Market players had second thoughts about Moderna's (MRNA) coronavirus vaccine candidate late on Tuesday, which caused a sharp drop into the finish. The action has been very mild and the indices were on pace for the narrowest trading range since February but the reaction to this news shook things up and caused a scramble to reposition.
Those concerns are being quickly forgotten Wednesday morning, though, as the indices recover all the late losses. There is no news to account for the shift, although there has been an undercurrent of positive sentiment as Covid-19 numbers slowly improve and there is more movement toward opening the economy.
Many market players are feeling more positive as the drive to reopen the economy intensifies and Covid-19 cases drop in the hardest hit states. There are still some states seeing increases but there is leveling off for the country as a whole and that is encouraging.
The bears continue to be frustrated by how little market reaction there is to the poor economic numbers. While one Fed member commented Tuesday that he believed that unemployment would stay in the double digits into the end of the year the market continues to have remarkable confidence in both the Fed and the possibility of further fiscal policy.
Still, there are plenty of skeptics out there that don't believe the trillions in stimulus will fix all the economic problems. They are not gaining any traction at this point, though. Ultimately, market navigation may not be as easy as "don't fight the Fed," but it is working well at this point.
The most notable factor at work right now is the two-tiered nature of the market. There is the "new economy" stocks that benefit from the economic shift occurring as people adjust for years of social distancing. Then there are the "old economy" stocks that bargain hunters are hoping will turn into good values as they continue to retrench.
We have both a bull market and bear market occurring simultaneously, which makes for good stock-picking but presents problems if you are trying to trade the major indices. I am treating this as trading range action and will be focused on trading individual stocks. There are times for market timing and this is not one of those times.