The Dow closed up 550 points Tuesday after Federal Reserve Gov. Lael Brainard called for more stimulus, the Dallas Fed predicted above-trend growth for 2021, and biotech firm Moderna came out with positive coronavirus vaccine results.
First, even though Brainard said economic recovery from the COVID-19 pandemic will be slow, the markets latched on to her call for the Fed to boost economic growth by resorting to a “yield curve control”.
In other words, she is lobbying for the Fed to move from just stabilizing to more active stimulus.
The markets were all over that.
Then, St. Louis Fed President James Bullard said if “we play our cards right” unemployment could drop sharply over the next six months.
Bullard also gave a nod to investors who have been piling into equities, noting to reporters: “Equity markets are something we don’t usually talk about at the Fed. I think they have been optimistic and they have been right, I think, up to now anyway.”
The St. Louis Fed said that the pandemic has been a major boon for the market value of tech firms especially.
By the time Dallas Fed Reserve Chairman Robert Kaplan chimed in to say that economic recovery depended on Americans biting the bullet and wearing face masks, investors were already rather upbeat.
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Even though Kaplan said that data pointed to a slowing recovery as COVID-19 cases surge nationwide, what investors latched onto was this:
“In ’21, we will see an above-trend growth, and we will continue to grind down the unemployment rate,” Kaplan told CNBC’s “Closing Bell”. “I still believe if we follow these protocols, we would see a rebound from the deep hole we dug in the second quarter.
Kaplan brought up the timing of a vaccine, which also coincided with Moderna’s positive results that further boosted markets.
In early stage human trials, Moderna’s potential COVID-19 vaccine showed a “robust immune response” in all 45 patients, based on data published Tuesday in the New England Journal of Medicine.
Right now, all we have is face masks standing between us and solid economic recovery. A vaccine would be the game-changer, and Moderna early-stage human trial results struck exactly the right note for investors at the same time that Fed figures were striking a relatively upbeat tone.
The results showed that the vaccine triggered an immune response with only mild side effects, and earned Moderna the status of first in the U.S. to publish results in a peer-reviewed medical journal, according to CNN.
More specifically, the 45 patients who took part in the human trial produced neutralizing antibodies, which is believed to be key to building some level of immunity against COVID-19.
Moderna shares jumped up to 16% Tuesday on the results.
Next up, Moderna is slated to start its bigger, Phase 3 trial, which would be the final step before it comes up for a regulatory decision as to its suitability for delivery to the public as a COVID-19 vaccine.
By Michael Kern for Safehaven.com
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