Stocks Continue to Rally on Mixed News, Hopes For A Coronavirus Vaccine

The stock market continued its week-long rally yesterday, with the Dow Jones Industrial Average climbing 690 points to finish almost 3.2% higher on a day that saw both good and bad news for the market.

The S&P 500 closed 3.35% higher and the Nasdaq gained 3.62% as the pending home sales index hit a three-year high in February, but oil prices continued to crater and the Dallas Federal Reserve reported that its manufacturing index fell well below expectations.

Oil prices hit an 18-year low yesterday, as the price of WTI crude fell to $20.09 per barrel, the lowest price since February 2002. Demand continues to disappear as nearly all travel is frozen amid the coronavirus outbreak just as the supply is about to explode as Saudi Arabia and Russia increase production when the current OPEC deal ends on March 31.

The Dallas Federal Reserve’s manufacturing activity index absolutely collapsed in March, measuring -70.0 compared to expectations of -10.0. New orders, capacity utilization and shipments all fell to their lowest readings since the Great Recession.

A handful of stocks climbed higher on positive news of clinical trials for a COVID-19 vaccine and the ability to rapidly test for the virus as well, but at least one analyst is skeptical the gains will last.

Johnson & Johnson (NYSE: JNJ) rose 8% after announcing it would begin human testing of a coronavirus vaccine by September and says it expects the first batches of a COVID-19 vaccine could be available for emergency use authorization in early 2021. The company also reported that it plans to produce as much as one billion doses of the vaccine.

Alex Gorsky, Johnson & Johnson’s Chairman and CEO said, “The world is facing an urgent public health crisis and we are committed to doing our part to make a COVID-19 vaccine available and affordable globally as quickly as possible.”

Abbott Labs (NYSE:ABT) climbed 6.4% after it received an emergency use authorization (EUA) from the FDA for its 5-minute COVID-19 testing kit, which it says it hopes to produce 5,000 per day starting on Wednesday.

“Abbott's ID Now Covid-19 test will help battle the pandemic in real-time by bringing vital information in minutes to front-line clinicians who are working to stop the spread of the virus,” said John Frels, Abbott's vice president of research and development.

Nigam Arora, investor and founder of the Arora Report says the revenues that Abbott Labs will see from sales of the 5-minute COVID test will be dwarfed by the losses it will see elsewhere as a result of the coronavirus.

And Arora says that Johnson & Johnson will be selling the vaccine at cost, resulting in no additional revenue for the company. Thus, the run-up in stock price is unwarranted in his opinion.

While investors and Wall Street analysts can debate whether or not the rising stock prices are warranted, the rest of us can at least benefit from these companies bringing forward new tests and treatments in the fight against COVID-19.