Asian stocks dipped Tuesday amid concerns a more infectious Covid-19 strain will derail an economic recovery. Treasuries and the dollar were steady after gains.
An MSCI index of Asia-Pacific shares was on track for its first decline in six days as countries in the region are struggling to contain the highly transmissible Delta variant of the virus. U.S. futures dipped after technology stocks led U.S. benchmarks to fresh records Monday. New limits on travel from Britain, which is seeing a spike in cases, dragged on cruise operators and airlines.
The Treasury yield curve flattened amid month-end index rebalancing and the break in auctions until July 12, reducing supply. Oil extended a decline with the market expecting OPEC+ producers to increase supply at an upcoming meeting. Bitcoin was steady around mid-$34,000.
Global stocks are poised to close out their fifth quarterly advance amid a worldwide vaccine rollout that powered an economic recovery and sparked concerns about increasing prices pressures and the withdrawal of stimulus measures. The recovery also drove the reflation trade as more economies reopened, though that is being hampered as some countries, especially in Asia, are falling behind in their vaccine strategies.
The U.S. is now the best place to be during the pandemic due to its fast and expansive vaccine rollout stemming what was once the world’s worst outbreak. Meanwhile, parts of the Asia-Pacific region that performed well in the ranking until now — like Singapore, Hong Kong and Australia — dropped as strict border curbs remain in place.
“The Delta variant has also emerged in our client conversations as a potential threat to reflation/inflation,” JPMorgan Chase & Co. strategists led by Marko Kolanovic said. “The economic consequences are likely to be limited given progress on vaccinations across developed market economies. It could, however, pose some risk of a delay in the recovery in countries where vaccination rates remain lower.”
After closing at record highs last week, stocks are falling for the second day in a row as corporate earnings—which lifted the market to new highs during the pandemic—start to show signs of weakness, all while speculative pockets of investor mania continue to rage on.
Shortly after the open, the Dow Jones Industrial Average fell 147 points, or 0.4%, while the S&P 500 also slipped 0.4%, and the tech-heavy Nasdaq, which underperformed Monday, shed 0.3%.
Far outperforming any other stock in the S&P, shares of railroad company Kansas City Southern are soaring 15% after Canada National proposed to acquire the company in a $33.7 billion deal—topping Canadian Pacific’s $25 billion bid from last month and setting the stage for a potential bidding war.
Heading up the S&P’s losses, Marlboro parent Altria Group’s stock is slumping 6% after reports that Joe Biden’s administration (which has not commented on the matter) is considering a reduction in the amount of nicotine allowed in tobacco products.
On the earnings front, shares of IBM are climbing 2.5% after the software giant surpassed first-quarter expectations with revenue of $5.4 billion—bolstered by ongoing growth in its enterprise cloud business—and adjusted earnings of $2.2 billion.
Meanwhile, medical device company Abbott, which makes Covid-19 test kits, reported worse-than-expected revenue of $10.5 billion Tuesday morning as Covid-related sales fell nearly 10% quarter to quarter, sending shares down about 3%.
Reflecting ongoing uncertainty over the economic recovery, epicenter stocks—or those belonging to companies hard-hit by the pandemic—are also driving losses Tuesday, with chemicals firms Dupont De Nemours, cruise-liner Carnival Corp. and Delta Air Lines all falling about 2%.
“The reopening news is directionally positive, but the big problem is that many epicenter stocks have already seen their enterprise values return to pre-Covid levels, while some are well beyond where they stood in 2019,” Vital Knowledge Media Founder Adam Crisafulli said in a Tuesday morning note.
In a break from tradition, the Bank of Japan revealed Tuesday that it opted out of buying exchange-traded funds despite weakness in Japanese stocks. Crisafulli says the move is “perhaps the most important piece of news today” because it signals the central bank is dialing back its economic support—at a time when central banks around the world, including the Federal Reserve, have revved up their accommodative policy to help the economy and usher in new stock-market highs. Japan’s Nikkei 225, the nation’s benchmark index, fell 2% Tuesday and is now down 4.5% from a February high.
Boosted by massive fiscal stimulus, an accelerating vaccine rollout and falling unemployment, stocks have had a strong start to the year, with the S&P pulling off 23 new all-time highs in 2021, according to LPL Financial Chief Market Strategist Ryan Detrick. “Many of our favorite sentiment gauges are becoming extremely bullish, which could be a near-term contrarian warning,” Detrick says of indicators like sentiment, at a three-year high, and low cash allocations from portfolio managers increasingly piling into stocks.
