallies on Monday following Pfizer’s announcement. “It is materially bullish for stocks in the near term,” said Tom Essaye of The Sevens Report. “Regarding the data, the 90% efficiency rate in preventing COVID-19 is higher than was hoped for...Given election clarity and the calendar (holiday’s approaching), a run in the S&P 500 to 3900 is not unreasonable. ” Shares of cruise-operator Carnival Corp. rocketed higher by 18%, Southwest Airlines jumped 9% and the Walt Disney Company popped 6% as investors bet a vaccine may allow more vacationers to attend its many amusement parks. “I think that the rally is justifiable. I think we’re going to start a new discussion, and the discussion is what’s America going to look like post Covid,” said CNBC’s “Mad Money” host Jim Cramer. “If you think about where we were last week, where we felt that there was very little chance to be able to stop this thing, now suddenly we have hope.” The Monday rally for equities also marked the first trading day after NBC News projected that former Vice President Joe Biden won the 2020 presidential election against incumbent President Donald Trump. The call came four days after Election Day and amid close counts in several battleground states. Wall Street hoped the victory for Biden would reduce the odds of a drawn-out election fight, even as Trump refused to concede. Many traders had put on bets for market volatility in November and were unwinding those positions, helping fuel a rally. In the meantime, the chances of a “blue wave” that sweeps Democrats into the majority of both the Senate and the House have waned, meaning drastic policy changes such as tax hikes are less likely. “A Biden presidency with a Republican Senate would be unlikely to see any increase in taxes, which was arguably the biggest fear investors had about a Biden presidency,” Brian Levitt, global market strategist at Invesco, said in a note on Sunday. “And a Biden presidency could mean a return to a more traditional, predictable approach to trade policy, which would likely result in less volatile markets.” Democrats are projected to keep their House majority, although Wall Street was watching closely as Senate control is still in limbo. Both of Georgia’s Senate races are likely going to runoffs slated for early January. Wall Street had rallied in the past week in anticipation for such a gridlocked government and was set to build on that rally as it gained clarity in the presidential race. All three major averages just notched their best weekly performance since April. The S&P 500 and Nasdaq jumped 7.3% and 9%, respectively, last week, while the Dow rose 6.9%. The S&P 500 also posted its biggest election week gain since 1932. Tech was the biggest winner last week among the 11 S&P 500 sectors, surging 9.7%. Investors piled into the high-growth group as the prospect of higher taxes and tighter regulations under a Democratic sweep decreased. Stock futures gained even as Trump is refusing to concede the election, vowing that as soon as Monday his team will start “prosecuting our case in court to ensure election laws are fully upheld.” The president and his surrogates have launched lawsuits in multiple key states, including Pennsylvania and Michigan, and have signaled they plan to press for recounts in some close races. Biden announced Monday morning the members of his coronavirus task force, who will be charged with crafting a plan to curb the spread of the coronavirus as it reaches record-level highs in the U.S. Among its ranks are Dr. Ezekiel Emanuel, chair of the Department of Bioethics at The Clinical Center of the National Institutes of Health, and Dr. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. The U.S. reported more than 126,000 new cases of the coronavirus two days in a row and has reported a new record daily spike in cases every day over the past four days, according to data compiled by Johns Hopkins University. “As the election focus starts to fade, investors will begin paying more attention to Covid as cases continue to explode and Europe institutes a series of mitigation measures,” Adam Crisafulli, the founder of the Vital Knowledge, said in an note on Sunday. “Vaccine anticipation has helped protect stocks from the ugly virus headlines.” Stocks in Asia-Pacific jumped on Monday as investors in the region reacted to Democrat Joe Biden’s defeat of incumbent Donald Trump in the U.S. presidential race, according to NBC projections. In Japan, the Nikkei 225 jumped 2.12% to close at 24,839.84 while the Topix index added 1.41% to end its trading day at 1,681.90. South Korea’s Kospi also rose 1.27% to close at 2,447.20. Mainland Chinese stocks also saw robust gains on the day, with the Shanghai composite up 1.86% to about 3,373.73 while the Shenzhen component gained 2.188% to around 14,141.15. Hong Kong’s Hang Seng index advanced about 1%, as of its final hour of trading. Oil jumped on Monday by almost 10%, the highest daily rise in almost 6 month, after Pfizer said its COVID-19 vaccine was very effective, and Saudi Arabia said an OPEC+ deal on output cuts could be adjusted to offset rising supply and weak demand. Brent crude rose $3.33 cents, or 8.4%, to $42.78 a barrel, and U.S. West Texas Intermediate crude was at $40.53, up $3.39 cents, or 9.1%. Gold beat a sharp retreat on Monday, sliding 2% after Pfizer said its vaccine was more than 90% effective in preventing COVID-19 based on initial data from a large study, sending stock markets soaring and denting safe-haven bullion’s appeal. Spot gold slipped 1.8% to $1,917.22 per ounce. The decline erased gains from the metal’s climb to a near eight-week peak at $1,965.33 earlier in the session, which was driven by a weak dollar amid hopes for more stimulus following Joe Biden’s victory in the U.S. elections. U.S. gold futures dipped 1.8% to $1,916.70.