By Caitlin Ostroff and Chong Koh Ping
U.S. markets rushed higher Monday after progress on a Covid-19
vaccine and Democrat Joe Biden's electoral victory sent stocks
soaring and boosted companies in the hardest-hit sectors of the
economy.
The Dow Jones Industrial Average soared 5.6%, 1,589 points
higher, to 29924. The open pushed the Dow past its intraday record
high from February. The S&P 500 surged 3.7%, suggesting that
last week's advance, the strongest since April, still has
momentum.
Earlier, the Russell 2000 index of small-cap stocks rose 7% in
premarket futures trading, hitting CME Group Inc.'s limit up, which
prevents them from rising further.
Markets rallied after a vaccine developed by Pfizer Inc. and
partner BioNTech SE proved better than expected at protecting
people from Covid-19 in a pivotal study, a milestone in the hunt
for shots that can stop the global pandemic.
The vaccine jolted markets, at least temporarily, reviving the
fortunes of the pandemic losers, such as airlines, travel companies
and banks. Meanwhile, the pandemic winning stocks, such as big tech
companies, performed less well. Tech heavy Nasdaq-100 futures rose
1%. Brent crude oil rose more than 7% and European bank stocks shot
10% higher.
The positive, though incomplete, results bring the vaccine a big
step closer to getting cleared for widespread use. Pfizer said it
is on track to ask health regulators for permission to sell the
shot before the end of this month, if pending data indicate the
vaccine is safe.
In premarket trading, shares in Pfizer rose nearly 15%.
Following the vaccine announcement, the yield on the 10-year
Treasury moved higher to 0.918%, from 0.821% Friday. In
commodities, copper futures rose as much as 1.5% to $7,048 a metric
ton on the London Metal Exchange, their highest level June
2018.
The vaccine news caught key parts of the markets off guard, with
sharp, sudden moves in even the most liquid assets. In addition to
the surge in Treasury yields, the Japanese yen slid 1.5% against
the dollar to 104.89. Gold fell 3.9% to $1,876 per troy ounce.
The moves suggested investors were instantly recalibrating their
forecasts for faster economic growth and higher inflation based on
the vaccine news, as a successful vaccine has the potential to
restart swaths of the economy hobbled by the pandemic. A reopening
of the economy would also weaken the advantage tech companies, who
thrive on virtual experiences and lack of social contact, have
enjoyed during the pandemic.
Shares in the hardest-hit sectors, including travel and leisure
companies, rallied in premarket trading too, with Carnival Corp. up
32% and American Airlines Group Inc. gaining more than 27%.
"We all sort of knew that November would be a pretty important
period for last stage news on the three main vaccines. The news is
clearly pretty positive," said James McCormick, a strategist at
NatWest Markets. "We've got the election past us and now the market
is focusing on what's next."
The new leg of the rally in stocks also reflects the reduced
uncertainty surrounding the U.S. elections, combined with
expectations that a Democrat-controlled White House and divided
Congress could result in moderate policy measures on taxes and
spending.
"The market-friendly bits of Biden will be in place: the lack of
volatility, more clear foreign policy," said Altaf Kassam, head of
investment strategy for State Street Global Advisors in Europe.
"But at the same time, the bits that the market was worried about
-- higher taxes and more regulation -- will not happen. That's
what's been driving the market higher."
Overseas, the pan-continental Stoxx Europe 600 jumped 4.2%.
Regional markets in Asia also rallied, with benchmarks in Japan,
South Korea, India and Taiwan hitting multiyear or record
highs.
Overseas investors expect that an administration led by
President-elect Biden will engage in more predictable foreign
policy, and may be less inclined to levy tariffs or unexpectedly
escalate tensions with China, Mr. McCormick, said. "Equities
outside of the U.S. get a nice lift from this," he said.
Asia is likely to benefit as higher trade tariffs become less
likely, according to Tai Hui, chief market strategist for the
region at J.P. Morgan Asset Management. "A lot of the shocks we've
experienced in the past three years will be less of a concern. And
investors will welcome that," he said.
China's Shanghai Composite Index closed 1.9% higher and Hong
Kong's Hang Seng Index rose 1.2%. The Chinese yuan rallied to about
6.56 per U.S. dollar in the offshore market, trading at its
strongest levels in more than two years.
"The consensus is that Biden will be easier on trade and foreign
policy, unlike Trump who is more erratic and aggressive," said
Colin Low, senior macro analyst at FSMOne.com in Singapore.
Japan's Nikkei 225 gained 2.1% to close at a fresh 29-year high,
after ending Friday at levels last hit in 1991.
The WSJ Dollar Index, which tracks the U.S. currency against a
basket of 16 others, was largely unchanged near its lowest since
June 2018.
"Globally, investors are just happy to turn the page on the U.S.
elections," said Eli Lee, head of investment strategy at Bank of
Singapore. Mr. Lee said the feared scenario of a drawn-out
contested election had diminished, reducing uncertainty for markets
and for policy makers such as the Federal Reserve.
"The Fed has been on the back foot for the past couple of months
as it wants clarity on what policies would be on the fiscal front
to craft monetary policies to support the economic recovery," he
said.
--Xie Yu contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Chong
Koh Ping at chong.kohping@wsj.com
(END) Dow Jones Newswires
November 09, 2020 09:50 ET (14:50 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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