Dow Surges to Intraday Record on Vaccine Results, Biden Win

By Caitlin Ostroff and Chong Koh Ping

U.S. stocks jumped to fresh records Monday after progress on a Covid-19 vaccine and Democrat Joe Biden's electoral victory sent indexes soaring and boosted companies in the hardest-hit sectors of the economy.

The Dow Jones Industrial Average climbed 4.6% to its first intraday record since February, before the pandemic shutdown began. The index traded just below the 30000 benchmark. The S&P 500 surged 3.4%, also in record territory.

Markets rallied after a vaccine developed by Pfizer and partner BioNTech proved better than expected at protecting people from Covid-19 in a pivotal study, a milestone in the hunt for shots that can stop the global pandemic.

The vaccine jolted markets, at least temporarily, reviving the fortunes of the pandemic losers, such as airlines, travel companies and banks. Meanwhile, the pandemic winning stocks, such as big tech companies, lagged behind the rest of the market. The tech-heavy Nasdaq Composite rose about 1%.

Brent crude oil rose more than 9% and European bank stocks shot 10% higher.

The positive, though incomplete, results bring the vaccine a big step closer to getting cleared for widespread use. Pfizer said it is on track to ask health regulators for permission to sell the shot before the end of this month, if pending data indicate the vaccine is safe. Pfizer shares jumped 7.8%.

Following the vaccine announcement, the yield on the 10-year Treasury moved higher to 0.932%, from 0.821% Friday.

The vaccine news caught key parts of the markets off guard, with sharp, sudden moves in even the most liquid assets. In addition to the surge in Treasury yields, the Japanese yen slid 1.6% against the dollar to 105.03. Gold fell 4.1% to $1,871 per troy ounce.

The small-cap Russell 2000 index jumped 5.4%. Earlier, futures tied to the index rose 7%, hitting CME Group Inc.'s limit up, which prevents them from rising further.

The moves suggested investors were instantly recalibrating their forecasts for faster economic growth and higher inflation based on the vaccine news, as a successful vaccine has the potential to restart swaths of the economy hobbled by the pandemic. A reopening of the economy would also weaken the advantage of tech companies, who thrive on virtual experiences and lack of social contact, have enjoyed during the pandemic.

Shares in the hardest-hit sectors, including travel and leisure companies, rallied, with Carnival up 39% and American Airlines Group gaining more than 16%.

"We all sort of knew that November would be a pretty important period for last stage news on the three main vaccines. The news is clearly pretty positive," said James McCormick, a strategist at NatWest Markets. "We've got the election past us and now the market is focusing on what's next."

The new leg of the rally in stocks also reflects the reduced uncertainty surrounding the U.S. elections, combined with expectations that a Democrat-controlled White House and divided Congress could result in moderate policy measures on taxes and spending.

"The market-friendly bits of Biden will be in place: the lack of volatility, more clear foreign policy," said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. "But at the same time, the bits that the market was worried about -- higher taxes and more regulation -- will not happen. That's what's been driving the market higher."

Overseas, the pan-continental Stoxx Europe 600 jumped 3.9%. Regional markets in Asia also rallied, with benchmarks in Japan, South Korea, India and Taiwan hitting multiyear or record highs.

Overseas investors expect that an administration led by President-elect Joe Biden will engage in more predictable foreign policy, and may be less inclined to levy tariffs or unexpectedly escalate tensions with China, Mr. McCormick, said. "Equities outside of the U.S. get a nice lift from this," he said.

Asia is likely to benefit as higher trade tariffs become less likely, according to Tai Hui, chief market strategist for the region at J.P. Morgan Asset Management. "A lot of the shocks we've experienced in the past three years will be less of a concern. And investors will welcome that," he said.

China's Shanghai Composite Index closed 1.9% higher, and Hong Kong's Hang Seng Index rose 1.2%.

"The consensus is that Biden will be easier on trade and foreign policy, unlike Trump who is more erratic and aggressive," said Colin Low, senior macro analyst at FSMOne.com in Singapore.

Japan's Nikkei 225 gained 2.1% to close at a fresh 29-year high, after ending Friday at levels last hit in 1991.

The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, was largely unchanged near its lowest since June 2018.

"Globally, investors are just happy to turn the page on the U.S. elections," said Eli Lee, head of investment strategy at Bank of Singapore. Mr. Lee said the feared scenario of a drawn-out contested election had diminished, reducing uncertainty for markets and for policy makers such as the Federal Reserve.

"The Fed has been on the back foot for the past couple of months as it wants clarity on what policies would be on the fiscal front to craft monetary policies to support the economic recovery," he said.

--Xie Yu contributed to this article.

Write to Caitlin Ostroff at [e-mail] and Chong Koh Ping at [e-mail]

(END) Dow Jones Newswires

11-09-20 1017ET