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Before The Bell - The new week started out on a strong up note for Wall Street, as news of a second vaccine for preventing the deadly COVID-19 virus, this time from drug maker Moderna (MRNA), helped drive the Dow Jones Industrial Average up by 470 points, to a record closing high just south of 30,000, on Monday. That strong upsurge, which also included meaningful gains by the other equity indexes, however, did not carry over to trading yesterday morning, as the Dow, the S&P 500, and the NASDAQ all retreated initially.

Hurting the market at the open were fears about the arduous task of distributing the vaccines, which now are in the works, not only from Moderna, but also from Pfizer (PFE). Then, there was news out of Amazon (AMZN), which announced that it had launched a pharmacy business. That news cut deeply into the shares of pharmacy behemoths, CVS Health (CVS) and Walgreens Boots Alliance (WBA). Both stocks fell sharply in early dealings. In all, the Dow would fall by more than 400 points in the first half hour of trading.

However, not all the news was bad, as it was announced after the closing bell on Monday that iconic electric car marker Tesla (TSLA) would soon be added to the S&P 500 Index. That affirmation sent the stock up by some 12% early in the session. Meanwhile, there were mixed tidings on the economic front, with the report of just an incremental rise in October retail sales. However, industrial production perked up nicely last month. Adding it all up, it was a mixed-to-weaker setting and the stock market acted accordingly.

But as the morning progressed, the buyers did step in and trim the deficits sharply, so that as we neared the noon hour in New York, the markets looked to be heading toward an afternoon recovery.  To wit, the hours after lunch would see further improvement, with the NASDAQ going into the green as we moved inside the final two hours of trading, while the S&P 500 and the Dow inched closer to exiting the loss column. It seemed at that time as if the Dow would be progressing toward the 30,000 level, a historic point it had neared on Monday.  

The rest of the afternoon would see some efforts to bring a session gain home, but that recovery would fall flat in the last hour of the session and the three large-cap indexes would all close moderately lower. All told, the Dow would end 167 points in the red. What proved a barrier for the bulls were concerns about potential lockdowns in the coming weeks as new cases of COVID-19 continue to spike, approaching 200,000 some days. There also are worries about the pace of vaccine distributions.

 Meantime, the futures would be flattish in after hours trading last evening. The market might have some tougher sledding in the coming days as the S&P 500 and the Dow are up sharply this month and these and other indicators are now in overbought territory. On the other hand, the small caps continue to outperform. Now, looking ahead to a new day, we see that the early read on the stock market during the middle session of the week is now modestly positive, boosted, perhaps, by news that Pfizer will soon submit its COVID-19 preventive vaccine to the FDA for approval. – Harvey S. Katz, CFA      

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.