The S&P 500 rose on Tuesday, putting it on the cusp of a fresh all-time high amid a rotation out of technology shares and into stocks that would benefit from a reopening of the economy and a vaccine, such as cruise lines and airlines.
The broader market index gained 0.5% and was within 0.5% of reaching its Feb. 19 record of 3,393.52. The Dow Jones Industrial Average jumped 301 points, or 1.1%. The Nasdaq Composite struggled, however, sliding 0.1%.
Sentiment was lifted after local news agencies reported Russian President Vladimir Putin claimed the country had given regulatory approval for the world’s first Covid-19 vaccine.
While there was skepticism about whether Russia had developed a safe vaccine so quickly, the news triggered optimism from investors about the race for an inoculation and perhaps that the market isn’t pricing in how quickly a valid one could be ready.
A Johnson & Johnson executive also told Reuters the company could produce 1 billion doses of its vaccine candidate if it proves to be successful. J&J shares dipped 0.3%, however.
“Markets are looking forward to better days ahead,” Jeff Buchbinder, equity strategist at LPL Financial, said in a note. “Although the timing is uncertain, the stock market is expressing confidence that the pandemic will end eventually with a vaccine—or multiple vaccines—and with help from better treatments in the interim.”
Shares of companies that would benefit most from a vaccine jumped. American Airlines gained 3%. Norwegian Cruise Lines climbed 6.2%. Casino shares rose. Mall-owner Simon Property Group was higher by 4%. Gap shares climbed by 6%.
Major tech shares struggled. Apple, Netflix and Microsoft were all down at least 0.7%. Amazon dipped 0.3%.
“A concern in the market has been that you’re seeing it becoming tighter and tighter,” said Quincy Krosby, chief market strategist at Prudential Financial. This rotation “helps the overall health of the market. That’s what’s important now and what’s needed.”
Goldman Sachs over the weekend raised its economic growth outlook, predicting at least one vaccine approved by the end of this year and widespread distribution of the drug by the second quarter of next year.
Dennis DeBusschere, quantitative strategist at Evercore ISI, also pointed out that coronavirus-related hospitalizations have seen a sharp drop recently. “Recovery stocks’ returns have accelerated relative to Quarantine as net hospitalizations have collapsed. That will continue assuming vaccine trends remain positive and fiscal stimulus gets passed,” he said.
Investors still grappled with the uncertain fate of further coronavirus stimulus aimed at supporting Americans struggling during the pandemic.
Treasury Secretary Steven Mnuchin said Monday the White House is open to resuming coronavirus aid talks with Democrats and putting more relief money on the table to reach a compromise.
Senate Majority Leader Mitch McConnell said Monday in a tweet that he hoped lawmakers will be finalizing the bill this week and that he’s glad President Donald Trump “stepped in to soften the blow of [Democrats’] hostage tactics.”
Over the weekend, Trump signed four executive orders to extend some coronavirus aid, including unemployment benefits, a payroll tax holiday, defer student loan payments through 2020 and to extend federal eviction protections.
“Given the limited scope of the deal and the positive market reaction, equity investors continue to embed a likelihood that a larger agreement is reached,” Mark Hackett, Nationwide’s chief of investment research, said in a note on Monday.
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