Stocks rose Wednesday, with Big Tech was doing most of the heavy lifting. Unfortunate news relating to vaccines emerged.
Dow Jones Industrial Average
dipped 8.22 points, or 0.03%, to close at 31,060.47. The
rose 8.65 points, or 0.23%, to end at 3,809.84, and the
gained 56.52 points, or 0.43%, to close at 13,128.95. The biggest gainer on the S&P 500 was
(ticker: INTC), up 7% on a CEO change that investors cheered.
Johnson & Johnson
(JNJ), according to a New York Times report, is unlikely to distribute as many Covid-19 vaccine doses in the spring as previously expected, due to manufacturing delays. The stock fell 0.1%.
The news is one minor step backward for the positive vaccine narrative, and the market responded in kind. Cyclical stocks, or those most correlated to perceived changes in the economy, fell. The
Industrial Select Sector SPDR ETF
(XLI) fell 1%. The
Energy Select Sector SPDR ETF
(XLE) fell 0.8%. The
SPDR S&P Bank ETF
(KBE) fell 0.7%. Interest rates fell slightly, which reflects an incrementally less-optimistic tone on the economic recovery and is a slight negative for bank profitability.
“Reopening” stocks, or those that benefit the most when investors grow more confident in reopenings, fell. Shares of
(WYNN) fell 2%, 0.7%, and 2%, respectively.
Companies that see a revenue tailwind when people are homebound got a nice boost.
Zoom Video Communications
(ZM) stock rose 2%, and
(PTON) stock soared 7%.
One of the reasons the market-cap-weighted S&P 500 was able to eke out a gain was because megacap tech stocks, collectively worth several trillions of dollars, rose significantly.
(MSFT) shares rose 1.6%, 1.4%, 2.8%, and 0.7%, respectively.
One of the best checks on how optimistic the market feels about the recovery is the
Invesco S&P 500 Equal Weight ETF
(RSP), which slipped 0.3% Wednesday. The ETF, which isn’t weighted by market cap, reflects if the market’s movement was consistent across sectors, signifying broad optimism. The slight drop in the ETF means that technology’s rise wasn’t part of a tide that lifted all boats.
Still, one reason selling on Wednesday was benign rather than extreme is partly that investors still expect billions of doses of vaccines to be distributed throughout the year. The reopening and economic “normalization” thesis is still intact.
The stock market has been decreasingly moved by macro events, such as the vaccine rollouts, Evercore strategists pointed out in a report. Now, even if one vaccine producer falters, investors remain confident the others will pick up the slack in distributing doses. And when a new vaccine looks ready, the broader market doesn’t get the same lift it used to enjoy because it has already reflected the mass distribution. Stocks are increasingly moved by company-specific stories, especially as earnings season kicks in.
One big risk: If vaccine rollouts stumble significantly and for a sustained period, expect serious downside in a fully priced market.
Write to Jacob Sonenshine at firstname.lastname@example.org