Wall Street partially followed world equity indexes to record levels on Monday; gold plunged, oil jumped and US Treasury yields surged as a promising development in a coronavirus vaccine saw investors charge into risk on investments.
At the same time, investors were encouraged by the final declaration of victory at the weekend for President-elect Joe Biden.
The 10-year Treasury shot up from 0.81% before the announcement to 0.95%, an enormous move for the bond market, and one that shows a surge in confidence in the economy as we head off into 2021. The yield settled around 0.939% just before 8 am Sydney time.
Wall Street’s main indexes hit early record highs on Monday as the first successful data from a late-stage COVID-19 vaccine trial spurred hopes of the economy recovering quickly from a year of pandemic-driven crisis.
But don’t be surprised if the markets slow during Tuesday and back on Wall Street tonight because there was a definite slide in the afternoon session and the weakness in the Nasdaq could spark more selling.
Monday’s gains were concentrated in stocks in the Dow and the S&P 500 – the Nasdaq, the powerhouse for most of this year’s gains – especially from the depths of the sell-off in late March – saw the gains die and it ended the session deeply in the red and down more than 1.5%.
It’s a powerful sign that the Nasdaq and its stocks were the biggest beneficiaries of the lockdowns and pandemic forcing people to social distance and stay at home and go online to work and consume.
So don’t be surprised if the Nasdaq weakness develops into a sell-off in tech stocks (the so-called FANGs), despite the apparent good news from Pfizer and Biden’s election.
The Wall Street reaction Monday looks like the start of a major re-rating on markets back to the value shares and away from the growth, pandemic favorites like Netflix, Apple, Amazon and here in Australia, Kogan, Temple & Webster and a host of other stocks who have boosted their online performance this year (Woolies, Coles, Adairs, Premier Investments, Kathmandu and more).
The Pfizer news and Wall Street’s selective surge will see the Aussie market open strongly today – up 2.7% if the 170 point gain on the overnight futures market is any guide off the back of the surges in the Dow and the S&P 500 but not the Nasdaq.
Wall Street’s gains were concentrated in stocks that were seen as losers under COVID- transport, energy, tourism, cruising shares all surged, while the winners under the lockdown – so-called stay at home shares – fell sharply, restricting the gains by Nasdaq-listed stocks to the point where it ended down 0.2% and a long way from the glamour days of huge rises and endless records in the US summer and early fall.
Reuters said so-called value stocks boosted all three major US stock indexes to all-time highs and crude prices jumped more than 10%.
Pfizer shares closed the session up nearly 9%.
Don’t be surprised to see this re-rating of the potential of listed stocks change quickly around the world in the wake of the Pfizer news.
The indexes subsequently trimmed their gains and saw Nasdaq ease to a ‘red’ end to the day.
The Dow was up close to 1.300 points at one stage but ended with a gain of 834 point, or 2.95% at 29,157. The S&P 500 was up close to 100 points but ended with a gain of 41 points or 1.17% at 3,550 points.
But the Nasdaq after an initial gain, eased over the rest of the session to end the day down 181 points or 1.5% at 11,713.
Earlier the benchmark Stoxx Europe 600 index surged 4%, its biggest one-day gain since late March, while the FTSE 100 in Britain rose 4.7% and the Dax in Germany was up nearly 5% and CAC in France surged by more than 7% (France is suffering from a very hard second wave of virus infections at the moment).
In Asia markets saw smaller gains, having closed before Pfizer announced its news. The Nikkei 225 in Japan was up 2.1%, and the Hang Seng Index in Hong Kong finished added 1.2%, Shanghai was up 1.8% and the ASX 200 was little changed after Friday’s big rise.
But the ASX futures platform saw a jump – – 183 points at one stage just after 7.30 am, pointing to an opening surge of close to 3%. But that slowed and eased to a gain of just 170 points or 2.7%.
The companies hit hardest by months of travel bans and lockdowns soared. Boeing Co shares were up 14% at one stage, airline and cruise company shares soared by between 14% and 35%.
Pfizer and BioNTech said they had found no serious safety concerns so far and expected to seek US emergency use approval (from the Food and Drug Administration) later this month.
The study also has to be published and peer-reviewed to check on the claims by the two companies.
