Midday Market Update: Investors Excited About Vaccine

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Stocks were mostly rising Tuesday, with investors' risk appetites appearing strong.

By noon, the S&P 500 was up just 0.45%; the Index was dragged down by the tech-heavy Nasdaq, which teetered between up and down by about a tenth of a percentage point all day. Investors are growing less interested in the recently high-flying growth tech class of stocks. Instead, investors were pivoting into cyclical sectors. And on another bullish note, the 10-Year Treasury yield spiked to 0.65% from 0.58%. Yields fall when prices fall. 

Some on Wall Street say growth tech stocks are in a bubble, as the outperformance of the Nasdaq 100 relative to the S&P 500 is reminiscent of past eras when tech stocks were in a bubble, although tech valuations compared to fundamentals are much more appropriate now compared to those periods. 

All cyclical sectors, large and small cap, rose considerably and are coming up from low valuations. Banks were up as much as 4% as the yield curve saw a level of expansion usually seen within a period of weeks, not hours. 

Russia President Vladimir Putin said the country has developed the world’s first coronavirus vaccine. The global stock market tends to rally on any hint of positive vaccine news, even if there are caveats. In the U.S., biotech stocks bolstered by progress on a vaccine, fell. If Russia has truly produced a vaccine that can be distributed globally, the following companies would enjoy less market share:

Those price movements are as of midday Tuesday. Pfizer is a highly diversified drug maker, while Moderna’s vaccine market opportunity is incredibly meaningful to its current expected revenue stream, though Pfizer’s opportunity is also material. 

Also, Trump told reporters he wants to lower the capital gains tax, which would attract financial capital to the U.S. That may be aiding the positive sentiment Tuesday, although European indices outperformed the Dow Jones Industrial Average, which is not tainted by a heavy technology presence. The German DAX rose 2% while the FTSE 100 rose 1.7%. 

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