After rallying sharply in the overnight futures session, stocks and index ETFs opened higher Wednesday, boosted by optimistic vaccine news from Moderna. But that enthusiasm is quickly waning it seems.
The Dow Jones Industrial Average traded 0.6% higher, while the S&P 500 added 0.55%. The Nasdaq Composite which is still struggling since its dramatic reversal on Monday, fell 0.3% as big tech stocks like Amazon, Netflix, and Alphabet all slipped at least 1%. Having tested Monday’s highs, a key technical area on charts, all three indexes have quickly given up gains, however, and are trading negative on the day as of noon EST.
Stock index ETFs are also trading negative after opening green along with their underlying benchmarks. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), are slightly negative in early afternoon trade Wednesday, while the Invesco QQQ Trust (QQQ) is deep in the red.
Moderna’s stock spiked more than 12% in after-hours trading on Tuesday, in a move reminiscent of what happened in May, before the stock and broader market gave back gains quickly when it was decided more data was needed.
“A COVID-19 cure/vaccine is a binary event for markets, and there are many ‘shots on goal’ on the healthcare side and only one needs to be successful,” said Tom Lee, founder and head of research at Fundstrat Global Advisors, in a note. “There are piles of cash seen in hedge funds, macro funds, mutual funds, and individual investors. If the cadence of healthcare data continues to support some sort of cure, the focus on ‘re-closings’ ultimately fades.”
The U.S. is aiming to deliver 300 million doses of a coronavirus vaccine by early 2021, and companies like Johnson and Johnson are in the competition as well. However, Dr. Anthony Fauci, the nation’s top infectious disease expert, has often lauded Moderna’s potential vaccine.
On Monday, he said he’s “cautiously optimistic” scientists will be able to generate at least one safe and efficacious vaccine by the end of the year or early 2021.
For now, investors will need to assess whether that optimism is warranted.
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