Is the Stock Market Getting Ahead of Itself on COVID-19 Vaccine News?

Ever since the coronavirus crisis began early this year, investors have waited for a final resolution that would allow life to get back to normal. On Monday, market participants decided that they’d gotten their wish, based on a clinical trial of a COVID-19 vaccine candidate that showed encouraging results…

That sent major benchmarks soaring. As of just after 11 a.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 1,062 points to 29,386. The S&P 500 (SNPINDEX:^GSPC) jumped 88 points to 3,598, and the Nasdaq Composite (NASDAQINDEX:^IXIC) rose 68 points to 11,963. If those figures hold up for the Dow and the S&P, they would represent all-time highs for the two benchmarks.

Based on the indexes’ big moves, though, you’d think that someone had found a permanent cure and made it available to everyone worldwide instantaneously. Unfortunately, some huge challenges remain ahead. The stock market is forward-looking, but there’s still a question of whether even long-term investors are getting hyped a bit earlier than is appropriate.

Will this small step turn into a giant leap?

The positive COVID-19 vaccine news came from Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX), which announced the latest results in their first interim analysis from their phase 3 study of BNT162b2. The vaccine candidate proved more than 90% effective in preventing COVID-19 in people who had no evidence of prior infection.

The trial involves more than 43,000 participants, nearly 39,000 of whom have gotten a second dose of vaccine. Between those getting the vaccine and those receiving placebos, 94 participants have become confirmed COVID-19 cases. However, the data showed that those getting the vaccine are far less likely to contract COVID-19 than those who didn’t get it.

Pfizer CEO Albert Bourla didn’t hesitate to celebrate the finding, saying, “Today is a great day for science and humanity.” Bourla noted that Pfizer is “reaching this critical milestone in our vaccine development program at a time when the world needs it most.” Shares of Pfizer and BioNTech were up 10% and 13%, respectively.

Where the real action is

It makes sense for the companies actually involved in vaccine development to see their share prices rise. But looking around the stock market, the industries that got hit hardest by the COVID-19 pandemic are the ones posting the huge gains Monday. Among them are:

  • Airlines, with Delta Air Lines (NYSE:DAL) and other major carriers rising 12% to 15%.
  • Cruise ship operators, with Carnival (NYSE:CCL) leading the way with a 32% gain.
  • Movie theater companies, with AMC Entertainment Holdings (NYSE:AMC) enjoying a 48% jump.
  • Restaurants, led by Dave & Buster’s Entertainment (NASDAQ:PLAY), up 36%.

The bullish argument here is that the main uncertainty facing these industries was whether they’d be able to survive financially long enough for a solution to make itself known. Even if the vaccine won’t be immediately available, the prospect that one is coming within a defined time frame could be enough for these businesses to get the financial support they need to bridge the gap.

But there’s still massive uncertainty regarding whether that support will be forthcoming. The federal government is set to…

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