Stock indexes and index ETFs underwent a historic surge Monday as investors sent stocks to record levels with major presidential and coronavirus vaccine headlines.
Investors were elated over trial data from drugmakers Pfizer and BioNTech showing that their coronavirus vaccine is over 90% effective, and results in protection within 28 days of vaccination.
Stock futures rocketed overnights and continued into Monday’s trade with the Dow Jones Industrial Average gaining nearly 1,300 points higher, or 4.6%, notching a fresh all-time high. At one point the benchmark index had climbed nearly 5.7%, or over 1,600 points.
The vaccine news was cheered by Wall Street as an indication that the pharmaceutical industry may soon have an efficacious method of controlling an infection that has wreaked havoc globally and killed over 230,000 Americans.
The 90% effective rate touted by Pfizer and Germany’s BioNTech was a massive improvement over the anticipated levels of effectiveness. Dr. Anthony Fauci, the Director of the National Institute of Allergy and Infectious Diseases, has stated that a vaccine with just a 50% to 60% effective would be acceptable.
The news helped lift the Direxion Daily S&P Biotech Bull 3X ETF (NYSEArca: LABU), which surged 3.5% on Monday.
“Amazing news from Pfizer with 90% efficacy. This hopefully is the beginning of the end of our fight against Covid,” Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group, wrote in an email.
“As I’ve been saying on the hopes of this, we need to shift our attention to those parts of the market that have been the most hammered because of Covid and away from the work from home stocks that have had such an incredible year because Covid is not forever,” he added.
A Post-Covid America Finally in Sight?
“I think that the rally is justifiable. I think we’re going to start a new discussion, and the discussion is what’s America going to look like post Covid,” said CNBC’s “Mad Money” host Jim Cramer. “If you think about where we were last week, where we felt that there was very little chance to be able to stop this thing, now suddenly we have hope.”
Some analysts are now projecting a rotation into small cap and value stocks, given the vaccine news. This could be a driver for ETFs like the iShares Russell 1000 Value ETF (IWD), which rocketed over 5.48% Monday.
“From an investment perspective, the most important implication of the news on the vaccine is you might finally see the rotation into value and small caps, it’s happening today but it might actually have some legs,” said Ed Keon of QMA.
Monday was also the first trading day after NBC News projected that former Vice President Joe Biden won the 2020 presidential election, beating out incumbent President Trump, after a contentious four-day battle for swing states.
While President Trump has still refused to concede, a plethora of traders had placed bets on increasing market volatility in November and were unwinding those positions, which could also be driving the rally.
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