The price of dogecoin is soaring Tuesday, climbing back near record territory from last week, as retail traders around the world stage a rally around cannabis holiday 4/20. The cryptocurrency, modeled after a meme and originally developed as a joke, has climbed eight-fold over the past month, nabbing a staggering $49 billion market capitalization.
I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at email@example.com.
Stocks sailed to record highs Monday before paring some gains as traders took in promising data on a leading COVID-19 vaccine candidate as well as President-elect Joe Biden’s victory in the U.S. presidential election, ending a days-long nail-biter over which candidate would prevail in winning the White House.
The S&P 500 jumped as much as 3.9% to more than 3,600 at session highs, topping its previous record intraday high of 3,588.11 from September, and its record closing high from that same day. The Dow gained as many as 1,610 points, or 5.7% to its own all-time high of more than 29,800. The Dow’s previous record intraday high was 29,568.57 from February. Both indices cut gains in the minutes leading up to market close, however.
The Nasdaq lagged and closed in negative territory, however, as hopes for a vaccine prompted traders to turn away from software stocks and other members of “stay-at-home” trade. Shares of Zoom Video Communications (ZM) and Peloton (PTON) each sold off on Monday. However, stocks poised to benefit from a broader economic reopening including airlines, cruise lines and lodging firms each surged.
Shares of Pfizer (PFE) jumped more than 7.5% after the company announced that their clinical trial showed that their vaccine candidate was more than 90% effective in preventing COVID-19 in participants with no evidence of a previous coronavirus infection. Shares of BioNTech (BNTX), which is working on the vaccine alongside Pfizer, also gained more than 16%.
Clarity around the results of the presidential election also helped fuel a market rally. Biden, alongside Vice President-elect Kamala Harris, is set to usher in a push for bigger fiscal stimulus, a public option in health care, investment in sustainability, and a more measured approach to foreign policy and trade, among other key issues. And in his victory speech Saturday, Biden promised to work toward these goals with an eye toward uniting a deeply divided nation, calling for an end of “this grim era of demonization in America” and underscoring that “if we can decide not to cooperate, then we can decide to cooperate.”
So far, traders have cast bets that some of the suspected “market negative” potential of a Biden presidency, such as a move to raise corporate taxes, would be tempered by a Senate that remained under Republican control. Two Senate races remain outstanding in Georgia and will not be decided until January, though prediction markets have so far given Democrats relatively slim odds of winning both seats needed for the party to claim a majority in the chamber.
“A divided government would constrain the Biden administration’s ability to implement plans for large-scale fiscal stimulus and public investment, tax, healthcare and climate related legislation,” analysts from BlackRock Investment Institute said in a note Saturday. “We see an increased focus on sustainability under a divided government, but through regulatory actions, rather than via tax policy or spending on green infrastructure. It also would likely signify a return to more predictable trade and foreign policy – even as U.S.-China rivalry is set to stay elevated due to bipartisan support for a more competitive stance.”
The analysts added that “some fiscal stimulus looks possible” during the lame-duck session in Congress, though the size and scope of any forthcoming package is likely to be much smaller than what a united Democratic government might have advanced.
“We’re monitoring the fiscal response closely, as a premature retrenchment could set back an economic restart that has so far surprised to the upside,” they said.
Other economists also expressed optimism that a stimulus package might get passed ahead of Inauguration Day, even after the months’ worth of discussions between Trump administration officials and congressional lawmakers fizzled out without an agreement.
“We are becoming increasingly hopeful that pressure from business leaders and vulnerable Republican Senators in 2022 will mean that something can pass before the end of the year, and very preferably before the end of the month,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, said in a note Sunday.
And for the high-flying tech stocks that have driven the market higher for much of this year, a Biden presidential victory with a likely Republican Senate poses the “goldilocks Election outcome,” according to WedBush analyst Dan Ives.
“Investors should expect a ratcheting down of US/China tensions and the ‘decoupling path’ of the Cold Tech war, which is a bullish sign for Apple (AAPL) and semi [semiconductor] stocks looking ahead,” Ives said in a note Saturday. Concerns of a tougher antitrust environment for Big Tech companies have also likely eased, he added.
