S&P 500 Futures Surge as Pfizer Vaccine Study Adds to Biden Win
(Bloomberg) -- U.S. equity futures jumped following news the Covid-19 vaccine being developed by Pfizer Inc. and BioNTech SE prevented more than 90% of infections in a study and as traders pressed bets that President-Elect Joe Biden will bring steadier stewardship of the American economy.
Contracts on the S&P 500 were up 3.5% as of 07:07 a.m. in New York, after gaining as much as 4.3% shortly after the news came out. The underlying index rallied 7.3% last week in the biggest advance since April. Nasdaq 100 futures were up 1.4%, while Dow Jones Industrial Average contracts gained 4.2%.
Bulls picked up where they left off in the best week for U.S. share indexes since April, undaunted by some of the highest equity valuations in two decades and the resurgent coronavirus. Up four of the last five days, the S&P 500 sits 2% away from the record it set at the start of September.
In Europe, the Stoxx Europe 600 Index jumped 3.3% with cyclical sectors such as travel, banks and energy leading gains. Preliminary results of the Covid-19 study of tens of thousands of volunteers pave the way for the companies to seek an emergency-use authorization from regulators if further research shows the shot is also safe. If that study succeeds as well, there could be two vaccines available in the U.S. by around year-end.
Risk markets consistently found something to celebrate throughout a chaotic final week of the election process, as odds shifted from a blue wave sweep to Donald Trump’s favor and then to Biden, who declared himself victorious amid signs his party will fail to take the Senate. Resilience in the S&P 500 is all the more impressive considering the gauge sits at more than 27 times annual earnings, a valuation with virtually no precedent since the dot-come bubble.
“It’s a win-win situation,” said John Plassard, deputy director at Mirabaud & Cie in Geneva. “For markets, the current situation is rather ideal. First, it’s unlikely that faced with a Republican Senate, Biden will be able to pass his tax reform. In addition, and contrary to popular belief, the desire to win the mid-term elections could see Biden push a pro-growth and pro-employment program before any tax increase.”
With odds pointing to a divided government, investors saw hopes dashed that Congress would pass a multitrillion-dollar spending package to boost the economy. But bulls turned to the Federal Reserve and Chairman Jerome Powell, looking for continued support that’s been critical to the rebound from the pandemic-fueled slowdown.
Powell reassured markets during last week’s political drama that the central bank remains at the ready should Washington fail to deliver the aid package many agree is needed. And that buttressed markets that, given the choice between a broad package of economic aid and targeted Fed liquidity support, would always choose the latter due to its benefits for asset prices.
©2020 Bloomberg L.P.