Stocks rose Tuesday in a convincing risk-on rally, as earnings rolled in and Moderna (MRNA) - Get Report seems closer to selling its coronavirus vaccine.
The S&P 500 rose 0.45% with gains across sectors, most of which were outperforming tech stocks. The tech-heavy Nasdaq rose 0.35%. The 10-Year Treasury yield rose to as much as 0.79%, its highest level since early June, when optimism on the V-shaped economic recovery was at its peak. Yields rise when prices fall.
Moderna CEO Stephane Bancel said the U.S. government could authorize emergency use of the company's experimental Covid-19 vaccine by December on the condition that Moderna sees positive trial results in November. The stock rose 1%, signifying investors see this is a valid step towards selling the vaccine.
In order for stocks to vigorously move higher, investors need to see one of two keys unlock further recovery in employment and consumer spend: a vaccine or fiscal stimulus. Fiscal stimulus may not happen until after the election, although it is anybody’s guess as to when the White House will be able to get a proposal for Republicans and Democrats in Congress to review.
A vaccine, less politically charged, would allow businesses to reopen and consumer to feel more conformable going into public. Still, Moderna can only produce so many doses. Pfizer (PFE) - Get Report and others are working on get approval for billions of doses to be distributed worldwide.
The optimism Tuesday spurred a broad market rally, with bank stocks up a little less than 1%, as the yield curve expanded, oil stocks up more than half a percentage point and consumer discretionary stocks up across the sub-sectors of airlines, restaurants and retail.
Shares of Procter and Gamble (PG) - Get Report rose 1.6% after the company beat revenue and earnings estimates, with revenue coming in at $19.32 billion, beating estimates by about $1 billion. Management raised sales guidance close to the mid-single digits in percentage terms and said the current quarter saw consumer opting for the more expensive products.
Large cap consumer staples stocks have participated in the overall market rally in recent weeks, as investors have, on some days, favored defensive stocks. But the quality of P&G’s beat also shows that the consumer, with or without stimulus, is still comfortable spending for the immediate term. This relaxes investors anxiety, though solutions for the largely unopened economy are necessary, especially through the end of the year.