By Caitlin Ostroff and Chong Koh Ping
U.S. stocks jumped to fresh records Monday after progress on a
Covid-19 vaccine and Democrat Joe Biden's electoral victory ushered
in a sea change in financial markets, reordering winners and
losers.
The Dow Jones Industrial Average climbed almost 1400 points, or
4.8%, in afternoon trading. The blue-chip index set its first
intraday record since February and came within about 70 points of
the 30000 mark before paring some gains. The S&P 500 surged
3.3%, also putting it in record territory.
Markets rallied after a vaccine developed by Pfizer and partner
BioNTech 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 travel companies,
retailers and banks, whose stocks rise and fall with the outlook
for the economy.
Shares of Carnival surged 37%, American Airlines Group gained
17%, Kohl's rose 16% and Bank of America climbed 14%.
Meanwhile, the pandemic's winning stocks, such as big tech
companies, lagged behind the rest of the market, a reversal of
fortunes that some investors said was among the most stark they had
seen.
The tech-heavy Nasdaq Composite rose about 0.9%. Netflix slumped
6%, Clorox declined 7.3% and Zoom Video Communications dropped 14%.
Peloton Interactive fell 16%.
The positive, though incomplete, results bring the vaccine a big
step closer to being 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. Pfizer shares jumped 12%.
The news rippled through other markets as well. The yield on the
10-year Treasury note jumped to 0.961%, from 0.821% Friday. Brent
crude oil rose almost 8%.
Investors also backed away from safety trades. The Japanese yen
slid 2% against the dollar to 105.43. Gold fell 4.7% to $1,859 a
troy ounce, on pace for its biggest one day percentage fall in
seven years. The yield on the 10-year German bund rose the most
since March, advancing to minus 0.51%.
The small-cap Russell 2000 index jumped 5.8%. Earlier, futures
tied to the index rose 7%, hitting CME Group's limit up, which
prevents them from rising further.
The moves suggested individuals, hedge funds and other investors
were rapidly 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.
"There are a lot of things that are benefiting from people
willing to take risk and rotate into the unloved, so to speak,"
said Brian Andrew, chief investment officer at Johnson Financial
Group. He said his firm has increased clients' exposure to stocks
in recent weeks, particularly strategies that invest in cyclical
companies like financials.
The rally also showed how investors are overlooking the current
period, in which the U.S. continues to report more than 100,000 new
Covid-19 cases a day and millions of Americans remain out of work
and unable to pay their bills. Many are looking instead toward the
economy more fully opening back up.
A reopening would weaken the advantage that tech companies,
which thrive on virtual work, learning and entertainment, have
enjoyed during the pandemic.
"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."
The pan-continental Stoxx Europe 600 jumped 4%. Overseas
investors expect that an administration led by President-elect Joe
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%. Japan's Nikkei 225 gained 2.1% to
close at a fresh 29-year high.
"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.
--Ben Eisen and 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 13:35 ET (18:35 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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