The Dow Jones Industrial Average jumped 1,434 points to a record high of 29,757 Monday morning, before dropping back to finish the day with a 835 point (2.95 percent) gain. The S&P 500 also leaped to huge intraday gains before finishing the day up 41 points, or 1.17 percent.
This boom is a dual reaction to Joe Biden’s presidential victory and the apparent effectiveness of a new COVID-19 vaccine currently being developed by Pfizer and German biotechnology firm BioNTech.
Sean Tesoro, President of Salem Five Investment Services, said that he wasn’t surprised by the gains, “given the magnitude of the news we’ve received.”
“What markets really don’t like is uncertainty,” he said. “With the election result we finally got some clarity.”
In regard to the vaccine he said that, “We’re starting to see some version of a light at the end of the tunnel.”
Pfizer reported that its new vaccine was 90% effective in initial analysis when compared to a placebo. This is a significant level of effectiveness, considering that flu vaccines generally have only a 40% to 60% effectiveness. This news does not, however, mean that the release of a vaccine is imminent.
Pfizer stock jumped 8.7 percent following the announcement.
Biden also announced the members of his coronavirus task force this Monday, in a move that has convinced many investors that his administration is serious about getting the pandemic under control.
“You can start to map out timelines for when things will go back to normal,” said Tesoro of the vaccine development. “When it’s open-ended it’s difficult to take a position. This is a framework that we can comfortably operate in.”
The best-performing stocks are those which were most held down by COVID-19, such as airlines, travel and hospitality companies.
Disney jumped 12 percent in hopes that increased access to travel could lead to more visitors at their theme parks and watching their movies in theaters. Carnival Cruise Line also surged 34.1 percent, though it’s still down by more than half for the year.
“Stay-at-home stocks,” on the other hand, like Peloton, Netflix and Roku, performed poorly in response to the news. The NASDAQ 500 dropped 181 points today, 1.53 percent, largely because they are made up of more of these sorts of stocks.
In addition, the market appears to have taken some comfort in the combination of the Biden win and a stronger than expected Republican performance in the Senate. While some lament the prospect of a “divided government,” the market appears happy that compromise will be necessary, thus holding off a leftward swing by the Biden administration.
Tesoro was cautiously optimistic about the likelihood of the stock market continuing this positive trend for the next few months.
“I expect that some of these gains will remain, but that volatility will return as we wait for clarification on the Senate,” said Tesoro.
“You can’t time the market,” he added. “You have to avoid making knee-jerk decisions in response to events like the election and stick to a long-term plan.”
