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Dow Surges 500 Points As Investors Bet On A Coronavirus Vaccine Breakthrough

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TOPLINE

The stock market finished sharply higher on Tuesday, jumping over 2.5% as Wall Street continued to grow more optimistic about a reopening of the economy and a potential coronavirus vaccine.

KEY FACTS

The Dow Jones Industrial Average rose 2.2%, just over 500 points, at Tuesday’s open, while the S&P 500 was up 1.2% and the Nasdaq gained 0.2%.

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Shares of Maryland-based biotech company Novavax jumped by up to 15% after the company said it had started the first human study of its experimental coronavirus vaccine.

Merck shares rose 1.5% after the pharmaceutical company announced that it is working in collaboration with scientific research organization IAVI to develop a vaccine.

Last week, another biotech company, Moderna, reported positive results from its vaccine trial. In total, there are 10 vaccines currently in clinical trials and another 114 in preclinical evaluation, according to a tally from Fundstrat.

Economic data released Tuesday helped boost market confidence: Consumer confidence jumped by more than expected to 86.6 this month, up from 85.7 in April, while new home sales last month also topped estimates.

Progress is also being made on the reopening front, lifting markets higher as several states start to lift lockdowns and allow businesses to resume. Stocks that would benefit from a reopening jumped on Tuesday, including MGM Resorts, Carnival, United Airlines and Southwest Airlines.

Crucial quote

“Stock markets posted another day of gains as investor optimism was stoked by easing social distancing restrictions and an economy poised for action,” says Peter Essele, head of portfolio management for Commonwealth Financial Network. “The nation’s largest banks, JP Morgan and Bank of America, neared double-digit returns as long-term Treasuries rates rose more than shorter maturities causing a slight steepening of the yield curve, a positive for names in this sector,” he adds.

Surprising fact

The New York Stock Exchange partially reopened for trading on Tuesday, after being closed for more than two months due to workers testing positive for coronavirus. Some 80 brokers will be allowed back onto the floor—about 25% of the number before the pandemic hit. “I’m ready,” a floor trader told CNBC about returning to work. 

What to watch for

Rising U.S.-China tensions. Some experts are worried about a derailment of the phase one trade deal—something Trump has repeatedly threatened to do. White House National Security Advisor Robert O’Brien said last Sunday that the U.S. is likely to impose sanctions on China if the country implements a new national security law that would give it greater control over Hong Kong.

Key background

Stocks are fresh off their best weekly performance since April: The S&P 500, Dow and Nasdaq
NDAQ
all rose by more than 3% last week. The S&P is up over 30% from its March 23 low.

Further reading

Merck Jumps Into The Race For A Coronavirus Vaccine (Forbes)

China Pledges To Uphold Phase One Trade Deal That Includes $200 Billion Purchase Of U.S. Goods (Forbes)

These 10 States Have The Highest Record Unemployment Rates (Forbes)

New York Coronavirus Deaths Fall To Less Than 100 Per Day (Forbes)

Full coverage and live updates on the Coronavirus

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