Vaccine-Driven Markets

By Nicholas Jasinski |  Tuesday, May 19

Expert Analysis. Just as a promising announcement about a vaccine candidate helped ignite a sensational rally on Monday, less-good news on the same front knocked the market today.

"Live by the vaccine, die by the vaccine," my colleague Ben Levisohn said ominously this evening.

U.S. stocks spent most of the day around the break-even line today, holding on to Monday's strong gains. In the final hour of trading, however, indexes fell from near their session highs into negative territory. The trigger was a report from health-care news site Stat that highlighted some skepticism in the scientific community about the vaccine announcement from Moderna that fueled much of Monday’s rally.

Investors have fashioned themselves as epidemiologists and infectious disease pros during 2020's coronavirus market, trading news about treatments and vaccines with itchy trigger fingers. But real expertise obviously matters, and Stat cited a pair of vaccine researchers from Yale and Johns Hopkins poking holes in Moderna's thin-on-details announcement from Monday.

The bottom line was that the result was promising, but much work remains to be done and a widely available vaccine isn't imminent. Not something investors couldn't have understood themselves, but seeing it laid out for them nonetheless inspired some late selling today.

The Dow Jones Industrial Average closed down 1.6%, the S&P 500 lost 1%, and the Nasdaq Composite fell 0.5%. Moderna stock dropped more than 10% today after a 20% surge on Monday. The company had also announced a public offering of $1.3 billion in shares last night, taking advantage of a more than 300% rise in its stock this year to raise money to fund "needs related to the manufacturing” of its vaccine, among other things.

Markets will remain highly sensitive to news about coronavirus treatments and vaccines. Needless to say, a cure or prevention would be a game changer. But investors have shown a tendency to get ahead of themselves.

Here's Barron's Josh Nathan-Kazis today:

The S&P 500 climbed 2.7% one day in April after Gilead Sciences announced that a trial run by the National Institute of Allergy and Infectious Diseases had found that its antiviral remdesivir benefited Covid-19 patients, even though the benefit was very small.

On Monday, it happened again, this time over an NIAID trial of Moderna’s Covid-19 vaccine. The data seemed positive, but came from a Phase 1 trial with 45 participants.

The key news highlighted by the company was that in the first eight people whose samples they had tested, the level of neutralizing antibodies were similar to the levels seen in people who had been sickened by Covid-19 and then recovered.

It was good news by any measure for investors eager for an end to Covid-19. But it was also interim data on a Phase 1 trial, which is rather early in the game in terms of the normal course of drug development.

Evidently it took a report from a health-care site that may not have been high on Wall Street's reading list before the pandemic to inform some investors of that fact today. Maybe they're not such distinguished infectious disease experts after all.