Dow posts first record close since February as Moderna vaccine data spurs optimism
- US equities soared on Monday after Moderna's encouraging vaccine update lifted hopes for a complete economic recovery.
- The Dow Jones industrial average and S&P 500 finished the day at all-time high levels. It marks the Dow's first record close since February.
- Moderna said Monday that its experimental coronavirus vaccine was 94.5% effective at preventing COVID-19 in trial patients. The biotech company plans to apply for emergency use authorization later this month.
- The news specifically lifted so-called reopening stocks including airlines, hotels, and cruises. Stay-at-home plays such as Zoom and Netflix tumbled.
- Oil prices surged as investors bet on vaccine distribution to revive market demand. West Texas Intermediate crude gained as much as 4.9%, to $42.09 per barrel.
- Watch major indexes update live here.
Moderna said Monday morning that its experimental vaccine was 94.5% effective at preventing COVID-19 in trial patients. An independent group of experts found signs of effectiveness after reviewing data from an ongoing 30,000-person trial, Moderna said. The company plans to apply for emergency use authorization later this month.
The encouraging news comes one week after Pfizer and BioNTech revealed similarly positive results from their own vaccine trial. While both experimental drugs still require regulatory approval to be distributed, their effectiveness suggests the virus could be reliably contained sooner than expected.
Here's where US indexes stood at the 4 p.m. ET market close on Monday:
- S&P 500: 3,626.91, up 1.2%
- Dow Jones industrial average: 29,950.44, up 1.6% (471 points)
- Nasdaq composite: 11,924.13, up 0.8%
The energy and industrial sectors led the S&P 500 higher. Health care and real estate stocks lagged the broader market's gains.
The so-called reopening trade soared as Moderna's update lifted investor optimism. Airlines including United, American, and Delta gained, as did cruise lines. Hotel stocks also jumped as investors bet on near-term vaccine distribution to revive the struggling sector.
Conversely, stocks that thrived in the stay-at-home economy sank as investors positioned for a full recovery. Zoom, Netflix, and Peloton, among others, tumbled. Falling tech giants in particular led the
"The global population couldn't have asked for more from the Moderna vaccine," Seema Shah, chief strategist at Principal Global Investors, said. "Visibility towards a return to normality is increasing, and this should provide more fuel to the reflation rally, with small caps, value, and cyclicals clear beneficiaries."
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Moderna's update offset concerns about still-rising COVID-19 cases throughout the US. The country reported more than 139,000 new cases on Sunday along with nearly 69,000 new hospitalizations, according to The COVID Tracking Project. Multiple cities have reinstated economic restrictions to hinder the virus's spread. With the pace of economic recovery already slowing, prolonged lockdowns risk freezing the nation's rebound.
Monday's strong open comes after Pfizer's own vaccine announcement spurred a massive rotation to value stocks throughout last week. Major indexes notched a second-straight weekly gain as investors bet on near-term vaccine distribution.
BlackRock strategists said Monday that the distribution of a vaccine could make the coronavirus recession far less devastating than the financial crisis and its long-term scarring. Though rising cases may drive short-term turbulence, the two promising vaccine candidates signal the pandemic can soon come to an end, the team said.
"Positive news on COVID-19 vaccines gives us greater confidence that the economic restart can re-accelerate in 2021," the strategists said in a weekly report. "We prefer to look through any market volatility generated by the virus resurgence and renewed restrictions over the challenging months ahead."
Pfizer and BioNTech both plunged on the vaccine news. Moderna's experimental vaccine can be stored at refrigerator temperatures for up to 30 days, making it far easier to transport than the Pfizer drug that needs to be stored at -94 degrees Fahrenheit.
Spot gold fell as much as 1.3%, to $1865.30 per ounce, as investors rotated out of safe-haven assets. The precious metal pared losses through the morning.
The US dollar declined against a basket of 10 major currency peers and Treasury yields climbed.
Oil prices gained on hopes for a vaccine to revive travel activity and overall consumption. West Texas Intermediate crude surged as much as 4.9%, to $42.09 per barrel. Brent crude, oil's international standard, rose 4.4%, to $44.67 per barrel, at intraday highs.
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