Dow closes down 300 points as COVID worries eclipse vaccine rally

Wall Street’s main stock indexes finished in the red on Thursday as surging COVID-19 infections in the United States and Europe eclipsed promising vaccine news that sparked a rally earlier in the week.

The Dow Jones Industrial Average finished the session down more than 317 points or 1.08 percent at 29,080.17.

The broader S&P 500 index – a proxy for the health of US retirement and college savings accounts – finished down 1.00 percent, while the Nasdaq Composite Index lost 0.65 percent on the day.

Thursday’s negative endings were a stark contrast to Monday when a powerful rally took hold after Pfizer said a late-stage clinical trial showed the COVID-19 vaccine it is developing with Germany’s BioNTech proved 90 percent effective.

That ignited hopes that the economy could be poised to normalise sometime next year.

Investors rotated out of tech and other stocks that have benefitted from pandemic shifts in work and consumer habits and into beaten-up sectors like travel, leisure and financials.

But angst over the pandemic challenges facing the US and the other parts of the world tempered investor optimism on Thursday.

The mood turned even dourer after Federal Reserve Chairman Jerome Powell said on Thursday that while the vaccine results were “good and welcome news” he warned that “the next few months could be challenging.”

New coronavirus cases in the US continue to spike above 100,000 for the eighth straight day, adding in excess of 144,000 cases as of Thursday, according to Johns Hopkins University.

New York on Wednesday followed the lead of California and parts of the Midwest by introducing new business-sapping restrictions to contain the spiralling infection rates.

That promises to heap even more pressure on the US labour market, where the recovery continues to shift into low gear.

Applications for unemployment benefits with states fell to 709,000 last week, the US Bureau of Labor Statistics said on Thursday.

While that is a seven-month low – layoffs remain widespread and are still higher now than they were during the peak of the 2007 to 2009 Great Recession.

Compounding the pain for the nation’s jobless – Washington is still deadlocked over another round of virus relief aid for the unemployed and struggling businesses.

The stalled stimulus package and rising infections pose key risks to economic recovery.

“Despite the prospects for an effective vaccine on the horizon, the resurgence in Covid-19 infections and looming expiration of fiscal support represent significant downside risks to the economy in the near term,” said Oxford Economics Lead US economist in a note to clients on Wednesday.

Among stocks making headlines on Thursday, shares of Moderna closed up more than 6.5 percent on expecations that the drugmaker will soon report results from the trial of its experimental COVID-19 vaccine.