NEW YORK: The S&P 500 and the Dow rallied sharply but closed shy of their records on Monday (Nov 9) as investors bet that a full economic reopening was finally in sight following the first positive data from a late-stage COVID-19 vaccine trial.
US crude oil rose more than 8 per cent and pushed up energy stocks while safe-haven US Treasuries sold off after US drugmaker Pfizer and its German partner BioNTech said a large-scale trial of their vaccine showed it was more than 90 per cent effective in preventing COVID-19.
Investors said they were also reassured by Saturday's news that Joe Biden had garnered enough votes to win the US presidential election as they had priced in this news last week.
"Election uncertainty is fading into the rearview mirror. Now we have this boost of investor enthusiasm after the vaccine news," said to Michael Antonelli, market strategist at Baird in Milwaukee. "All the types of companies that would benefit from us returning to a pre-COVID world are the big winners today."
Sectors such as energy, travel and financials which were among the hardest hit by lockdowns aimed at curbing the virus were some of the biggest percentage gainers on Monday.
While their vaccine study is still ongoing and requires approval, Pfizer and BioNTech said they had found no serious safety concerns so far and expected to seek US emergency use authorisation later this month.
"It's not that we're out of the woods with COVID. It's that the vaccine starts to remove the worst case scenario that we surge out of control and go back into a national lockdown," said Antonelli. "The market's looking into the future, to the first and second quarter of next year."
However the S&P pared some gains late in the session. US Senate Majority Leader Mitch McConnell on Monday said President Donald Trump was completely within his rights to look into "irregularities" from last week's election.
Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago, pinned the late session fading on "profit-taking" after the morning rally.
The Dow Jones Industrial Average rose 834.57 points, or 2.95 per cent, to 29,157.97 in its biggest one-day percentage gain since Jun 5. The S&P 500 rose 41.06 points, or 1.17 per cent, to 3,550.5 and the Nasdaq Composite dropped 181.45 points, or 1.53 per cent, to 11,713.78.
With a 14 per cent advance the S&P energy index led gainers among the S&P 500's 11 major sectors and registered its biggest daily percentage gain since March as investors bet demand would climb again when people become more comfortable with the idea of travelling as the health crisis subsides.
Also, bank shares, often seen as a proxy for the broader economy, soared 13 per cent in their biggest one-day advance since late March to hit their highest level since June.
The companies hit hardest by months of travel bans and lockdowns surged. The NYSE airlines index closed up 19.4 per cent while planemaker Boeing jumped 13.7 per cent. Cruise line operator Carnival Corp finished up more than 39 per cent.
In contrast, the consumer discretionary sector was the S&P's biggest sector decliner with a 1.6 per cent loss while the technology sector ended the day 0.7 per cent lower, pushing the Nasdaq lower for the session.
Companies that had outperformed during the pandemic as they were seen as "stay-at-home" winners fell sharply.
Netflix Inc fell 8.5 per cent and Amazon.com Inc declined 5 per cent while Zoom Video tumbled 17.3 per cent and exercise bike maker Peloton Interactive plunged 20.3 per cent to limit the Nasdaq's advance.
"Stocks like tech are being served up as a form of proceeds to fund the purchase of pro-cyclical stocks that would stand to benefit from the economic reopening that could be accelerated by way of a vaccine," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
Stocks around the world had already been gaining ground before the vaccine data pushed equities even higher as expectations of better global trade ties and more monetary stimulus under US President-elect Biden was already lifting demand for risky assets.
Pfizer shares closed up 7.7 per cent after soaring as much as 15.4 per cent during the session. But another drugmaker Biogen Inc slumped 28.2 per cent as a panel of experts to the US health regulator voted against the drugmaker's experimental Alzheimer's treatment.
On US exchanges 17.2 million shares changed hands in the market's busiest trading session since June and compared with the 9.68 billion average for the last 20 sessions.
Advancing issues outnumbered declining ones on the NYSE by a 3.22-to-1 ratio; on Nasdaq, a 1.96-to-1 ratio favored advancers.
The S&P 500 posted 140 new 52-week highs and 1 new low; the Nasdaq Composite recorded 246 new highs and 25 new lows.