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 more than 1,000 points,
or 3.7%, setting its first intraday record since February, before
the pandemic shutdown began. The index came within about 70 points
of the 30000 mark before paring some gains. The S&P 500 surged
2.7%, 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 31%, American Airlines Group gained
15%, Kohl's rose 11% and Bank of America climbed 10%.
Meanwhile, the pandemic's winning stocks, such as big tech
companies, lagged behind the rest of the market. The tech-heavy
Nasdaq Composite rose about 0.8%. Netflix slumped 5.1%, Clorox
declined 6.2% and Zoom Video Communications dropped 14%.
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 7.9%.
The news rippled through other markets as well. The yield on the
10-year Treasury note jumped to 0.956%, from 0.821% Friday. Brent
crude oil rose more than 8%.
The vaccine news caught other parts of the markets off guard,
with sharp, sudden moves in even the most liquid assets. The
Japanese yen slid 2% against the dollar to 105.43. Gold fell 4.9%
to $1,856 a troy ounce.
The small-cap Russell 2000 index jumped 5.5%. Earlier, futures
tied to the index rose 7%, hitting CME Group's limit up, which
prevents them from rising further.
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.
"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.
A reopening of the economy would also weaken the advantage that
tech companies, which thrive on virtual experiences and a lack of
social contact, 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 3.9%. 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 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%.
"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.
"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 11:42 ET (16:42 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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