By Stephen Culp
NEW YORK (Reuters) – The S&P 500 and the Dow followed world equity indexes to record levels and U.S. Treasury yields surged on Monday, as promising developments toward a coronavirus vaccine and the prospect of improved trade relations under President-elect Joe Biden gave a jolt to investor risk appetite.
Value stocks boosted all three major U.S. stock indexes to all-time highs and crude prices jumped more than 10%.
The indexes subsequently paired their gains, and the Nasdaq was last flat.
Pfizer Inc said its COVID-19 vaccine, developed with German partner BioNTech SE, was more than 90% effective in preventing infection, marking the first successful results from a large-scale clinical trial.
“Investors are truly optimistic and there’s not a whole lot of sellers out there,” said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut. “This optimism is reflected in multiple asset classes – stocks, Treasury yields, oil prices are up sharply, and gold prices are down sharply.
“Last Friday we were talking about new shutdowns – tightening restrictions on restaurants and bars – and this represents a light at the end of the tunnel,” Pursche added.
Global leaders welcomed the U.S. election results, congratulating President-elect Joe Biden even as incumbent Donald Trump refused to concede, vowing to challenge the result.
The CBOE Market Volatility index, a barometer of investor anxiety, dropped to its lowest level since late August.
The Dow Jones Industrial Average rose 1,260.16 points, or 4.45%, to 29,583.56, the S&P 500 gained 93.09 points, or 2.65%, to 3,602.53 and the Nasdaq Composite dropped 1.21 points, or 0.01%, to 11,894.02.
Pfizer’s announcement gave a jolt to European shares, sending them to an eight-month high, building on expectations of more stable trade policies in the wake of Biden’s victory.
The pan-European STOXX 600 index rose 3.98% and MSCI’s gauge of stocks across the globe gained 2.17%.
Emerging market stocks rose 1.37%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.96% higher, while Japan’s Nikkei rose 2.12%.
The vaccine news sent the benchmark 10-year U.S. Treasury yield soaring to its highest level since March, and the yield curve, an indication of risk appetite to its steepest since March, on optimism the world’s largest economy would emerge from a pandemic-induced recession.
Benchmark 10-year notes last fell 41/32 in price to yield 0.9594%, from 0.82% late on Friday.
The 30-year bond last fell 109/32 in price to yield 1.75%, from 1.598% late on Friday.
Oil prices surged and were on track for their biggest daily percentage gain in more than six months as the vaccine news and an OPEC output deal fueled optimism over rebounding demand.
U.S. crude rose 8.48% to settle at $40.29 per barrel and Brent was settled at $42.40, up 7.48% on the day.
The prospect of a Biden presidency buoyed trade-related currencies on expectations of a thawing of the tariff war as the dollar index rose from a 10-week low.
The dollar index rose 0.59%, with the euro down 0.35% to $1.1831.
The Japanese yen weakened 1.98% versus the greenback to 105.44 per dollar, while Sterling was last trading at $1.3169, up 0.10% on the day.
Gold prices slumped as investors pivoted away from the safe-haven metal in favor of riskier assets.
Spot gold dropped 4.3% to $1,866.86 an ounce.
(Reporting by Stephen Culp; additional reporting by Danilo Masoni; Editing by Dan Grebler)
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