Stocks Nosedive as Vaccine Hopes Fade: What Wall Street’s Saying

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Stocks fell Tuesday afternoon after a report said scientists don't think Moderna  (MRNA) - Get Report provided enough data when the company announced Monday that its coronanvirus vaccine yielded positive results. One thing is clear from all this: the biggest fear in the market is a second wave of coronavirus infections and a delayed vaccine. 

All three major U.S. indices ended Tuesday down, with the S&P 500 down 1.05%. The index had a marginal gain in the afternoon, before falling 1.4% from its intraday high. A move into the safe 10-Year Treasury bond took hold, sending the yield down to 0.68% from an intraday high of 0.73%. Gold, another safe haven asset, rose 0.86%. 

Causing stocks to reverse course, a little known specialty publication, Stat News, published an article saying scientists it had spoken with said they cannot have much confidence in Moderna’s positive Coronavirus vaccine human testing results because the company didn’t provide enough data in its Monday announcement. 

Here’s what Moderna had said Monday: 

“Moderna announced positive interim clinical data of mRNA-1273, its vaccine candidate against novel coronavirus (SARS-CoV-2), from the Phase 1 study led by the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health. At this time, neutralizing antibody data are available only for the first four participants in each of the 25 µg and 100 µg dose level cohorts.” 

Moderna shares fell more than 10%. 

To further the bearish thesis, value stocks fell harder than the broader market Tuesday, while growth outperformed, a trend seen all year, including during the stock market’s bounce from its bear market low on March 23.

The Vanguard S&P 500 Value ETF  (VOOV) - Get Report fell 1.45%, while its growth counterpart  (VOOG) - Get Report fell just 0.6%. Investors sometimes move into growth stocks and out of value when they see economic turbulence on the horizon, which could potentially be indicative of a stock market drawdown. Growth companies can often grow earnings at a premium rate, as revenues — driven by industry growth trends — aren’t highly impacted by changes in the economy. Many value companies are mature and cyclical, therefore lacking the earnings growth component and sensitive to the economy. 

The good news: Walmart  (WMT) - Get Report beat revenue and earnings estimates, exemplifying the strength of consumer staples in the current environment, as consumers rush for groceries and essentials. Walmart is largely a defensive value stock and it’s been up roughly 8% year-to-date, while the S&P 500 is down harshly. After gaining for most of the day, Walmart shares fell 2.12%. 

On broader environment, here’s what Wall Street said:

John Newman, Canaccord Genuity Moderna Analyst:

"We view data from Moderna's SARS-CoV-2 coronavirus vaccine, mRNA-1273, as a meaningful positive for SARS-CoV-2 vaccine development. plasma. mRNA-1273 was given as an initial dose and a boost dose at day 29. Also, in a pre-clinical mouse model, mRNA-1273 was found to fully protect against viral replication in the lungs. This data, while early, provides positive proof-of-concept for an emerging technology in the vaccine development space. Moderna intends to begin its n=600 patient phase 2 study in by the end of next month.” 

Matthew Harrison, Head, Biotech Research, Morgan Stanley:

“In the United Sates, the overall development of the virus remains in line with our models. However, as cases have remained at the peak longer than expected, our predicted total infections has risen somewhat to roughly 1.9 million from 1.8 million last week. Reopening states are starting to see a slight sustained rise in new cases, compared to those states that are not reopening.” 

Team, Bank of America Global Research:

“Bank of America May Fund Manager Survey says [the] pain trade [is] up: just 10% [of participants] expect a V-shaped recovery, 68% say it’s [recent rally] a bear market rally. Dec 2007 [was the] last time this many Fund Manager Survey investors expected value stocks to underperform growth stocks.” 

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