Biden is also set to strike a more serious tone on combatting the coronavirus pandemic, with the outbreak having already taken the lives of more than 230,000 Americans, sickened more than 9.8 million and dragged U.S. economic activity to a historic nadir. And while vote counts were under way last week, coronavirus cases hit a grim milestone in the United States: A record more than 120,000 new cases reported on Friday alone. Biden announced a new 13-person coronavirus task force on Monday, as one of his first major acts during his presidential transition.
4:04 p.m. ET: Dow climbs 835 points, or 3%, to pare some gains after soaring to a record intraday high
Here were the main moves in markets as of 4:04 p.m. ET:
U.S. West Texas intermediate crude oil prices (CL=F) jumped 8.5%, or $3.15 per barrel, to settle at $40.29 per barrel Monday afternoon, as hopes of a vaccine and broader economic reopening drove optimism over heightened energy demand. The energy sector far and away led gains in the S&P 500 Monday afternoon, surging more than 15% versus the broader market’s gain of just over 2.6%.
Still, crude oil prices remain lower by more than 30% for the year to date, with futures at one point having turned negative this spring before recovering.
11:45 a.m. ET: Why Pfizer’s promising vaccine data is bullish for Moderna: Morgan Stanley
Pfizer’s upbeat vaccine trial data, showing a more than 90% efficacy in preventing COVID-19 in patients without prior history of infection, points to potentially promising results for Moderna’s (MRNA) own vaccine candidate, according to Morgan Stanley equity analyst Matthew Harrison. Shares of Moderna were up more than 7.5% intraday on Monday.
Moderna’s candidate, like Pfizer’s, is based on messenger RNA (mRNA) technology, which produces a synthetic version of the mRNA a virus uses to build its proteins to teach cells how to create their own and eventually build immunity. Moderna calls its vaccine candidate mRNA-1273.
“Pfizer’s strong data should translate to mRNA-1273 since the level of neutralizing antibodies for mRNA-1273 is the same or better than Pfizer in earlier stage studies,” Harrison said in a note Monday. “We await potential differentiation in patient sub-groups or secondary endpoints (such as non-symptomatic infections).”
Harrison added that Modern’s vaccine candidate, if successful, will likely be easier to transport and thereby distribute en masse, since it does not require the same ultra-cold temperatures for storage.
“Moderna requires transport at -20C (vs. -80C for Pfizer), and can be stored at regular refrigeration for a week (vs. 24 hours for Pfizer) and requires no one-site dilution (vs. dilution required for Pfizer),” he said. “We see these factors as helping to maintain a commercial edge even with similar efficacy.”
9:54 a.m. ET: Stay-at-home trade comes unwound after promising vaccine data, while reopening stocks rally
Shares of companies that comprised the “stay-at-home” trade, or those viewed as beneficiaries of widespread social distancing and working and schooling from home, tumbled Monday morning after Pfizer and BioNTech released promising data around the efficacy of their COVID-19 vaccine candidate.
A vaccine has been viewed by many market pundits, business executives and policymakers as the key tenet of a sustained rebound in economic activity and corporate profitability, since without one, consumers would likely remain to some extent on the sidelines on returning to previous spending behaviors.
“The strong results from the Pfizer vaccine were better than most expected and means we could be opening back up sooner than expected,” Ryan Detrick, chief market strategist for LPL Financial, said in an email to Yahoo Finance Monday morning. “Coupled with an economy that continues to surprise to the upside and the stock market is now pricing in the prospects of a much better economy in ’21.”
Software stocks including Zoom Video Communications (ZM), Netflix (NFLX), Peloton (PTON), Etsy (ETSY), eBay (EBAY), Chewy (CHWY), Slack (WORK) and Amazon (AMZN) each sank shortly after market open.
The “reopening trade,” meanwhile, came roaring back to life. These included stocks like American Airlines (AAL), Delta Airlines (DAL), Southwest Airlines (LUV), Carnival (CCL), Norwegian Cruise Line Holdings (NCLH), Wynn Resorts (WYNN), Planet Fitness (PLNT), which each gained by double-digit percentages Monday morning. Each of these stocks stand – among many others – stand to benefit from a pick-up in travel and leisure spending, which had been weighed down by the pandemic.
Elsewhere in risk assets, West Texas intermediate crude oil prices (CL=F) and Brent crude (BZ=F) also each jumped by more than 9% Monday morning, with an increase in travel poised to drive a pick-up in demand for energy.
9:37 a.m. ET: Stocks soar to record levels, Dow adds more than 1,450 points
The Dow and S&P 500 each surged Monday morning as markets opened for trading.
