The S&P 500 index closed lower on Tuesday as investors seem to have focused on a report questioning the results of early research on COVID-19 vaccine from Moderna. Earlier, the market circulated information that the tests indicated the effectiveness of the vaccine, to which the stock indices responded with strong increases on Monday.
It appears that on Tuesday, the indices were down to session lows as a result of the STAT News report, which questioned the validity of the Moderna vaccine test results announced on Monday. The shares of Moderna Inc. fell after the report by more than 10 percent. So again, we don't know exactly when the effective coronavirus vaccine will be available, but that doesn't spoil the mood on Wall Street in the long run. Futures contracts are already recovering, growing by more than 0.5 percent. Nevertheless, it is clear that markets are more responsive to medical information than to information coming from the economy. Here investors seem to be convinced that the worst will be behind us after the second quarter. The third and fourth quarters may be definitely better.
According to a survey conducted by Reuters, the U.S. economy is expected to contract by 35 percent in the second quarter, to grow by 16 percent in the third quarter, while growth in the fourth quarter is expected to be 9 percent. It may be quite clear from these data that most economists do not expect a second wave of epidemics this autumn or winter. However, there are also institutions that see a prolonged recession in the US until the final three months of this year. This is a minority, however.
Financial markets and stock indices also seem to show that the worst is behind us and there will be no closing of economies at the end of the year. Let’s hope such a scenario works, but it is always worth having a contingency plan in the back of your head if reality takes precedence over current optimism. It seems that this is currently not present in stock prices and indices.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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