Wall Street was poised to open higher on Tuesday, with stock futures indicating a willingness by investors to extend a rally based on expectations that the deployment of a COVID-19 vaccine was imminent.
Encouraging developments in the fight against the coronavirus have put major benchmarks within view of recent record highs, and The Dow Jones Industrial Average is now within striking distance of the psychologically-charged 30,000 level, which would be a fresh record.
Investors also cheered news that President-elect Joe Biden was poised to nominate former Federal Reserve Chair Janet Yellen — who is well regarded by Wall Street — as Treasury Secretary. Markets also ticked higher on news that the Trump administration would formally begin the transition process, in spite of President Donald Trump’s faltering effort to challenge the vote in key swing states.
Although a relentless wave of new COVID-19 infections has crashed down on the global economy — driving up hospitalizations and deaths in its wake — major drugmakers have indicated that an inoculation is right around the corner.
On Monday, University of Oxford and AstraZeneca (AZN) revealed that their candidate demonstrated efficacy of 70.4% in two large-scale trails, If a lower dose is used, then a second, full dose, the efficacy is up to 90%, the company said.
However, AstraZeneca’s stock tumbled after one Wall Street analyst sharply questioned the efficacy of the inoculation, and raised questions about whether it would receive U.S. regulatory approval. Meanwhile, the U.S. plans to begin rolling out an antibody cocktail created by Regeneron (RAIN) as early as Tuesday
“Risk bulls could be excused for being slightly disappointed with the reaction so far to the very positive Astra-Zeneca news on the vaccine,” wrote Alan Ruskin, macro strategist at Deutsche Bank, in a research note on Monday.
In the immediate term, Ruskin said that some market bets are “starting to struggle. However, if the vaccines fulfill their promise, their impact would dominate the real economic landscape for the next 18 months at least,” he added. A fully inoculated public would be beneficial to beaten-down industries like travel, leisure and entertainment — all of which have been devastated by COVID-19 social distancing protocols.
The AstraZeneca news came on the heels of Pfizer (PFE) and BioNTech (BNTX) announcing plans to file for an emergency use authorization with the U.S. Food and Drug Administration, which would allow them to have their vaccine used in the U.S. starting in December.
Expectations for a relatively quick vaccine rollout have prospects for 2021 growth, while leading investors to unwind technology-heavy “stay at home” bets that previously bolstered key stocks like Netflix (NFLX), Amazon (AMZN), Zoom (ZOOM) and other names. Both the Dow (^ DJI) and S&P 500 (^ GSPC) notched record closing highs last week, as traders rode a wave of exuberance sparked by the vaccine news.
Also helping sentiment were manufacturing data that outpaced market expectations. U.S. business activity expanded at the fastest rate in more than five years this month. The survey was the latest indication the economy continues to extricate itself from the COVID-19 recession, even with new infections soaring.
However, the near term outlook remains clouded by the relentless scourge of more COVID-19 infections, and the inability of Washington’s warring parties to agree on stimulus. The current wave of the virus is swamping the darkest days of March and April, threatening to overshadow the holidays and drag on growth.
“This winter will be grim, and we believe the economy will contract again in 1Q, albeit at ‘only’ a 1.0% annualized rate,” JPMorgan Chase’s economics team wrote in a lengthy research note last week.
“The economy no longer has that tailwind; instead it now faces the headwind of increasing restrictions on activity. The holiday season—from Thanksgiving through New Year’s—threatens a further increase in cases,” the bank said.
7:20 a.m. ET Tuesday: Stock futures rip higher, point to rally at the open
Here were the main moves in equity markets, as of 7:20 a.m. ET Tuesday:
S&P 500 futures (ES = F): 3,601.50, +25.50 (+0.71%)
Dow futures (YM=F): 29,833.00, +287.00 (+0.97%)
Nasdaq futures (NQ = F): 11,942.75, +37.50 (+0.31%)
6:30 p.m. ET Monday: Stock futures add to gains
Here were the main moves in equity markets, as of 6:30 p.m. ET Monday:
S&P 500 futures (ES = F): 3594.50, +18.50
Dow futures (YM=F): 29717, +171
Nasdaq futures (NQ = F): 11953.50, +48.25