Here were the main moves in markets, as of 9:37 a.m. ET:
S&P 500 (^GSPC): +132.72 points (+3.78%) to 3,642.16
Dow (^DJI): +1,486.64 points (+5.25%) to 29,810.04
Nasdaq (^IXIC): +110.27 points (+0.92%) to 11,998.57
Gold (GC=F): -$69.20 (-3.55%) to $1,882.50 per ounce
10-year Treasury (^TNX): +10.9 bps to yield 0.929%
9:20 a.m. ET: Biden announces 13 health experts will comprise his Transition COVID-19 Advisory Board
Confirming reports from over the weekend, Biden on Monday announced 13 health experts would be part of his Transition COVID-19 Advisory Board to help inform his approach to combatting the pandemic in the U.S.
“The advisory board will help shape my approach to managing the surge in reported infections; ensuring vaccines are safe, effective, and distributed efficiently, equitably, and free; and protecting at-risk populations,” Biden said in a statement.
The board will be co-chaired by three individuals, including Dr. David Kessler, who served as FDA Commissioner from 1990 to 1997, Dr. Vivek Murthy, who served as U.S. Surgeon General from 2014 to 2017, and Dr. Marcella Nunez-Smith, whose work at Yale University focuses on promoting health-care for structurally marginalized populations.
8:28 a.m. ET: Biden applauds Pfizer’s vaccine progress, but warns ‘end of the battle against COVID-19 is still months away”
Biden, in a statement Monday morning, congratulated Pfizer for its work on its COVID-19 vaccine, but urged Americans to remain vigilant in wearing masks and social distancing to keep the spread of the virus under control.
“The end of the battle against COVID-19 is still months away,” Biden said in the statement. “This news follows a previously announced timeline by industry officials that forecast vaccine approval by late November. Even if that is achieved, and some Americans are vaccinated later this year, it will be many more months before there is widespread vaccination in this country.”
“This is why the head of the CDC warned this fall that for the foreseeable future, a mask remains a more potent weapon against the virus than the vaccine,” he added. “Today’s news does not change this urgent reality. Americans will have to rely on masking, distancing, contact tracing, hand washing, and other measures to keep themselves safe well into next year. Today’s news is great news, but it doesn’t change that fact.”
7:16 a.m. ET: Dow futures surge more than 1,400 points after upbeat vaccine data, Biden victory
Here were the main moves in equity markets, as of 7:16 a.m. ET:
S&P 500 futures (ES=F): 3,629.40, up 119.5 points or 3.4%
Dow futures (YM=F): 29,737.00, up 1,456 points or 5.15%
Nasdaq 100 futures (NQ=F): 12,144.25, up 98.25 points or 0.8%
7:10 a.m. ET Monday: Pfizer, BioNTech, say their COVID-19 vaccine candidate is more than 90% effective
Shares of Pfizer and German drug-maker BioNTech each soared Monday morning after the companies announced that their Phase 3 clinical trials showed their COVID-19 vaccine candidate was more than 90% effective in preventing the coronavirus in participants with no evidence of a previous infection.
The trial’s analysis assessed 94 confirmed COVID-19 infections among nearly 44,000 participants.
“The case split between vaccinated individuals and those who received the placebo indicates a vaccine efficacy rate above 90%, at 7 days after the second dose,” the companies said in a statement. “This means that protection is achieved 28 days after the initiation of the vaccination, which consists of a 2-dose schedule.”
The companies added that they planned to submit a request for Emergency Use Authorization of their vaccine candidate to the U.S. Food and Drug Administration after they have a total of two months’ worth of data to achieve the agency’s safety requirements. This is expected to take place in the third week of November.
6:01 p.m. ET Sunday: Stock futures open higher after Biden named winner of presidential election
Here were the main moves in markets, as of 6:01 p.m. ET Sunday evening:
S&P 500 futures (ES=F): 3,517.00, up 16.25 points or 0.46%
Dow futures (YM=F): 28,334.00, up 130 points or 0.46%
Nasdaq futures (NQ=F): 12,141.5, up 66.5 points or 0.55%
Economic and financial impact during the Covid-19 health crisis deepens. Businesswoman with protective face mask checking financial trading data on smartphone by the stock exchange market display screen board in downtown financial district showing stock market crash sell-off in red colour.
Spending paused because of uncertainty now has some answers.
