Coronavirus vaccine news from Pfizer and BioNTech served as a trigger for massive market moves. Post-announcement trades favour companies from the so-called 'old economy' at the expense of companies from the so-called 'new economy'.
Old economy is made up of companies with more traditional business, like airlines, oil majors or industrial stocks. Meanwhile, new economy stocks are usually tech companies and they have gained significantly this year. Zoom Communications is a perfect example of a new economy stock. Zoom shares gained over 550% this year as demand for video meeting software surged amid stay-at-home orders. However, the stock has slumped more than 10% in today's pre-market trading following announcements from Pfizer and BioNTech.
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Open account Try demo Download mobile app Download mobile appDoes this mean that 'new economy' stocks no longer have a solid business outlook? Not necessarily. It will take time to vaccinate the population and some countries may be adverse to buying vaccines before there are clear results on efficiency and safety. Moreover, production quotas announced by Pfizer and BioNTech mean that it may take years to deliver vaccines to everyone. Until then various coronavirus restrictions will stay in place and new may be levied should a pandemic situation worsen. While we may see some old vs new economy convergence going forward in the stock markets, it can take a long time in case of fundamentals. Keep in mind that approving the coronavirus vaccine does not change anything unless the vaccine is actually applied to the population.
Nevertheless, knee-jerk reaction highlighted profit taking from pandemic winners with US100 dropping like a rock. At the same time, US30 and US500 jumped as old economy stocks have a bigger share in those indices. US2000, index grouping US small-caps, rallied the most and has hit a limit up (trading halted until US session open). US2000 broke above a peak from 2018 and reached a fresh all-time high.
Nasdaq (US100), "winner" of coronavirus pandemic, slumped on vaccine news while other US indices rallied with small-cap Russell 2000 (US2000) being an outperformer. Source: Twitter
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