The global race for a coronavirus vaccine or treatment has seen two antibody breakthroughs this week. | Source: REUTERS/Lucas Jackson
- The Dow Jones Industrial Average (DJIA) jumped higher on Thursday.
- Another coronavirus treatment breakthrough comes from Japan’s Kao Corporation and Kitasato University.
- China’s export numbers defied expectations to rise 3.5% in April, bolstering investor sentiment.
The U.S. stock market is back in risk-on mode today, with the Dow Jones Industrial Average (DJIA) rocketing around 300 points higher during the morning session.
The move comes as yet another promising coronavirus treatment was announced overnight. Researchers at Kitasato University and Kao Corporation revealed a new antibody that ‘neutralizes’ the coronavirus in a lab setting. Bloomberg reported:
Kao and Kitasato University have discovered an antibody that helps suppress the coronavirus and hope the discovery will lead to the development of the treatments for the disease.
This isn’t the first time equities have rallied on hopes for a virus treatment or vaccine. Traders remain optimistic that a therapeutic response could see economic activity to normal sooner rather than later.
Dow, S&P 500, and Nasdaq enjoy a return to risk-on
Despite signs that investors are cautiously moving to cash, the stock market has maintained a steady range for the last month.
As of 10:09 am on Thursday morning, the Dow had gained 279.76 points or 1.18% to trade at 23,944.40.
Dow Jones Industrial Average (DJIA) futures looked bleak overnight, before two bombshell headlines from Asia triggered a buying spree when the stock market opened. | Source: Yahoo Finance
The S&P 500 rose 1.25% to 2,884.03, while the Nasdaq – which is just a few points from turning positive for the year – jumped 1.14% to 8,955.61.
The race for coronavirus therapy and vaccines
The Japanese discovery is the second major antibody breakthrough announced this week. On Monday, the Nature Communications journal published a similar antibody study. Scientists discovered that a lab-made antibody could block the novel coronavirus.
Both discoveries are a promising first step. The treatments will now go through clinical trials to be confirmed.
The markets are responding positively to any therapy or treatment because it could limit the damage of a second coronavirus wave in the fall. Crucially, it could help avoid further lockdowns and economic destruction.
Late last month, we saw the Dow Jones shoot higher on news that Gilead’s drug Remdesivir had a positive effect on Covid-19 patients.
Stock markets rally on China export optimism
There’s more positive news out of Asia this morning, too. China surprised everyone by revealing a 3.5% rise in exports for April compared to last year. It’s the first time this year exports have risen as China slowly emerges from economic paralysis.
The numbers defied gravity with most expecting an 11.5% decline. Despite the good results, analysts warn those numbers will slip again as demand is expected to disappear around the world. Louis Kuijs, China economist at Oxford Economics explains. As the rest of the globe remains in lockdown:
Exports should weaken significantly in the near term.
Waiting for another brutal jobless claims report
All eyes are now firmly on today’s jobless claims report. More than 30 million have claimed unemployment since the crisis began, wiping out all job gains since the last recession. St. Louis Federal Reserve President James Bullard estimates that 20% of America may lose their job before the crisis is over.
The unemployment rate is going to be extremely high. We think 20% isn’t unlikely, could even be higher than that.
Yesterday’s ADP private payrolls showed employment dropping off a cliff with 20 million jobs wiped out in April. The monthly Labor Department’s job report will follow on Friday. Bullard says it will be “one of the worst ever.”
But bad news won’t shock the Dow Jones any more
Despite the carnage on the jobs market, don’t expect the Dow Jones to blink. As Brian Belski of BMO Capital Markets put it, the stock market has already priced in the economic shock. The dramatic 30% plunge in March took care of that.
Bad economic numbers, once they’re finally reported, aren’t going to … equate into a reaction from the stock market.
The Dow Jones has already priced in two quarters of a recession, he told CNBC. But he warned that stocks could turn south if that economic damage continues through the third and fourth quarters.
This article was edited by Samburaj Das.
Last modified: May 7, 2020 2:10 PM UTC