Rosy Outlook on Virus Vaccine Brings Markets Some Lift

Promising data on a Covid-19 vaccine spurred Wall Street to end Wednesday on a positive note.

A musician plays his trumpet as pedestrians walk by on Royal Street in the French Quarter of New Orleans on July 9, 2020. (AP Photo/Gerald Herbert)

MANHATTAN (CN) — Markets climbed further upward on Wednesday, as investors were encouraged by new data showing promise in early-stage clinical trials of a vaccine against the virus that causes Covid-19.

The vaccine news brought significant gains in early trading on the Dow Jones Industrial Average, but by the closing bell the Dow had settled at a 0.8% increase of just 228 points. The S&P 500 and Nasdaq both had similar percentage gains.

Published a day earlier in the New England Journal of Medicine, the Phase 1 study shows that 45 patients who received a vaccine candidate developed by Moderna showed strong immune responses against the novel coronavirus without many side effects.

Phase 2 of the study is ongoing and is testing the safety, reactogenicity and immunogenicity of two vaccinations given 28 days apart. A third phase will begin later this month and could determine whether the final vaccine could immunize against Covid-19.

“The promising results has driven up the stock price, and it is also helping sentiment across the board,” David Madden, a market analyst at CMC Markets, wrote in an investor’s note. “The very nature of the pharma industry is volatile, as potential drugs often go through several rounds of tests before [they] gets approval.”

Moderna’s stock rose nearly 7% on Wednesday due to the news.

In total, nearly 13.4 million people have been infected by Covid-19 worldwide, while about 580,000 have died, according to data compiled by Johns Hopkins University. In the United States, nearly 3.4 million people have contracted Covid-19, while nearly 137,000 have died. 

Earnings have also continued to roll in, with Goldman Sachs the big name of the day. Much to shareholders’ delight, the firm reported a 41% year-over-year increase in net revenues for the second quarter of 2020 to $13.3 billion. 

The huge jump in revenue was largely due to a whopping 93% increase in Goldman’s investment bank division, as well as a lesser rise in the consumer and wealth management division.

“Our strong financial performance across our client franchises demonstrates the inherent benefits of our diversified business model,” CEO David Solomon said in a statement. “The turbulence we have seen in recent months only reinforces our commitment to the strategy we outlined earlier this year to investors.”

Shares of Goldman Sachs rallied early and finished the day up about 1.3%.

Regional banks did less well than Goldman Sachs. In its earnings release, US Bancorp reported that its net income fell from $1.1 billion during last year’s first quarter to $689 million during Q2 2020. The bank has serviced $7.3 billion in Paycheck Protection Program loans, and it noted it has set aside $7.8 billion in loan-loss reserves.

CEO Andy Cecere said in a statement that US Bancorp’s “diversified business mix generated health fee revenue growth, expenses were essentially flat, and capital and liquidity positions ended the quarter in a strong position.”

Similarly, Bank of New York Mellon reported its net income dropped slightly from $969 million during Q1 2019 to $901 million in Q2 2020. The bank’s fee revenue increased 2% year over year, mostly due to an increase in investment services, while total revenue increased slightly year over year to about $4 billion. 

On Tuesday, investors received the first round of banking earnings reports.

By a wide margin, the worst of the bunch so far has been Wells Fargo, which on Tuesday reported a $2.4 billion loss last quarter. JPMorgan Chase reported a record-high increase in revenue, however, showing $33.8 billion in managed revenue during the second quarter — mostly due to the 44% in the investment and corporate banking sides of the firm’s business.

On Thursday, Morgan Stanley and Bank of America are expected to release their earnings, while State Street, BlackRock and Citizens Financial will release their earnings on Friday.

The earnings are better than expected for most banks, and some analysts think even in the worst-case scenarios investors will take the carnage in stride. “I don’t think there’ll be any way to sugar-coat a disastrous Q2,” wrote Stephen Innes, chief global market strategist at AXI Trader on Monday.

He added that “some names could get hurt” but that “the U.S. indices are probably relatively safe as, for the most part, the safe bets rely more on the virtual economy rather than consumers physically showing up at shops.” 

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