Dow rallies 1,100 points, hits record as Pfizer says Covid-19 vaccine is more than 90% effective

Stocks rallied to record levels on Monday as investors cheered trial data from drugmakers Pfizer and BioNTech indicating their Covid-19 vaccine is more than 90% effective.

The Dow Jones Industrial Average traded 1,317 points higher, or 3.9% and hit an all-time high. At its session high, the 30-stock average was up nearly 5.7%, or more than 1,600 points.

The S&P 500 also reached a record, popping 2.7%. The small-cap Russell 2000 index gained 5.3%. The Nasdaq Composite was the relative underperformer, trading 0.8% higher.

The announcement was seen on Wall Street as a sign that the pharmaceutical industry may soon have a viable way to control a disease that has derailed the U.S. economy for much of 2020 and has killed more than 230,000 Americans.

The 90% effective rate from Pfizer and Germany’s BioNTech was better than what the market was expecting. Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, has said that a vaccine that was 50% to 60% effective would be acceptable.

“Amazing news from Pfizer with 90% efficacy. This hopefully is the beginning of the end of our fight against Covid,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in an email.

“As I’ve been saying on the hopes of this, we need to shift our attention to those parts of the market that have been the most hammered because of Covid and away from the work from home stocks that have had such an incredible year because Covid is not forever,” he added.

Travel, restaurant and hospitality companies that saw their equities swoon in the spring as Covid surged saw some of the strongest rallies on Monday following Pfizer’s announcement. On Monday, however, these names ripped higher.

“I think that the rally is justifiable. I think we’re going to start a new discussion, and the discussion is what’s America going to look like post Covid,” said CNBC’s “Mad Money” host Jim Cramer. “If you think about where we were last week, where we felt that there was very little chance to be able to stop this thing, now suddenly we have hope.”

Shares of cruise-operator Carnival Corp. rocketed higher by 39%, Southwest Airlines jumped 22% and the Walt Disney Company popped 14% as investors bet a vaccine may allow more vacationers to attend its many amusement parks.

Bank stocks also rallied. JPMorgan Chase, Bank of America and Citigroup all rose more than 10%. Wells Fargo traded nearly 13% higher.

The so-called stay-at-home trade struggled. Zoom Video traded 17% lower and Amazon slid 5.2%. Netflix dipped 8.3%. Teladoc Health dropped 12.3%.

“From an investment perspective, the most important implication of the news on the vaccine is you might finally see the rotation into value and small caps, it’s happening today but it might actually have some legs,” said Ed Keon of QMA.

Monday also marked the first trading day after NBC News projected that former Vice President Joe Biden won the 2020 presidential election against incumbent President Donald Trump. The call came four days after Election Day and amid close counts in several battleground states.

Wall Street hoped the victory for Biden would reduce the odds of a drawn-out election fight, even as Trump refused to concede. Many traders had put on bets for market volatility in November and were unwinding those positions, helping fuel a rally.

Democrats are projected to keep their House majority, although Wall Street was watching closely as Senate control is still in limbo. Both of Georgia’s Senate races are likely going to runoffs slated for early January.

Wall Street rallied last week in anticipation for such a gridlocked government and was set to build on that rally as it gained clarity in the presidential race.

All three major averages just notched their best weekly performance since April. The S&P 500 and Nasdaq jumped 7.3% and 9%, respectively, last week, while the Dow rose 6.9%. The S&P 500 also posted its biggest election week gain since 1932.

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—CNBC’s Patti Domm and Tom Franck contributed to this report.