Traders on the floor of the New York Stock Exchange, August 11, 2021.
Stocks were higher Monday following a volatile week on Wall Street, led by reopening stocks as the Food and Drug Administration approved its first Covid-19 vaccine.
The Dow Jones Industrial Average gained 261 points, or 0.75%. The S&P 500 and Nasdaq Composite rose 1% and 1.6%, respectively, to all-time highs.
The major averages are coming off a losing week as investors grew worried that the Fed’s potential move to pull back monetary stimulus could slow down the economic recovery that is already challenged by the spread of the delta Covid-19 variant.
“Markets may take a breather after their recent run, but strong Q2 results have provided a fundamental justification and reinforced our confidence in the sustainability of the recovery,” according to Barclays.
Shares of vaccine makers traded higher Monday after the FDA granted full approval for the two-dose Pfizer-BioNTech vaccine for Covid-19. Pfizer shares rose 2.9%. Its partner BioNTech‘s stock jumped 9% and Moderna is 6% higher. Trillium Therapeutics is soaring on news that it’ll be acquired by Pfizer. Its shares are up 189%.
Travel and leisure stocks reacted positively to the news, with Delta and American Airlines moving more than 2% higher. Carnival and Norwegian Cruise Lines gained about 4%.
The immediate impact of the FDA approval of the Pfizer vaccine on efforts to combat the virus could be muted until the U.S. population reaches herd immunity, which “will be a while,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
However, “to the extent that the general public becomes more comfortable living with the virus, the economy is likely to continue on its upward trajectory,” he said. “The economic recovery is what is driving corporate earnings and the stock market to all-time highs, and we expect that to continue through 2021 and into 2022.
Consumer discretionary and retail companies are most likely to benefit from the news, Zaccarelli said, while utilities and consumer staples are likely to underperform, as the market moves higher on increased reopening hopes.
Energy stocks are leading the S&P 500 as oil prices jumped Monday and snapped its longest losing streak since 2019. Diamondback Energy, Occidental Petroleum and Devon Energy gained 6%.
As reopening trades resurface, traders are eagerly awaiting the Jackson Hole symposium for clues on the Fed’s timeline for dialing back its $120 billion a month bond-buying program. The event, originally scheduled as an in-person gathering, will now take place virtually on Thursday and Friday for the second year in a row.
“Given the recent deterioration in incoming data and the pandemic situation, we see some risk Powell focuses on increased uncertainty due to the latest COVID-19 surge,” Nomura economist Aichi Amemiya said in a note. “At a minimum, we view recent comments from Fed officials as supporting our view of a December tapering announcement despite a preference on the FOMC for November as of the July meeting.”
The blue-chip Dow fell 1.1% last week, while the S&P 500 declined nearly 0.6%, breaking a two-week winning streak. The tech-heavy Nasdaq dipped 0.7% during the week.
“We suspect investor conviction is being challenged by the potential for upcoming monetary policy changes, shifting growth vs. value rotations, and a rising trajectory of new coronavirus cases,” Craig Johnson, technical market strategist at Piper Sandler, said in a note.
For the month of August, major benchmarks are poised to post modest gains. The S&P 500 is up 1.1% month to date, while the blue-chip Dow has gained 0.5% and the Nasdaq has climbed 0.3%.
“August is a historically volatile month for markets and this year is no different, with investors currently climbing multiple walls of worries,” said Rod von Lipsey, managing director at UBS Private Wealth Management. “Upticks in Covid-19 cases and a downward spiral in Afghanistan are creating a crisis of confidence, at a time when many investors are on holiday.”