Stocks closed mostly lower Monday, with the Dow clinging to a modest gain, after technology stocks fell and rising coronavirus cases led California’s governor to order businesses across the state to shutter once again.
Equity benchmarks started with sharp gains after the Food and Drug Administration granted “fast track” status to a pair of vaccine candidates produced by Pfizer and German biotech firm BioNTech SE.
How did major benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.99% eked out a 10.50 point gain, a rise of less than 0.1%, to end at 26,085.80. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -2.67% tumbled 226.60 points, or 2.1%, to close at 10,390.84, after setting a new intraday record at the start of trading. The S&P 500 /zigman2/quotes/210599714/realtime SPX -2.14% fell 29.82 points, or 0.9%, to finish at 3,155.22.
Stocks rose in thin trade last week, with tech stocks firmly in the lead. The Nasdaq on Friday scored its third consecutive record close and logged a 4% weekly rise ending Friday at 10,617.44. The Dow saw a 1% weekly rise to 26,075.30, while the S&P 500 advanced 1.8% for the week to 3,185.04. Friday’s session, meanwhile, saw the lowest daily volume since Feb. 21, according to Dow Jones Market Data.
What drove the market?
A rally in technology and tech-related companies that propelled the Nasdaq Composite to a new intraday high on Monday faded in afternoon trade, leaving the benchmark and S&P 500 index both firmly in negative territory at the closing bell.
The Nasdaq still is up 15.8% in 2020, even as the S&P 500 was modestly negative for the year. But major equity benchmarks took a breather Monday, after an initial rally sparked by the Food and Drug Administration granting Pfizer Inc. /zigman2/quotes/202877789/composite PFE +0.86% and BioNTech SE /zigman2/quotes/214419716/composite BNTX -6.00% accelerated status on two of their COVID-19 vaccine candidates. Shares of Pfizer closed up 4.1%, while those of BioNTech rose 10.6%.
“I don’t think we’re out of the woods at all,” said John Carey, director of equity income U.S. at Amundi Pioneer, in an interview. “Even if you get a vaccine, it will take awhile,” he said of widespread adoption that could eventually lead to immunity against the viral outbreak.
California also took a U-turn on Monday afternoon , with Gov. Gavin Newsom ordering every county in the state to shutter bars, indoor dining, movie theaters and wineries, while the state grapples with soaring COVID-19 cases.
Earnings season also kicks off this week. The bar has been set remarkably low as investors largely write off second-quarter earnings, devastated by the pandemic. That’s why analysts will be watching results for clues to a third- and fourth-quarter rebound that skeptics say might be difficult to fulfill if the coronavirus spread continues unabated.
“The market is certainly hyperfocused on the development of treatments around COVID-19 and around vaccines. That’s becoming the number one driver of this market, even more than stimulus was over a month ago,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.
“But we also are going to get to look behind the curtain of businesses that haven’t provided guidance,” he told MarketWatch. “It should be eye opening to say the least.”
The aggregate blended year-over-year growth estimate for earnings per share, which includes some earnings already reported and the average analyst estimates of coming results, is negative 44.6% as of Monday morning, according to FactSet.
Stocks had been shaking off a renewed rise in the number of coronavirus cases, which have surged across much of the Sun Belt, even though analysts have been warning that the resurgence threatens to slow, if not derail, the rebound in economic activity if officials reinstate lockdown measures.