Stocks on Wall Street were set to open nearly 3 percent higher on Monday, after promising news about a Covid-19 vaccine developed by Pfizer propelled markets higher. The jump followed strong gains in European and Asian markets, on the first day of trading since the presidential race was called for Joseph R. Biden Jr. on Saturday.
The benchmark Stoxx Europe 600 index surged 2.5 percent, the fifth gain of more than 1 percent in the past six trading days. The FTSE 100 in Britain rose 2.4 percent, the CAC in France jumped 3.2 percent, and the DAX in Germany was 3.4 higher. The Nikkei 225 in Japan ended the day 2.1 percent stronger, and the Hang Seng index in Hong Kong finished up 1.2 percent.
Futures markets extended their rally after a vaccine developed by Pfizer and BioNTech was found to have been more than 90 percent effective in preventing Covid-19 infections, based on a large study. Pfizer said by the end of the year, it will have manufactured enough doses of the vaccine to immunize 15 to 20 million people. Pfizer shares jumped more than 12 percent in premarket trading.
The news of a vaccine being potentially available as soon as this year sent shares in the industries most heavily hit by restrictions on travel surging. In premarket trading, American Airlines jumped 14 percent and United Airlines rose 10 percent. Carnival, the cruise ship operator, rose 19 percent, before markets opened. The company’s stock had dropped more than 70 percent this year.
Trading on Monday follows the best week for the S&P 500 since April, as investors became more convinced that President-elect Biden would govern alongside a Republican-held Senate. However, two runoff elections in Georgia mean the control of the Senate won’t be known until January.
The S&P 500 fell sharply in late October but rose 7.3 percent last week and is now 2 percent away from a record it reached in September. On Friday, the MSCI All Country World Index, a global equity index, reached a record high after gaining 7.6 percent last week.
Oil prices surged higher. The West Texas Intermediate, the U.S. benchmark, gained 8.4 percent, rising above $40 a barrel. Traders dumped haven assets, with the yield on 10-year U.S. government bonds rising 10 basis points, or 0.1 percentage points, to 0.92 percent, the gold price fell 2 percent.
A critical factor behind the swings over the past two months has been the prospect for more government spending to shore up American consumers, businesses, and — possibly — state and local government finances. Though talks are expected to continue, the election muddied the picture somewhat, and diminished expectations about the size of the fiscal deal.
Paul Donovan, the chief economist at UBS Global Wealth Management, offered a rundown of some key issues for investors in the short and long term: “Prospects for a ‘lame duck’ fiscal package; any policy actions President Trump may take in the coming weeks before Biden’s inauguration; who will get posts in the Biden administration; which party will control the Senate.”
Over a longer period, he says, markets will be more focused on environmental policy, and whether rising polarization will damage U.S. economic growth.
Turkey’s lira rose from record lows on Monday after two major changes to the leadership managing the country’s economy. The head of the country’s central bank was replaced on Saturday. The next day, the finance minister, Berat Albayrak, who is also the son-in-law of President Recep Tayyip Erdogan, announced his resignation.
“This unusual set of events could mark a shift towards orthodox policies, which would provide the lira with a much needed respite,” said Piotr Matys, a currency strategist at Rabobank.
For Wall Street, the 2020 election was fraught with risk and uncertainty.
Early on, candidates who promised to rein in the excesses of corporate America and tax the superrich, as part of their pledges to close the country’s wealth gap, were in contention to be the Democratic nominee for president.
More recently, the concern shifted to the potential for civil unrest, or an election with no clear outcome, both factors that would result in the kind of uncertain environment that investors and chief executives both loathe.
In the end, though, big companies and wealthy investors seem to have landed in a sweet spot: a more predictable White House under Joseph R. Biden Jr., now the president-elect, paired with a Republican-led Senate that can ward off higher taxes or other policy changes investors find unappealing. (At least for now, that is. Control of the Senate is a matter that won’t be settled until January after Georgia holds two runoff elections.)
“Financial markets don’t want risk or sudden changes,” said Charles Phillips, a longtime software executive who is raising a technology-investment fund and a supporter of Mr. Biden. “So the fact that he’s levelheaded and collaborative, and the fact that most likely we may have a Republican Senate — if that happens, it’ll limit what he can do,” he said.
Markets bolted upward last week as the national vote count appeared to point to that result. Over the weekend, after the race was called for Mr. Biden, some analysts said to expect more gains over the peaceful completion of the voting process, and to watch for an uptick in shares of companies Mr. Biden’s policy agenda is likely to benefit — including green-energy companies, producers of virus-testing materials and laboratories, and those in the infrastructure space.
