Moderna Gives Stocks a Shot in the Arm: What Wall Street's Saying

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Stocks rose considerably Wednesday, as positive vaccine news rolled in. 

The S&P 500 rose 0.91%, with the 10-Year Treasury yield rising to 0.64%. Yields rise when prices fall. Market action Wednesday pointed towards optimism on a fast economic recovery.

Late Tuesday, Moderna  (MRNA) - Get Moderna, Inc. Report said its first coronavirus vaccine human testing results in the U.S. yielded positive results, a development that strengthens the thesis that the world could have a vaccine by the end of 2020. Moderna shares rose 6.9% to $80.22 a share. 

Reopening and cyclical stocks led the rally, as investors de-risked from big tech. The tech-heavy Nasdaq underperformed the S&P 500, rising just 0.59%. The NYSE FANG Index, the components of which have run-up substantially in the past month as investors look for growth in a challenged economic environment, was flat. Netflix  (NFLX) - Get Netflix, Inc. (NFLX) Report, up about 24% since June 8 and reporting earnings this week, fell 0.31%. 

Airlines rose between 9% and 14.5%. Oil, banking and consumer discretionary rose between 2% and 5%. Some of these cyclicals have been in correction territory since June 8 as virus cases have soared in the U.S., states have paused reopenings and question remain over a much-needed new round of fiscal stimulus. Earnings are rolling in and some on Wall Street point out there is more upside for value stocks over growth. 

One negative for second quarter earnings: even though economic data has positively surprised in the past few months, as the economy recovers, banks’ loan loss provisions have largely exceeded estimates, a negative indicator for the financial health of the consumer. 

Here’s what Wall Street is saying:

Matthew Harrison, Biotech Analyst, Morgan Stanley:

“mRNA-1273 elicited both humoral and cellular immune responses based on interim Phl data. We see this as strong initial data for mRNA-1273 and expect MRNA higher on these results which confirm the initial Phl press release.” 

Mark Haefele, Chief Investment Officer, UBS Global Wealth Management:

"Global equities received a boost from positive clinical trial results for Moderna's potential COVID-19 vaccine, kindling hopes of a full return to normality for the global economy. The trial vaccine generated antibodies in all 45 participants in the trial, confirming initial data released in May. Moderna's chief medical officer said the trial vaccine—mRNA-1273—had produced a "robust immune response across all dose levels" and there were no safety concerns that would stop further trials. This paves the way for Phase 3 trials this month, with a readout likely in the autumn, around the time of the US election in November, in our view. So we believe such developments underline the upside case for equities as well as the potential for healthcare in the short and long term. However, we continue to see geopolitical risks generating volatility, including the US election and US-China tensions.”

Jared Woodard, Head, Investment Research Committee, Bank of America:

"US equities are not cheap but we are still bullish because: 1. there is no alternative (record 77% of S&P 500 stocks pay higher dividends than Treasuries - Chart 1), and 2. stocks are more defensive than they seem…tech & e-commerce (78% of market upside) are more like utilities than discretionary. Refreshing our End of 60/40 thesis, we find that the plunge in yields and central bank yield curve control make Treasuries less attractive than ever, both as portfolio hedges and as income sources. Instead, we prefer taxable munis, corporates & convertibles, EM [emerging market], and mortgage REITs [real-estate investment trusts]. What's the likely market impact of the US election? Gridlock is bad. Efficient governance is more essential than ever to blunt recession impacts and support growth. Investors have taken in stride the 63% odds suggested by PredictIt of a Democratic sweep, possibly because they expect policies to cut unemployment to outweigh any costs from any potential new taxes/regulation.” 

Team, Columbia Threadneedle Investments: 

"We do expect slightly higher returns in international markets, which were lagging U.S. returns and have provided equally aggressive monetary and fiscal support to their economies. The best returns are in the credit space where spreads in some areas are still elevated, and there’s explicit U.S. Federal Reserve support."

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