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Markets Invert on Positive News on COVID-19 Vaccine; Pandemic Winners Sink Among Broader Gains

  • Pfizer and BioNTech announce that their COVID-19 vaccine is 90 percent effective, exceeding expectations
  • News causes a rapid shift in market favorites, with “stay-at-home” stocks dropping amid broader gains
  • Pfizer applying to fast-track distribution of the vaccine, though research is continuing into its effectiveness on severe and asymptomatic cases

Markets rose sharply this morning after Pfizer and its German partner BioNTech announced that its candidate COVID-19 vaccine is 90 percent effective. The news led to a rapid realignment of favored stocks, as investors anticipate a rosier outlook for most industries but less demand for “stay-at-home” services such as video conferencing.

While investors were anticipating the results of third-phase testing on three vaccines in November, Pfizer’s announcement yielded better than expected results. The U.S. Food and Drug Administration previously said it could approve a safe vaccine that was at least 50 percent effective, though White House coronavirus Anthony Fauci said a 75 percent effective rate would be preferred. Pfizer had anticipated that its vaccine would be 60 to 70 percent effective.

Stocks soared for several industries that have been hobbled by public health restrictions brought on by the COVID-19 pandemic, with sectors such as airlines, cruise lines, and banking seeing gains. The anticipation that travel and tourism will regain strength once a vaccine is available sent energy and oil stocks up as well.

Businesses that saw their stocks boom during the pandemic, such as the video conferencing company Zoom and the at-home fitness company Peloton, experienced a reversal in fortune on the vaccine news. Tech companies who have offered virtual gatherings and other social connections during the pandemic also saw their stocks decrease.

The rapid realignment in the market signals how businesses may need to once again change their strategies after the pandemic caused many companies to reinvent themselves. For example, grocers who benefited from panic buying and restaurant restrictions may need to refresh their offerings in order to retain customer loyalty.

The market gains come on the heels of a similar boost following the election of Joe Biden as U.S. president. Investors anticipate less market volatility in a Biden White House, including less potential for major policy changes if the Senate remains in Republican control.

Pfizer plans to submit an application for emergency use authorization to the FDA after collecting two months of data, a milestone set for the third week of November. It would be able to produce tens of millions of doses of the vaccine before the end of the year if the application is approved, though health care workers would likely receive priority for this early batch.

Research into the vaccine is ongoing, and it comes with some caveats. Pfizer and BioNTech are still looking into whether the vaccine can prevent severe COVID-19 cases that result in hospitalization or if it can prevent people from becoming asymptomatic carriers of the virus, a factor which has challenged efforts to contain its spread.

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