Mr. Biden did win substantial financial backing from finance-industry donors, (about $74 million, according to figures compiled by the Center for Responsive Politics, which overshadowed Mr. Trump’s support from those donors by a factor of four to one), and some expressed their excitement for their candidate.
“President-elect Biden offers enormous experience, a steady hand and an unparalleled ability to overcome obstacles,” said Jon Gray, the president of the giant investment firm Blackstone Group.
Other reactions from across Wall Street after the election was called were more measured.
Ken Griffin, the billionaire founder of Citadel, said he was “relieved there is no social unrest,” David Solomon, the C.E.O of Goldman Sachs, and George Wallace, who runs Neuberger Berman, both pointed to the challenges Mr. Biden faces with the country in a pandemic and an economic crisis. Bill Ackman, who runs the hedge fund Pershing Square Capital Management, meanwhile, called on President Trump to “concede graciously and call for unity from all who have supported you.”
Over the past year, SoftBank, the Japanese conglomerate headed by maverick billionaire Masayoshi Son, has come back from the brink of disaster.
SoftBank said on Monday that the trend had continued through the end of the summer, extending a recovery that followed one of the worst losses in Japan’s corporate history.
The company on Monday reported 562 billion yen, or $5.4 billion, in profit for the three months that ended in September. The jump from a big loss a year ago was largely driven by broad growth in global tech stocks as the coronavirus pushes consumers to spend more of their lives online.
Last year, a disastrous investment in the office space company WeWork cast doubt on Mr. Son’s investment strategy. Earlier this year, the coronavirus pandemic cratered Softbank’s high-profile bets on companies like Uber and Oyo, which were hit hard by lockdowns across the world.
But a broad market recovery has pushed up the value of some stocks held by Softbank’s Vision Fund, the world’s largest tech investment vehicle. The company said the fund’s original investment of $75 billion in 83 companies had grown to $76.4 billion by the end of September.
Around half of the fund’s growth, however, came from increased valuations in its unlisted companies. SoftBank has frequently come under criticism by analysts for a lack of transparency in how it values its investments in the these privately held companies.
The market volatility was not all good news for SoftBank. The company also recorded $1.27 billion in losses from risky bets on derivatives. The moves, which were widely reported in September, have raised additional concerns about Mr. Son’s investment acumen.
In an earnings conference Monday evening, Mr. Son brushed off criticism about his management, dismissing the losses as short-term setbacks that distracted from his long-term vision for the company’s success.
The third-quarter earnings season is nearly over, and so far the results have been better than expected, by a wide margin. About 80 percent of companies in the S&P 500 stock index that have reported third-quarter earnings so far have exceeded analysts’ expectations, The New York Times’s Peter Eavis and Niraj Chokshi report.
That’s well over the norm. Typically, just shy of two-thirds of companies beat analysts’ quarterly forecasts.
Here are the highlights of Peter and Niraj’s takeaway from the earnings season.
The strong are getting stronger.
As the pandemic forced people to stay home and do more things online, some successful companies were perfectly positioned to take advantage of the change.
Consider Amazon. Its profits in the first nine months were up $5.8 billion compared with a year earlier. They allowed the company to spend 120 percent more during the period on things like warehouses, technology and other capital investments. That spending — $25.3 billion — could make it harder for all but Amazon’s biggest competitors to keep up with its growth.
Some companies are doing better than expected.
When the pandemic hit, many executives understandably feared that their companies were facing an existential crisis. But a surprising number of those have excelled in part because many Americans who did not lose jobs but were also not spending on travel and entertainment found themselves with more disposable income.
General Motors, Ford Motor and other automakers reported big profits.
For some large restaurant chains, drive-through customers, as well as delivery and takeout orders helped them grow. On Thursday, Papa John’s, whose stock is up 32 percent this year, reported surging sales, profits and cash flow and announced a new stock buyback program.
Businesses have adapted, successfully in some cases.
Hertz sought bankruptcy protection in May. And its biggest competitor, the Avis Budget Group, ran up large losses — $639 million in the first six months of the year. But Avis turned a modest $45 million profit in the third quarter.
The company’s comeback was made possible by cost-cutting and a decision to sell 75,000 vehicles in the United States to take advantage of strong demand for used cars. (Nationally, spending on used light trucks, including sport utility vehicles, was up nearly 19 percent in the third quarter from a year earlier.)
The outlook is dire for others.
Passenger airlines are among the biggest losers of the pandemic, and they have few options to improve their prospects. Delta, United Airlines and American Airlines worked quickly to cut costs and got $50 billion in the March federal stimulus package.
In the third quarter, American lost $2.4 billion and United lost $1.8 billion. For all three, revenue fell more than 70 percent from the same three months last year.