Dow extends gains, S&P 500 dips a day after nearing new records coronavirus vaccine hopes

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Pfizer and BioNTech released early study results indicating that their vaccine prevented more than 90% of infections with the virus that causes COVID-19. USA TODAY

Markets were mixed Tuesday a day after surging near all-time highs on hopes for a COVID-19 vaccine as investors unloaded technology stocks that surged during the crisis and piled into cyclical shares that would benefit from a broad economic upswing.

“People are saying, ‘Now’s a good time to buy all of the (stocks) that got destroyed,” says Chris Zaccarelli, chief investment officer of Independent Advisor Alliance.

The Dow Jones industrial average closed up 2638 points, or 0,9% at 29,421, just 130 points off its mid-February high. The Standard & Poor’s 500 index dipped 0.14% to 3,545. And the tech-heavy Nasdaq fell 1.37% to 11,554.

On Monday, the Dow soared as much as 1,610 points to a new intraday high before closing up 834 points to 29,157 after Pfizer and its German partner BioNTech released early study results indicating their coronavirus vaccine prevented more than 90% of infections from the virus that causes the disease. The S&P 500 index jumped 1.2%.

Stocks that would benefit from a reopening economy — including airlines, casino and restaurant companies – rallied. On Tuesday, shares of industrial, energy and financial companies that would gain from a stronger economic recovery moved higher, lifting the Dow. Industrial conglomerate 3M was up 3.5%. Heavy equipment maker Caterpillar rose about 1% and Exxon climbed 2.2%.

Markets also have vaulted higher on the likelihood of a split government, with Democrat Joe Biden in the White House and the higher odds of the Senate remaining in Republican control That likely would “take BIden’s most ambitious policy proposals off the table,” particularly tax increases, says Jeff Buchbinder, equity strategist for LPL Financial 

Technology stocks, meanwhile, were largely immune to the big stock selloff early in the crisis as consumers and businesses turned to ecommerce, home entertainment products and online video services like Zoom. Those offerings are still expected to do well, Zaccarelli says, but their stock values may have peaked for now and so investors are selling the shares and using the proceeds to buy beaten-up companies that have more upside. That translated into losses for the S&P 500 index and Nasdaq, Zaccarelli says

Brad McMillan, chief investment officer at Commonwealth Financial Network, says more market volatility lies ahead on renewed concerns about COVID-10 spikes and two runoff elections in Georgia that could still tip Senate control to Democrats. 

Market benchmarks in London, Frankfurt and Tokyo advanced while Shanghai closed lower. Japan’s benchmark Nikkei 225 has been trading at 29-year highs as shares rallied after Joe Biden was declared president-elect days after the U.S. presidential election. News about possible progress on a COVID-19 vaccine have pushed prices still higher.

In early trading, the FTSE 100 in London rose 0.6% to 6,222.92 while the DAX in Frankfurt added 0.2% to 13,119.63. The CAC 40 in Paris gained 0.2% to 5,352.98.

On Wall Street, the future for the benchmark S&P 500 index rose another 0.3% and that for the Dow Jones Industrial Average was 0.1% higher.

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The Shanghai Composite Index lost 0.4% to 3,360.15 after spending most of the day in positive territory. Authorities said they have quarantined 186 people and conducted virus tests on more than 8,000 after a freight handler at the city’s main international airport tested positive for COVID-19.

No additional cases have been found, the city government said on its microblog Tuesday. It remains unclear how the 51-year-old man contracted the virus, which has largely spared the sprawling metropolis despite its dense population and strong international links.

The Kospi in Seoul added 0.2% to 2,452.83 and the S&P-ASX 200 in Sydney advanced 0.7% to 6,340.50. India’s Sensex was 1.4% higher at 43,190.99. New Zealand and Southeast Asian markets also rose.

Also Tuesday, China reported October inflation fell to its lowest level in a decade. That gives Beijing room to spend more or ease access to credit further to support an economic recovery that is strengthening.

The Philippines reported its economic output shrank by 11.5% from a year earlier in the quarter ending in September.

Markets were relieved by the resolution to extended uncertainty about the battle for the U.S. presidency. Over the weekend, Joe Biden clinched the final Electoral College votes to unseat President Donald Trump, though Trump has yet to concede.

Congress may be split between Democratic control of the House of Representatives and Republicans in the Senate. Investors appear to be hoping that might constrain a Biden administration’s possible moves on tax increases and regulatory changes.

The impact of Pfizer’s vaccine announcement highlighted the virus’s economic dominance, temporarily overshadowing concerns over who controls the U.S. government. The number of confirmed U.S. virus cases passed 10 million on Monday, the world’s highest total.

Potential legislative gridlock also makes chances of a rescue package for the economy from Congress likely to be smaller than if Democrats had swept control of all of Washington.

In energy markets, benchmark U.S. crude oil gained 22 cents to $40.51 per barrel in electronic trading on the New York Mercantile Exchange. The contract soared $3.15 on Monday to $40.29. Brent crude, the price standard for international oils, rose 24 cents to $42.65 in London. It rose $2.95 the previous session to $42.40.

The dollar declined to 104.99 yen from Monday’s 105.45 yen. The euro declined to $1.1826 from $1.1831.

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