US stocks fell for a second straight day, even after European stocks rallied on a record rally this month as investors weighed the surge in Covid-19 cases against recent vaccine breakthroughs that will help the global economy get back on top Legs to come.
The S&P 500 fell 1.2 percent, prolonging the decline Tuesday as afternoon trading losses rebounded shortly after New York City’s announcement that schools would again close. The tech-heavy Nasdaq Composite closed 0.8 percent lower.
In Europe, the regional Stoxx 600 index rose 0.4 percent, adding to the gains that put it on its strongest month with data from the late 1980s. It rose by around 14 percent in November. The UK’s FTSE 100 also closed 0.3 percent higher after renewed positive news about a possible vaccine.
Pfizer and German partner BioNTech announced last week that their coronavirus vaccine candidate was more than 90 percent effective in late-stage studies, and rival Moderna released even better data on Monday.
On Wednesday, Pfizer and BioNTech increased the efficacy rate for their shock to 95 percent, just like they did with Moderna, and said they would submit documents to US and European regulators for approval within days.
Hetal Mehta, senior European economist at Legal and General Investment Management, said investors had previously been too cautious about the prospects for a vaccine. “Our base for some time has been that vaccines will be widespread in the second half of next year,” she said.
Meanwhile, central banks were unlikely to withdraw their support for monetary stimulus to financial markets as economic recoveries from the pandemic were expected to be “patchy,” added Ms. Mehta.
Oil prices rose on the latest vaccine news. Brent crude rose 1 percent to about $ 44.23. The energy sector was one of the hardest hit countries by the pandemic as travel expenses were severely curtailed and global oil demand fell by an average of almost 10 percent in 2020 as flights ceased and more people avoided commuting.
“Yes, the vaccines will take some time to roll out and the logistical challenges are significant, especially in some emerging markets. However, this does not change the fact that the world economy will be stronger in two years than it is now,” he said Bell, global market strategist at JPMorgan Asset Management.
November saw a rotation from growth stocks like tech companies to “value” sectors of the market – unloved stocks typically found in economically sensitive industries.
Value stocks had rallied since the vaccine breakthroughs, with the S&P 500 up about 13 percent this month, while growth stocks are up about 8 percent.
That shift in value, however, came about in fits and starts that analysts attributed to the nature of the strategy: buying stocks when they are seen as undervalued relative to their earnings or assets.
“When you invest in growth, buy and hold,” said Robert Buckland, global equity strategist at Citi. “If your strategy is to buy stocks with a dividend yield of over 4 percent, which is below, adapt. Value investing needs to be more dynamic. ”
He added that US equity markets have the least exposure to value stocks such as consumer staples, banks and industrials in any major and developed emerging market. The equity markets in Europe and Great Britain have the highest value weights at around 50 percent, based on MSCI data. “The S&P has been the winner for the past 10 years,” said Buckland.
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