On Monday, Pfizer (PFE) and its German partner BioNTech shook markets with the most positive news yet on a potential vaccine for COVID-19.Before the market open, the companies announced their mRNA-based COVID vaccine candidate has indicated an efficacy ratio north of 90%.
Pfizer CEO Dr. Albert Bourla said of the results, “Today is a great day for science and humanity.” Dr. Anthony Fauci called the results “extraordinary.”Following this news, markets soared with the Dow (^DJI) and S&P (^GSPC) hitting intraday record highs before fading a bit into the close. The Dow’s close at 29,157 was still the index’s highest close since February 20.
And some of the biggest pandemic trends were reversed sharply as investors placed big bets on this news serving as a key step in the economy’s return to something like normal.Big “stay at home” winners like Zoom (ZM), Peloton (PTON), and Netflix (NFLX) were under pressure.
Airlines rallied, with shares of United (UAL), Delta (DAL), and American (AAL) all rising more than 15%.These lists go on — office space REITs were big winners, eCommerce plays like PayPal (PYPL) and Shopify (SHOP) sold off, gym operators rallied, banks jumped, credit card issuers were higher, and so on.
But the market’s reaction holds a key lesson for investors who might’ve been surprised to see such an enthusiastic reaction to this news. Especially considering the relative optimism the scientific community has had around vaccine development for some time.
And the lesson is that even a tentative roadmap for a vaccine allows businesses and consumers to plan in a way that has been nearly impossible for the past eight months.
“With the vaccine news today, households and firms are going to plan ahead, for example by booking travel, vacation, and capex,” said Torsten Sløk, chief economist at Apollo Global Management.
“The implication is that we will immediately begin to see the positive effects on employment, GDP, and earnings, even before the vaccine is available to the public.”
In other words, Pfizer’s vaccine or any others that follow need not be distributed to the population before starting to directly aiding the economic recovery. Sløk also notes that sectors of the economy that include close proximity to others account for about 22% of total employment.
And as we saw in the October jobs report published Friday, the number of workers out of a job in the leisure and hospitality and business and professional services sectors totaled 4.5 million, accounting for the vast majority of those who still remain unemployed. As of October, the number of workers unemployed remained 5.3 million higher than in February.
With these sectors able to see some light at the end of the COVID tunnel, the prospects for bringing workers back in the medium-term grow better.
And while no one sees Pfizer’s announcement on Monday as the end of the pandemic, an ability to reasonably contemplate the other side of this crisis is a welcome change for the businesses that had so far been left behind during the surprisingly durable economic recovery.
And Wall Street strategists are starting to move on to 2021. In a note to clients published Thursday, Sean Darby, global equity strategist at Jefferies, unveiled his S&P 500 price target for 2021. And Darby expects stocks will continue going up next year.
“We expect the market to reach 3,750 by end of 2021,” Darby wrote, unveiling his year-ahead price target for the first time. On Thursday, the S&P 500 closed at 3,510, implying just under a 7% gain for the benchmark index through the end of next year.
Underpinning Darby’s positive outlook is an improved outlook for corporate earnings amid a strengthening economy and an accommodative Federal Reserve.
“All of our US macro-equity-bond indicators are positive or beginning to turn,” Darby writes.
“S&P 500 earnings are finally beginning to reflect the better underlying health of the economy as the backlog of orders increases. Similarly, the Russell 3000 earnings are just turning at the same time as job openings are recovering.”
Darby adds that, “One key underwriter for the markets, under either candidate, has been the Fed with its intervention in both fixed income and credit markets. The influence of the Fed’s balance sheet should not be underestimated as the forward PE ratio has certainly tracked the ‘excess money’ in the economy.”
So while some may argue that the Fed is “out of ammo” after the unprecedented expansion of its credit facilities in the early part of this pandemic, the Fed is still a driving force behind flows in the market. On Thursday, Fed Chair Jerome Powell reiterated the central bank’s stance, saying at a press conference, “We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.”
And as Canaccord Genuity’s Tony Dwyer wrote in a note to clients this week, “Remember, a significant and sustainable period of economic retrenchment comes when there is a need for money to fund forward growth but very little access to it. The opposite is true today.”
As of Friday morning, the race for president had yet to be called. However, former Vice President Joe Biden’s odds of winning improved as he took the lead in the battleground state of Georgia over President Trump. Meanwhile, the prospect of a “blue wave” in Congress has been all but ruled out by investors.