Dow Recoils as Doctors Warn Gilead Miracle Drug Is ‘No Game Changer’
The Dow Jones Industrial Average (DJIA) slid on Thursday after doctors warned that Gilead's coronavirus drug is not a "game changer." | Source: REUTERS/Lucas Jackson
- The Dow Jones Industrial Average (DJIA) dove on Thursday as investor enthusiasm cooled off from Wednesday’s feverish rally.
- Gilead’s bombshell coronavirus treatment boosted markets yesterday, but doctors remain cautious.
- The MSCI World Index of global stocks is still on track for its best month in history.
The global stock market rally began to fade on Thursday. The Dow Jones Industrial Average (DJIA) led the drop, falling more than 300 points at the opening bell.
Traders feasted on hopes for the new Gilead drug, Remdesivir, yesterday. But doctors this morning have urged caution. Carlos del Rio, Executive Associate Dean for Emory at Grady, said it’s not a game-changer .
At most a “solid hit” but certainly not a “home run”. Not a “game changer” I am afraid.
Remdesivir is not a “game changer”
Others in the scientific community were concerned the data from the Remdesivir study hadn’t been properly looked at by researchers . Instead the results were whisked straight to the White House for a photo opportunity. Dr. Eric Topol of the Scripps Research Translational Institute remains cautious about the data.
It was expected to be a whopping effect. It clearly does not have that.
Dow slides after jobless claims disappoint again
Dow Jones futures contracts initially soared after the market closed last night. Solid earnings at Microsoft, Facebook, and Tesla helped ease concerns of a broad, tech-led selloff.
But the rally faded before the markets opened. By 9:43 am ET, the Dow had lost 320.45 points or 1.3% to fall to 24,313.41.
The S&P 500 and Nasdaq declined 1.02% and 0.26%, respectively.
Global stocks on track for record month
Despite Thursday’s drop, global stocks are still on track to hit their best month in history.
The MSCI World Index, which tracks 1,643 stocks around the world , is up 13.3% for April. It’s the strongest showing since the index was created in 1986.
The U.S. stock market is also on pace for a blistering month. The S&P 500 is expected to clock in the best monthly performance since 1974.
The last two months have been surreal, to say the least. The financial markets saw the fastest correction in history as the coronavirus pandemic unleashed panic and fear into the market. But a trigger-happy Federal Reserve and hopes of a turnaround quickly pushed the markets back to 2019 levels.
The effect has been truly global with supply chains disrupted across Asia, Europe, and America. The MSCI World Index captured the sentiment perfectly, tracking 1,644 stocks across 23 countries.
It’s worth pointing out, however, that the index heavily favours US companies. 64% of the index’s weighting is attributed to the United States. And its five largest constituents are Microsoft, Apple, Amazon, Facebook, and Alphabet.
As CCN.com reported, these five companies have an outsized effect on the stock market right now.
Stock market positives
Despite a bleak economic backdrop, traders have latched onto positive headlines. The Dow pushed higher yesterday on news that Gilead Sciences Inc’s drug Remdesivir is being fast-tracked into hospitals.
The drug showed a 31% faster recovery for Covid-19 patients compared to those that received a placebo. Dr. Anthony Fauci called the breakthrough “highly significant.” The Food and Drug Administration (FDA) is expected to make it available as soon as possible.
Traders also got a boost from the Federal Reserve. Chairman Powell pledged continuing support for the economy in yesterday’s statement.
“[The Fed is] committed to using its full range of tools to support the U.S. economy in this challenging time.”
Dow Jones could still plough new lows
Despite the broad optimism on Wall Street, the stock market isn’t out of the woods yet. Market researcher James Bianco believes new lows still lie in wait .
At a minimum, I do think we will still revisit the 2200 S&P 500 low, if not make a lower low.
Bianco said the retracement could come in late summer or early fall. He said the relief rally looks too similar to historic bear market rallies, which later plunged new lows.
The market will face another test today because the Thursday economic data dump forced investors to digest more bad news. Initial jobless claims came in at 3.84 million, somewhat higher than the 3.5 million forecasters expected.
Over the past six weeks, more than 30 million Americans have officially filed for unemployment. But the real number of workers who have lost their jobs is likely even higher.
