Stock futures opened slightly higher on Monday as hopes lingered that an effective vaccine against COVID-19 would be available in the near-term. Contracts on the S&P 500 and Dow each ticked higher after both indices posted record closing highs earlier in the day.
After Moderna’s (MRNA) released preliminary data Monday morning showing its vaccine candidate was 94.5% effective in preventing coronavirus infections, investors are set to watch to see whether equities follow last week’s playbook, when news that Pfizer’s (PFE) vaccine candidate was 90% effective in preventing COVID-19 first emerged. That announcement had sparked a knee-jerk rally in cyclical and value shares that unwound mid-week, but then reignited again on Monday after Moderna’s announcement.
“We saw such a positive reaction last week which then petered out as investors started to take account of all of those various question marks that still remain,” Seema Shah, Principal Global Investors’ chief strategist, told Yahoo Finance on Monday. “We’ll need to see a continuation of this kind of good news to keep this rotation going.”
“But I think that even if we take account of all the various question marks that are out there, next year still looks pretty strong,” she added. “Not only do we have a potential vaccine in play, but we also have all the central banks providing endless liquidity. We have fiscal stimulus on the cards and of course we have an economic recovery which either is going to be ongoing. So I think as investors look at this, there are a lot of reasons to have a pro-cyclical trade on. It’s just a question of maybe maintaining some caution as you move into that.”
Other strategists have also underscored the near-term risks to equities, while acknowledging the more sustained rally that may arise later next year. In a note Monday, Morgan Stanley strategist Mike Wilson said he expects the S&P 500 will be range-bound between 3,150 and 3,550 as the market grapples with rising new COVID-19 cases and restrictions, before jumping to 3,900 by year-end next year. In some of the latest new virus-related restrictions, California on Monday sharply rolled back reopening plans across the state, and Michigan announced a partial lockdown starting Wednesday and lasting for three weeks.
Shares of AbbVie (ABBV), Merck & Co. (MRK) and Bristol-Myers Squibb (BMY) each rose in late trading, after Warren Buffett’s Berkshire Hathaway disclosed it newly added stakes in the three health-care stocks to its portfolio. Shares of Costco (COST) rose overnight after declaring a special cash dividend of $10 per share, helping offset worries even after Berkshire Hathaway disclosed it exited its entire position in the stock during the third quarter.
6:10 p.m. ET Monday: Stock futures open higher
Here were the main moves in markets, as of 6:10 p.m. ET Monday evening:
S&P 500 futures (ES=F): 3,626.75, up 3.75 points or 0.1%
Dow futures (YM=F): 29,880.00, up 15 points or 0.05%
Nasdaq futures (NQ=F): 12,071.5, up 66.5 points or 0.55%