Dow jumps 400 points, heads for a record close on hope effective vaccines will fuel economic rebound

U.S. stocks jumped on Monday after Moderna said preliminary trial data showed its coronavirus vaccine was more than 94% effective.

The promising announcement makes the Massachusetts-based biotech firm the second drugmaker to say it has a potentially effective vaccine. Moderna shares rallied nearly 11% on the day.

Similar trial results last week from Pfizer and BioNTech drove investors into underperforming names dependent on a vaccine reopening the economy. The companies said at the time that their candidate was more than 90% effective in preventing Covid-19 among participants.

The Dow Jones Industrial Average added 350 points, or 1.2%, at the opening bell and was on pace to notch a record close. The S&P 500 rose 0.6% and the Nasdaq Composite slipped less than 0.1%.

Stocks that would benefit from the economy reopening led the way higher. United Airlines was up 4%, and Carnival traded 8.4% higher.

Last week, the Dow climbed 4% for its second-straight positive week. The S&P 500 posted a record closing high on Friday and notched a one-week gain of 2.2%. The Nasdaq Composite lagged, however, sliding 0.6%.

Those moves came as traders piled into beaten-down value names at the expense of high-flying growth stocks amid positive vaccine news. The iShares Russell 1000 Value exchange-traded fund (IWD) rallied 5.7% last week while its growth counterpart, the iShares Russell 1000 Growth ETF (IWF) slid 1.2%.

The news sparked hope for an economic recovery, thus making travel stocks such as United Airlines and Carnival more attractive. United and Carnival rallied 12.4% and 15.9%, respectively, last week.

“The announcement of an effective Covid-19 vaccine by Pfizer/BioNTech last week was so important that we almost forget that there has just been a U.S. presidential election,” TS Lombard analysts Steven Blitz and Andrea Cicione wrote in a note.

“The vaccine turns what could have been a prolonged crisis into something closer to a natural disaster (large shock, swift recovery),” they said. “Without an effective vaccine, current EPS consensus expectations (pointing to a return to trend by the end of next year) would be on the optimistic side. But with one, they may actually come to pass.”

Traders were also excited after Moderna said its vaccine remains stable at 36 to 46 degrees Fahrenheit, the temperature of a standard home or medical refrigerator, for up to 30 days. It can be stored for up to six months at negative 4 degrees Fahrenheit.

By comparison, Pfizer’s vaccine requires a storage temperature of minus 94 degrees Fahrenheit.

To be sure, the number of coronavirus cases are still rising, thus threatening the prospects of a swift economic recovery.

More than 11 million Covid-19 infections have been confirmed in the U.S., according to data from Johns Hopkins University. Data from the COVID Tracking Project also showed that a record of more than 68,500 people in the U.S. are hospitalized with the coronavirus.

Dan Russo, chief market strategist at Chaikin Analytics, thinks the market can weather this latest spike in coronavirus cases, however.

“It seems that investors are more focused on vaccine news and are willing to look past the near-term spike in cases,” he said in a post. “If this becomes a cause for concern for investors, it will become apparent on the charts and risk management will take over.”

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