The Dow Jones enjoyed a monster rally on Monday, spiking nearly 1,000 points as risk appetite exploded on Wall Street.
Today’s story was all about Moderna, whose potential coronavirus vaccine breakthrough has stock market bulls piling into the index.
All three of the major U.S. stock market indices soared on Monday, though the Dow and S&P 500 left the tech-heavy Nasdaq in the dust.
With next to no economic data to digest over the weekend, investors remained laser-focused on the progress of coronavirus vaccines and treatments that would help life get back to normal in the United States.
Monday brought possibly the most significant piece of news we’ve seen on that front. Moderna announced substantial signs of early progress in their race to become the first biotech firm to develop an effective COVID-19 vaccine.
CEO Stephane Bancel had the following to say in a press release announcing the results:
With today’s positive interim Phase 1 data and the positive data in the mouse challenge model, the Moderna team continues to focus on moving as fast as safely possible to start our pivotal Phase 3 study in July and, if successful, file a BLA.
We are investing to scale up manufacturing so we can maximize the number of doses we can produce to help protect as many people as we can from SARS-CoV-2.
For the Dow Jones, this news was like rocket fuel, and energy prices soared amid the blatant risk-on conditions.
Adding an extra-kick, U.S. President Donald Trump called the results “staggeringly good.”
Despite all the wild optimism, it’s worth noting that if a vaccine came to market in 2020, it would be the most rapid vaccine development in history. And considering that the mumps vaccine launched in a “record” four years, it wouldn’t even be close.
The flip side is that the global scientific community has never been so singularly focused on developing a single vaccine.
Clearly, stock market bulls dare to dream that a return to everyday life in 2021 may not be such a pipe-dream after all.
After dragging on the Dow Jones for some time, crude oil has suddenly become a bright spot for the index.
Energy prices are trending higher, reducing concerns over the decimation of high paying energy jobs in the United States and the significant loss of income from being the world’s largest producer.
But even with WTI above $30 again, economists at ING don’t believe that conditions are improving as quickly as they seem. They warn that the market is underestimating the extent of the supply and demand imbalance:
The fundamentals in the market are improving, but we continue to believe that the market is rallying too much too soon, with the risk that further strength will only prolong the supply and demand imbalance.
Even as lockdowns ease, many analysts fear that the global engine of business and tourist travel won’t recover until there are effective ways to prevent and treat COVID-19.
This means that crude oil’s fate is linked closely to coronavirus vaccine development for the foreseeable future.
The Dow 30 was completely green on Monday, as every single stock moved higher on the day.
But no DJIA stock moved as aggressively as Boeing, which soared 12% as major airlines and travel stocks rallied in response to the Moderna vaccine news.
Walt Disney – which desperately needs to get its parks open again and resume producing TV and film content – was up 7% on the day. Meanwhile, Saudi Arabia revealed it had bought the dip in DIS.
Unsurprisingly, Dow Jones oil supermajors Exxon Mobil and Chevron each shot more than 5% higher. Global growth bellwether Caterpillar was booming too.
Goldman Sachs stock rallied 6%, even after Warren Buffett’s 84% divestment. Goldman and fellow Dow Jones bank stock JPMorgan benefited from rising Treasury yields.
Apple rose 2%, while defensive plays like Walmart and Pfizer brought up the rear with gains much closer to 1%.