After attempting to tread water throughout the day, and hold gains made on Monday, stocks plummeted into the close, after reports circulated that drugmaker Moderna Inc.’s vaccine study, which was considered a key factor in Monday’s rally, didn’t generate enough critical data to determine its validity.
While the S&P 500 and Nasdaq Composite had vacillated throughout the day, both benchmarks turned red in the last hour of trading, while the Dow Jones Industrial Average extended its existing losses.
Stock Index ETFs, which were green Monday as well, tracked moves in the benchmark stock indexes, as the SPDR S&P 500 ETF Trust (SPY), the SPDR Dow Jones Industrial Average ETF (DIA), and the Invesco QQQ Trust (QQQ), all sank into the close Tuesday.
U.S. stocks soared higher on Monday, moving into positive territory for May, following news that Moderna released positive, preliminary results from its first human trial of its experimental Covid-19 vaccine, generating optimism that the medical community was taking steps to beat the coronavirus.
Shares of the biotech company surged over 25% after it released positive results from preliminary human tests of its vaccine candidate for the coronavirus. According to the company, the vaccine generated Covid-19 antibodies in all 45 participants.
However, all that changed on Tuesday, as the stock gave back most of its gains, losing over 10%, as information that the report of neutralizing antibodies in subjects who were vaccinated comes from blood drawn two weeks after they received their second dose of vaccine, a very short time to establish meaningful outcomes.
“That’s very early. We don’t know if those antibodies are durable,” said Anna Durbin, a vaccine researcher at Johns Hopkins University.
Analysts have been cautious about this market rally, as it seems very susceptible to any news related to the coronavirus, and results in continued volatility, as markets struggle to break through technical chart levels as well.
“A vaccine would be a bullish game-changer, and stocks reacted accordingly,” Tom Essaye, author of “The Sevens Report” newsletter, wrote in a note. “But one day doesn’t make a sustainable move.”
“We’re going to continue to see volatility because every day the market’s taking any little piece of information it has about things and prices it in,” said Peter Mallouk, president and chief investment officer of Creative Planning. “Every day it’s taking every little piece of information and it’s instantly pricing it in. Everything else is a derivative of Covid-19 now.”
The Congressional Budget Office released its own weak outlook Tuesday for economic growth, unemployment, and the federal budget, forecasting some job gains later this year but suggesting that the overall climate that will remain tepid through 2021.
In its latest projections, the CBO sees GDP plummeting 38% on an annualized basis in the second quarter with the addition of 26 million unemployed Americans than there were at the end of 2019.
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