Markets

‘Most Significant Medical Advance In 100 Years’ Sets Off Market Fireworks

“I believe this is likely the most significant medical advance in the last 100 years, if you count the impact this will have [on] public health [and] global economy,” Pfizer CEO Albert Bourla said Monday, while speaking to CNBC following news the company’s jointly-developed COVID-19 vaccine has an efficacy rate above 90%.

Stocks, which were already poised to hit fresh highs on optimism around a return to normalcy under a Joe Biden administration, exploded higher.

Generally speaking, Pfizer beat expectations. Cantor Fitzgerald called the interim efficacy data “much higher than anticipated.” RBC characterized it as a “best case with broad implications.” Bourla, in the same interview with CNBC, described himself as almost delirious. “Sometimes I have tears in my eyes when I realize that this is the end of nine months, day-and-night work of so many people and how many people, billions, invested hopes on this,” he said. “I never thought it would be 90%” effective.”

Read more: ‘A Great Day For Humanity’ – Pfizer Delivers. COVID Vaccine Prevents 90% Of Infections

Assuming all of this optimism is even halfway warranted, the ramifications for markets are far-reaching, especially with an incoming US President who has prioritized a science-based approach to tackling the country’s outbreak, which remains the worst in the world.

The stay-at-home trade and secular growth favorites underperformed mightily in early trading Monday. US small-caps were on pace to best the Nasdaq 100 by an incredible 450bps. The rotation manifested in dramatic ways, leaving market participants with a veritable cornucopia of eye-popping visuals, like the one below.

On a call with reporters, Anthony Fauci called the efficacy of Pfizer’s candidate “just extraordinary.” It will have a “major impact” on how the country (and the world) approaches the virus going forward, he added.

“The upshot is that the Pfizer trial has already accumulated more results than most market participants and experts would have expected,” Deutsche Bank’s Robin Winkler said, before noting that “by extension, it is likely that other vaccine trials, such as Moderna and AstraZeneca’s, have also accumulated a large number of cases by now and could be much closer to reporting preliminary results than the market has been assuming.”

The read-through, Winkler wrote, is that “Pfizer might only have kicked off the ‘results season,’ with more news to come soon.”

If that’s the case, and the balance of the other news is similarly encouraging, it’s conceivable that the rotation evidenced across assets Monday could prove sustainable, although we’ve been here before when it comes to false dawns for pro-cyclical rotations and the long-awaited return of value.

Spot gold plummeted Monday, diving more than 5%. This is quite clearly evidence that the yellow metal is still used by some as a safe haven, as opposed to merely a play on currency devaluation.

As for rates, suffice to say it’s a breakout day — figuratively and literally. “The combination of the vaccine news and ‘clarity’ on the political front has cleared the way for a meaningful selloff in Treasurys… and our 1-handle target [is] close at hand,” BMO’s Ian Lyngen said. “Beyond 1.0% in 10s, there is very little until an opening gap from March at 1.112% to 1.140%.”

At 10:20 AM ET, what Bloomberg described as a “huge” block sale in 10-year note futures contributed to the selloff. That trade pushed up cash yields to 0.973%, the highest since March.

For stocks, Bloomberg’s Andrew Cinko wrote that “elevated short-interest could keep a bid in equities throughout the day as those positions are covered.” Specifically, he noted that short interest in a pair of key S&P 500 ETFs sat at 5.3% as of Friday’s close. “Normal” would be less than half that.

Commenting further on CNBC, Pfizer’s Bourla said this: “The hopes of billions of people and millions of businesses and hundreds of governments were on our shoulders. Now, I think we can see light at the end of the tunnel.”


 

3 comments on “‘Most Significant Medical Advance In 100 Years’ Sets Off Market Fireworks

  1. runamok says:

    This is indeed good news on the public health front. We needed this.

    I’m going to go to my local savings and loan later this week to open up a couple of tranches of CDs, take advantage of these new, phenomenally high interest rates.

  2. Emptynester says:

    When you look back at how quickly the Federal Reserve intervened in March- it really does appear that they learned from prior mistakes (1987, 2000, 2008 etc) where they acted too slowly and too hesitantly.
    It seems hard to imagine, short of world war, what would be so horrible that the Fed would not jump in with both hands and feet (and as many USDs as required) and be able to “save the USA”.
    I am wondering what the money on the sidelines is thinking?

  3. runamok says:

    In the interest of making sure the extraterrestrials have an additional fact around the events of this German-hosted miracle cure before all of our portfolios are wiped out by an authentic, Taleb-like black swan financial event, I thought I’d post this follow-on tidbit.

    The CEO of Pfizer, on Monday, the day of the miracle cure announcement, sold 130k+ Pfizer shares at pretty very nearly a 52-week high.

    I know there are blackout periods for executives.

    Notwithstanding, for a breakthrough that is a once in a 100-year public health celebration, and could possibly earn the scientific team involved a Nobel Prize at some point 20 years from now, this is not good for optics. What could possibly be wrong?

    For such a heralded event that would surely herald Pfizer a great amount of fame, and, likely, a fair amount of fortune in the meantime, this doesn’t bode well for the trust one would otherwise have for the vaccine. Is it money over public health after all? Will the Pfizer cure fizzle?

    Or, rather than this reflecting on the confidence of the vaccine’s long-term effectiveness, perhaps the sale reflects equally, or more so, on the banality of our elites, the mockery they make of citizens. That the CEO of Pfizer, on the same day announcing this breakthrough, sells a fortune in shares, is further evidence of how the ruling elites view all of us. We are their sheep.

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