By Susan Tompor
Detroit Free Press
So much for watching your 401(k)s go to hell, as President Donald Trump famously suggested would happen if Democrat Joe Biden won the race for the White House.
Not so on Monday, anyway.
On Monday, Wall Street bet on the odds that America could indeed get back to work — and back into the gym or mall — if an effective vaccine to fight COVID-19 is discovered.
The Dow Jones Industrial Average soared by 4.47% — gaining 1,266.06 points — to trade at 29,589.46 points shortly after 10 a.m., a half an hour after the market opened in New York. The Dow was trading at record levels.
Shortly before 11:30 a.m., the Dow pulled back slightly and was up by 3.8% and a bit more than 1,000 points.
The rally was fueled by news reports that significant progress is being made toward a vaccine that would fight the spread of COVID-19.
Monday also is the first day of trading on Wall Street since Saturday’s news that former Vice President Biden had won the angst-packed presidential contest. (Trump plans to wage a last-ditch legal battle, even though many experts say the margin is too big for Trump to claim a second term.)
Wall Street also appeared to gain some hope that a much-needed economic stimulus package could make its way through Congress soon, possibly even in the lame duck session.
In the morning, Pfizer stock gained about 7.5% to trade at $39.15 a share at one point. A coronavirus vaccine isn’t around the corner, but the company’s news indicated that it has had very promising developments.
Pfizer said Monday that its vaccine candidate “was found to be more than 90% effective in preventing COVID-19 in participants.” The company appears to be on track to apply later this month for emergency-use approval from the Food and Drug Administration.
“This means we are one step closer to potentially providing people around the world with a much-needed breakthrough to help bring an end to this global pandemic,” according to the Pfizer report online.
Pfizer noted that the company cannot apply for FDA Emergency Use Authorization based on these efficacy results alone. More data on safety is needed.
The Detroit Free Press reported in September that a Phase 3 trial was underway at the Michigan Center for Medical Research in Farmington Hills to test the coronavirus vaccine created by Pfizer and German biotechnology company BioNTech. The vaccine uses messenger RNA, a copy of the SARS-CoV-2 genetic code, to trick the body into creating COVID-19 antibodies to fight off infection.
The spread of the coronavirus in the United States has weighed heavily on the economy, as physical distancing is essential to help limit hospitalizations and deaths.
Big Michigan names, including General Motors and Ford, saw a bounce Monday morning. GM was up more than 5% to trade at $39.48 a share. Ford was up about 4.5% to trade at $8.14 a share.
A vaccine is key to bringing economies across the globe back to life. A spike in COVID-19 cases has led to new national lockdowns in France, Germany and elsewhere.
David Kudla, CEO of Mainstay Capital Management, said the stock market views the presidential election as now essentially decided — eliminating the uncertainty that had been building up in recent weeks.
The news on developments relating to a vaccine, he said, is probably even a larger driver for stock gains.
“As COVID cases have continued to rise setting new daily infection rates over the past weeks,” Kudla said, “a vaccine becomes more and more important to our personal health and health of the economy.”
Melissa Joy, president of Pearl Planning, a wealth adviser in Dexter, said: “A vaccine will be good news for clarity on how businesses can recover.
“I’m concerned about small businesses, some are already closed and others hanging on by a thread. …
“In general, though, the US economy seems favorably positioned relative to some other parts of the world. It will be impossible to seamlessly restart the economy.”
She noted a lot of investors — those who supported both Trump and Biden — were plain scared going into the election.
“That anxiety seemed to diminish for some last week,” Joy said.
Anne Nichols, chartered financial analyst and managing director for Dearborn Heights-based Fern Capital, said Wall Street also appears to be expressing as sigh of relief against a “total blue wave,” where the Democrats would have gained more seats in the Senate and the House.
Instead, we’re heading for more divided government.
“If the Republicans keep the Senate, that will most likely mean taxes will stay stable,” she said.
Two Senate runoff elections will be held in Georgia that will help decide control of the U.S. Senate.
Wall Street is also banking on the notion that some of the more progressive programs the Democrats had raised during the campaign have less chance of being passed in Congress.
But risks do remain in the days ahead.
“Any prolonged legal battle by the Trump team will probably hurt the market,” Nichols said.
“The market hates uncertainty and right now the market seems to be signaling a clear Biden win.”
