U.S. markets and stock exchange traded funds strengthened Monday, with cyclicals and more economically sensitive sectors leading the charge, after promising results from the latest coronavirus vaccine candidate helped fuel optimism over a gradual economic recovery.
On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) rose 0.8%, the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was up 0.2%, and the iShares Core S&P 500 ETF (NYSEArca: IVV) gained 0.5%.
The University of Oxford and AstraZeneca said their vaccine was as much as 90% effective in preventing infections and showed no serious side effects, the Wall Street Journal reports. The promising results helped allay fears from a spike in coronavirus cases, as investors hope the vaccine will bring Covid-19 under control and allow beaten down segments of the economy to recover.
“When you look into the details, it looks like very good news,” Paul O’Connor, head of multi asset at Janus Henderson Investors, told the WSJ. “There’s a growing prospect of a significant normalization of economic activity in the second half of next year.”
Vaccine Optimism, COVID Concern
Compared to the treatment from Pfizer and Moderna, AstraZeneca’s vaccine can be stored at temperatures above zero degrees Celsius, which may potentially provide easier distribution.
Meanwhile, Pfizer and partner BioNTech are asking the U.S. Food and Drug Administration to clear the companies’ Covid-19 vaccine and pushing for distribution as early as mid-December.
“The vaccine is the driving factor in terms of the general optimism,” Scott Brown, chief economist at Raymond James, told Reuters. “(But) you are going to get a little bit of back and forth as this is a holiday week and typically we are going to get lot more volatility.”
On the economic front, U.S. business activity accelerated in November to a five-year high despite the spike in coronavirus infections and higher restrictions that threatens a slowdown in the economy. IHS Markit data revealed both manufacturing and services activity remained in expansion territory. However, analysts warn that the rising cases and shutdown measures could slow growth in the short-term.
“You’ve got Covid cases rising at an alarming rate in the U.S. and Europe, and restrictions that look like they’ll be harsher than what we thought a month ago,” Christopher Smart, chief global strategist at Barings, told the WSJ.
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