Dow, S&P 500 Set For Record Highs on Historic Pfizer Vaccine Update, Biden Win Projection

Wall Street will extend its best post-election week since 1932 Monday after Pfizer dropped news of a 90% efficacy rate in late-stage trials of its experimental coronavirus vaccine.

The Monday Market Minute

  • Global stocks hit an all-time high as markets continue to rally following informal declarations of a Presidential victory for Joe Biden.
  • Pfizer says its developing coronavirus vaccine hit a 90% efficacy rate in late-stage trials, a much stronger-than-expected result in the race for a workable treatment.
  • World leaders reach out to congratulate Biden after all major U.S. TV networks project the former Vice President will win the 2020 election once results are officially certified.
  • Incumbent President Donald Trump vows to challenge those results while repeating his unsubstantiated claims of voter fraud.
  • The U.S. dollar gains ground in overnight trade but remains within a whisker of a ten-week low as investors bet on Federal Reserve stimulus in absence of a deal from the current lame-duck Congress.
  • U.S. COVID infections top 10 million, with new cases rising by 120,000 per day, as the third wave of the pandemic accelerates in major economies around the world. 
  • The S&P 500 is set to open at an all-time high, while the Dow is poised for its fourth-largest point gain on record as it approaches 30,000. 

U.S. equity futures rocketed higher Monday after Pfizer Inc.  (PFE) - Get Report said its developing coronavirus vaccine hit a 90% effectiveness rate in late-stage trials, a much higher-than-expected result that added to gains following the likely Presidential victory for Democrat Joe Biden.

Pfizer said it would have 1.3 billion doses of the vaccine available next year, while adding it would seek Emergency Use Authorization from the Food & Drug Administration later this month.

U.S. equity futures are set to extend the best post-election week of gains since 1932 at the start of trading Monday, with futures contracts tied to the Dow Jones Industrial Average priced for a staggering 1,600 point opening bell gain following the Pfizer news.

Contracts tied to the S&P 500 are indicating a 150 point opening bell advance that would take the benchmark to a fresh all-time high, while those linked to the tech-focused Nasdaq, which is up 38.5% for the year, are set for a smaller 100 point gain as investors dumped stay-at-home stocks on the Pfizer news.

Pfizer shares were marked 14.4% higher at $41.71 each.

“If the Pfizer Covid Vaccine turns out to be the real deal, then this is a game-changer,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in Charlotte, North Carolina. To the extent that consumer spending and economic activity have been suppressed by concerns of the increasing Covid cases, anything that can reverse that trend will be welcomed by the markets.

“Given the good economic news that this repricing is anticipating, markets are in a temporary state of high liquidity and fiscal stimulus at the same time that the economy is improving,” he added. “This won’t last forever, but while it does it is extremely bullish for risk assets.”

Several U.S. TV networks called the election for Biden, 77, by mid-day Saturday after vote counts in key swing states, including Pennsylvania, showed insurmountable leads for the former Vice President.

Incumbent Donald Trump, however, has vowed to challenge the results, marshaling a small legal team to pursue allegations of voter fraud while demanding recounts in Georgia and Wisconsin. However, Trump hasn't been seen in public since Thursday and, despite several volleys of allegations on his Twitter feed, little if any credible evidence of large-scale voter fraud has emerged.

That has taken investors back to a Biden win and the implications for his administration-elect, whose spending ambitions are likely to be tamed by the Senate, which could remain in Republican control following run-offs for two seats in the state of Georgia in early January.

With Biden's aim of repealing corporate tax cuts and pumping more cash into the COVID-hit economy unlikely to make it through the upper chamber, investors are hoping his measured leadership will improve foreign and trade relations while allowing U.S. companies to benefit from a low-tax backdrop and extended support from the Federal Reserve. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.05% higher at 92.285, but was hovering just a few pips above a 10-week low, as investors start to factor in the prospect of more Fed stimulus in the absence of an agreement from the current lame-duck Congress.

Market enthusiasm for a Biden win, however, may be matched by the growing reality that the acceleration of coronavirus infections in the U.S. has reached worrying levels heading into the colder months of the year.

New cases have topped the 10 million mark, according to data from Johns Hopkins University, with daily infections rising at a rate of 120,000 and hitting record levels in various states around the country. 

Pfizer said it would have 50 million doses available this year, but a full rollout of the vaccine will take months, if not years, to complete. 

Similarly grim readings in Europe, however, failed to halt a global equity rally that lifted the MSCI World index to a record high in early Monday trading, while taking the Nikkei 225 in Japan to the highest levels since 1991.

European stocks extended solid early gains on the Pfizer news, with the Stoxx 600 surging 4%, and past a one month high, with the trade-sensitive DAX index rising 5% on the hopes of a new detent between Washington and Beijing -- and indeed Brussels -- under a Biden administration.

That optimism was also evident in oil markets, where global crude prices jumped past the $40 dollar mark despite concerns for energy demand amid the current European lockdowns and the prospect of more global supply if the U.S. were to ease sanctions on Iran under Biden in the early part of next year.

WTI contracts for December delivery, the U.S. benchmark, traded $3.44 higher from their Friday close in New York and were changing hands at $40.58 per barrel in early European dealing while Brent contracts for January, the new global benchmark, were seen $3.38 higher at $42.83 per barrel.