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Vaccine Optimism Sparks Overnight S&P 500 Rally – But There’s a Catch

Last Updated September 23, 2020 2:31 PM
Joseph Young
Last Updated September 23, 2020 2:31 PM
  • The U.S. stock market is climbing in pre-market trading after Pfizer CEO Albert Bourla says vaccines would likely be ready by 2021’s end.
  • Stocks still face a medium-term risk as Anthony Fauci says the baseline number of cases across many states remains high.
  • As some states begin increasing their testing capacity and the U.S. approaches winter, Fauci warned of a “more precarious position.”

The S&P 500 rally has been rallying overnight in pre-market trading as vaccine optimism continuously fuels investor confidence. But Anthony Fauci has a warning about “disturbing” data across many states. 

Fauci, the National Institute of Allergy and Infectious Diseases director, said on September 11 that he finds the statistics concerning.

Data from CNBC has shown that COVID-19 cases are still growing by 5% on a weekly average.  

stock market
The performance of the S&P 500 index in the past month. | Source: Yahoo Finance 

While the positivity around vaccines is buoying the S&P 500 sentiment, rising cases remain a near-term threat to stocks.

Pfizer CEO Predicts Vaccines by Year-End and S&P 500 is Reacting

At the peak of after-hours trading on September 14, the S&P 500 rose by over 40 points . The Dow Jones surged by more than 300 points, indicating a highly-anticipated market open.

The market upsurge followed the comments of Pfizer CEO Albert Bourla. He said he is “quite comfortable” with the prospect of distributing vaccines by the year’s end. Bourla noted :

“I cannot say what the FDA will do. But I think it’s a likely scenario, and we are preparing for it.”

The confidence of investors about the trajectory of vaccine distribution remains undeniably optimistic. But the S&P 500 faces risks of an economic slump in the longer term from a high baseline of cases. 

Speaking to MSNBC, Fauci said last week that the U.S. cases are plateauing at 40,000 cases. That statistic is “disturbing,” he said:

“I’m sorry, but I have to disagree with that because if you look at the thing that you just mentioned, the statistics, Andrea, they’re disturbing. We’re plateauing at around 40,000 cases a day and the deaths are around 1,000.”

Researchers at CNBC found that 11 states now have a weekly average growth of 5% in cases. The states are Alaska, Arkansas, Connecticut, Delaware, Maine, Nebraska, New Hampshire, New Jersey, Rhode Island, Wisconsin, and Wyoming.

Anthony Fauci says he disagrees with President Donald Trump on the COVID-19 trend reversal.

Heading into the Presidential election, the S&P 500 could continue to surge after a major pullback.

As CCN.com reported, top investment banks, including Goldman Sachs and Deutsche Bank, predict an end to the market correction.

The high average weekly cases in the U.S. don’t pose an immediate threat to the ongoing S&P 500 recovery. However, it could hinder the momentum of equities in the medium term if new cases fail to decline substantially.

Why is Fauci So Concerned?

Fauci’s biggest concern  is that there are certain states in the U.S. with a relatively low testing capacity. When the states begin testing more actively, it could record more infections.

The ten highest-infected countries by COVID-19. | Source: Worldometers.info 

A high “baseline of infections that are 40,000 per day” could cause infections to soar again if testing further increases. Fauci explained:

“You have threats of increased test positivity in certain regions of the country, such as the Dakotas and Montana and places like that… You don’t want to start off already with a baseline that’s so high,” he said.

When vaccines are distributed across the U.S. by the year’s end, it could offset the fear surrounding high daily cases.

But if there are delays with the vaccines, it could put the U.S. in a more difficult position. Health officials, including Fauci, believe colder weather by the end of 2020 could put the U.S. in a “more precarious situation.” 

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the securities mentioned.