U.S. stock markets hit record highs on vaccine news, raised economic recovery hopes

·4 min read

TORONTO — U.S. stock markets soared to record highs Monday on positive news about a COVID-19 vaccine that bolsters hopes about a global economic recovery. 

The Dow Jones industrial, S&P 500 and Nasdaq composite set all-time highs after Pfizer announced that its large-scale clinical vaccine trial indicates a 90 per cent success rate in combating the virus.

"It's the clearest so far indication that there is light at the end of the pandemic tunnel," said Angelo Kourkafas, analyst on the investment strategy team at Edward Jones.

He said the efficacy was larger and the timing of the announcement earlier than expected.

"The combination of effectiveness and timing, I think that's why you're seeing that positive reaction today," he said in an interview.

Market observers are hopeful that an effective vaccine will accelerate the economic recovery.

Areas of the market that have been hit hard by lockdown and restrictions, including travel stocks such as Air Canada, outperformed companies that thrived on the stay-at-home trend such as Shopify Inc.

Air Canada shares soared 28.6 per cent and Cineplex Inc. was up 31.8 per cent while Shopify lost 13.8 per cent.

Crude oil gained around eight per cent on the prospect of improved demand, while the Canadian energy sector surged 16.7 per cent after playing catch-up from past softness. 

About a dozen Canadian oil producers saw their shares increase by double-digits with Vermilion Energy Inc. up 25.9 per cent, MEG Energy Corp. 24.8 per cent, Suncor Energy Inc. 24.7 per cent and Canadian Natural Resources 22.6 per cent.

The December crude contract was up US$3.15 at US$40.29 per barrel and the December natural gas contract was down 2.9 cents at US$2.86 per mmBTU. 

In Toronto, the S&P/TSX composite index closed up 193.03 points or 1.2 per cent to 16,475.86 after hitting an intraday high of 16,715.72.

Dow Jones closed 834.59 points or 2.95 per cent to 29,157.97 after reaching a high of 29,933.83.

The S&P500 climbed 41.06 points to 3,550.50 after reaching a peak of 3,645.99, while the Nasdaq lost 181.45 points to 11,713.78 after reaching a high of 12,108.07. 

Vaccines have long been viewed as an important market catalyst. However, uncertainties about the virus, including mounting infection rates, and challenges facing vaccinations, will probably result in some near-term choppiness, said Kourkafas.

"Mass production and widespread distribution will probably take months and in the meantime, the virus will continue to shape the direction of the economy for some time," he said.

President-elect Joe Biden warned Monday about a "very dark winter" as he named his coronavirus task force and pleaded for Americans to wear masks.

The calling of Biden's win on Saturday also boosted market sentiment, said Kourkafas. President Donald Trump has vowed to continue fighting the results in court, but the worst-case scenario for investors of protests in the streets has failed to materialize.

While the TSX enjoyed a triple-digit gain on the day, it lagged its U.S. counterparts because the materials sector was hit by a large drop in the price of gold and technology stocks decreased.

The December gold contract was down US$97.30 at US$1,854.40 an ounce and the December copper contract was up 0.2 of a cent at nearly US$3.16 a pound. 

The Canadian dollar was trading at 77.10 cents US to match its high set on January 6 and compared to an average of 76.69 cents US on Friday. 

Kourkafas believes a positive outlook is warranted for next year, but he cautioned investors against making "any narrow calls" in their portfolios despite a shift on the day to cyclicals, value stocks and small-cap names.

"Even with a vaccine, some of the long-term growth drivers behind some of the stay-at-home plays don't reverse completely," he said, referring largely to tech companies that have driven much of the recent growth.

After a 10-per-cent move higher in the past week, markets will probably take a breather, said Kourkafas.

"We've got some positive news, positive developments but you know, that pace of market assent is likely not sustainable. Markets will have to digest and consolidate some of the recent gains."

This report by The Canadian Press was first published Nov. 9, 2020. 

Companies in this story: (TSX:AC, TSX:SHOP, TSX:SU, TSX:VET, TSX:MEG, TSX:CNQ, TSX:CGX, TSX:GSPTSE, TSX:CADUSD=X) 

Ross Marowits, The Canadian Press