The announcement that Moderna's (MRNA) vaccine candidate met its phase 3 clinical trial endpoint was not a big surprise, but its effectiveness of 94% and its shelf life were much better than expected. It helped to keep the indexes running.
Unlike last week, the vaccine news did not generate much of a "sell the news" reaction and the rotational action out of growth and into volume was not nearly as severe. The FATMAAN names help relatively well as money poured into lagging names and small caps.
The reaction today is an indication that the market has not yet discounted the end of the Covid crisis and a return to "normal." Although the major indexes are hovering around all-time highs, they seem to be indicating that they expect economic growth to shift back into high gear once the vaccines become widely available.
It is fascinating how the indexes can ignore the blaring headlines about the increase in Covid-19 cases and the various shutdowns that are taking place, as they focus on what will happen next. The market is a discounting mechanism, but it operates in a very inefficient manner at times.
There are some good arguments for the position that the market is being too optimistic about the economic impacts of the vaccines, but the price action is hard to argue with.
It is particularly important to be cognizant of the fact that there is some major rotation going on. The stocks that worked best a month or so ago and no longer the leaders. It is the lagging names that are stepping up and many of them have pretty poor charts.
There is likely to be some very messy trading action as the market looks ahead to the end of the Covid-19 crisis and starts to rotate into new leadership, but the good news is that plenty of good opportunities will develop as it plays out.
Have a good evening. I'll see you tomorrow.