A “triple whammy” of good news—led by promising results from a coronavirus vaccine trial—buoyed investors Monday, powering Wall Street to strong across-the-board gains.
The Dow Jones industrial average surged nearly 700 points at the opening bell, then kept going, after Moderna announced that an early-stage human trial for its coronavirus vaccine successfully produced COVID-19 antibodies in participants. The biotech company said a large clinical trial to determine the treatment’s effectiveness would follow in July. Moderna’s shares soared more than 19%.
At Monday’s close, the blue chip index’s lead swelled 911 points, or 3.9%, to 24,597.37. The broader Standard & Poor’s 500 index soared 3.2%, to 2,953.91, while the tech-heavy Nasdaq composite advanced 2.4%, to 9,234.83.
Investors also found comfort in comments made by Federal Reserve Chair Jerome Powell during a “60 Minutes” interview broadcast Sunday. He said the central bank is “not out of ammunition by a long shot” in its resources to support the economic recovery, even while he cautioned that it could stretch late into 2021. The comment come as most states have begun to ease restrictions on businesses and social activity after weeks of stay-home orders affecting about 315 million Americans.
David Rosenberg, chief economist of Rosenberg Research, said investors were being rewarded with a “triple whammy of good news” after two weeks of market volatility marked by dramatic intraday swings as bad news piled up, interspersed by notes of optimism on the medical-research front, rising consumer sentiment and rumblings from business.
“For one, there is palpable relief that the majority of the states are reopening their economies, including 75% of California,” Rosenberg said in an email to The Washington Post. “Second, there is growing hope that a vaccine is coming our way sooner, rather than later. Lastly, Fed Chairman Jay Powell told investors over the weekend that the central bank’s checkbook remains wide open, strongly hinting that more monetary policy stimulus is on its way.”
Last week, fresh economic data revealed the pandemic’s mounting economic toll: The U.S. Labor Department on Thursday reported weekly jobless claims of 3 million, bringing the two-month total to more than 36 million unemployed people. April retail sales plummeted 16.4%, a drop that was worse than analysts had predicted as lockdowns kept consumers at home.
The darkening retail picture prompted some economists to issue even graver predictions for second-quarter gross domestic product, given that consumer spending accounts for 70% of U.S. economic growth. The economy shrank 4.8% in the first quarter—the biggest decline since the Great Recession—and some analysts believe the April to June period could see a contraction as high as 40%.
“The economic collapse has taken a dangerous turn where now it is consumer prices that are being pulled down into the abyss as consumers sitting at home have postponed their purchases,” Chris Rupkey, chief financial economist and MUFG Union Bank wrote in commentary. “The danger is that consumers will see that prices are falling and actually stop buying goods and services to wait for even cheaper prices and a better deal which will only serve to prolong the recession and reinforce the economy’s downward spiral into the unknown.”
That put investors in a selling frame of mind, with the Dow ending the week 2.6% lower. The S&P 500 fell 2.2%, and the Nasdaq shed 1.2% over the five-day run.
But Monday’s news led investors to leave safe havens for riskier ground. The yield on the 10-year U.S. Treasury note ticked upward, to 0.665% in early trading. Bond yields rise as prices drop.
Crude prices continue to recover, adding to the positive sentiment, as the easing of restrictions around the world also reined in fears of an oil glut. West Texas intermediate crude, the U.S. oil benchmark, jumped 7.8%, to $31.83 a barrel. Brent crude, the global oil benchmark, was trading up 7.7%, at $35 per barrel.
“The supply cuts of the last month combined with gradual reopening of various countries around the world has put a significant dent in the supply/demand imbalance and alleviated capacity concerns that led to last months panic,” Craig Erlam, an analyst with OANDA, wrote in commentary Monday.