Dow, S&P 500 erase gains as tug of war continues between vaccine optimism and rising COVID-19 cases

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Stocks erased gains to turn slightly lower Wednesday afternoon, as investors struggled to restart a rally in the face of a surge in COVID-19 cases after another positive vaccine development.

What are major benchmarks doing?

The Dow Jones Industrial Average DJIA, -0.06% fell 44.43 points, or 0.2%, to 29,738.92, while the S&P 500 SPX, -0.13% was off 3.30 points ,or 0.1%, at 3,606.23. The Nasdaq Composite COMP, -0.05% remained in positive territory, up 13.40 points, or 0.1%, at 11,912.74.

The Dow on Tuesday fell 167.09 points, or 0.6%, to close at 29,783.75, while the S&P 500 declined 17.38 points, or 0.5%, to finish at 3,609.53 — a day after both gauges posted record finishes. The Nasdaq Composite ended 24.79 points lower at 11,899.34, down 0.2%.

The small-cap Russell 2000 RUT, +0.31% continued to outperform, rising 6.57 points, or 0.4%, to a record 1,791.91.

What’s driving the market?

Analysts said enthusiasm around progress on the COVID-19 vaccine front was tamped down by the logistical challenges of getting millions inoculated.

Pfizer Inc. PFE, +1.58% said on Wednesday that the vaccine candidate it has developed with BioNTech SE BNTX, +3.87% was 95% effective in a final analysis of clinical trial data. Pfizer plans to seek authorization for the vaccine within days, the companies said.

“The news out of Pfizer was good,” said Peter Cardillo, chief market economist, Spartan Capital. “But the reality of the positive news is being scrutinized in the sense that we are still maybe three to four months before a vaccine is attainable. And then it’s a question of distribution.

“I don’t want to sound like it isn’t positive, but investors are rethinking being overly optimistic,” he said, resulting in stocks “staying in a trading range, near the high end.”

Pfizer shares were up 1.7%, while BioNTech’s were up 3.8%.

The U.S. recorded 159,431 new cases of COVID-19 Tuesday, and at least 1,583 people died, according to a New York Times tracker. In the past week, the U.S. averaged 158,254 cases a day, up 79% from the average two weeks ago, with cases rising in 50 states and territories, straining hospitals and health care resources.

“Investors are torn between expectations for a more normal future, with the development of vaccines, and the current situation, with the rapidly spreading virus infections and lockdowns causing more economic pain across the West,” said Fawad Razaqzada, analyst at ThinkMarkets, in a note.

Until Tuesday, optimism over a vaccine had tended to overshadow worries over the continued rise in cases. Two vaccine candidates have so far proved more than 90% effective in preventing COVID-19 infections in late-stage trials.

Meanwhile, there has been no sign of movement toward additional pandemic aid from Washington. Federal Reserve Chairman Jerome Powell on Tuesday made a fresh appeal to Congress to pass another coronavirus relief package to help troubled businesses and out-of-work Americans.

Powell said he expected the economic recovery to continue “at a solid pace” but faced significant downside risks despite progress toward vaccines and treatments.

In economic news, builders broke ground on more new homes in October, the government said. Housing starts ran at a 1.545 million annual rate, beating the MarketWatch consensus.

Which companies are in focus?
  • Boeing Co. BA, +0.03% shares edged 0.7% higher after the Federal Aviation Administration approved the return to service of the aerospace giant’s 737 MAX jets, which have been grounded since March 2019.
  • Shares of cryptocurrency miner Marathon Patent Group Inc. MARA, +2.90%  gained nearly 4.5% Wednesday after the company provided an upbeat outlook on its potential to produce bitcoin.
  • Airline shares continued to power higher: United Airlines Holding Inc. UAL, +3.69% jumped about 3.5%, while American Airlines Group Inc. AAL, +2.73% gained more than 3%, and Delta Air Lines Inc. DAL, +2.95% shares were up more than 3.5%.
  • Shares of Target Corp. TGT, +4.74% rose 5.2% after the retail chain announced earnings and revenue that topped forecasts.
  • Shares of Lowe’s Cos. LOW, -6.40% were down about 6.3% after the home improvement retailer reported fiscal third-quarter sales that rose above expectations, but delivered an adjusted profit that was just in line with forecasts.
How are other assets trading?

The yield on the 10-year Treasury note TMUBMUSD10Y, 0.885% rose 2 basis points at 0.89% after the vaccine news. Yields and prices move in opposite directions.

The ICE U.S. Dollar Index DXY, -0.14%,  a gauge of the greenback’s strength against its major rivals, was 0.1% lower.

The pan-European Stoxx 600 index SXXP, +0.44% closed 0.4% higher, while the U.K.’s FTSE 100 index UKX, +0.31% advanced 0.3%

Crude-oil futures rose on vaccine optimism, with the U.S. benchmark CLZ20, +1.64%  up 1.7% or 71 cents to $42.14 a barrel. Meanwhile, gold futures GCZ20, -0.67% fell $11.10 to $1,873.90 an ounce.

Read next: Bitcoin trades above $18,000 and touches record market value, exceeding its 2017 top

William Watts contributed reporting

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