U.S. stock futures soar on positive results from Moderna vaccine trial, assurances of Fed support

Biotechnology company Moderna reported Monday that early human trials for its coronavirus vaccine successfully produced covid-19 antibodies in all participants. The company plans to launch a large clinical trial in July aimed at showing whether the vaccine works. Moderna's shares soared 30% in early trading.

Investors also found comfort in comments Federal Reserve chair Jerome Powell made during a "60 Minutes" interview. He said the central bank is "not out of ammunition by a long shot" in its resources to support the economic recovery - which he warned could stretch into 2021.

David Rosenberg, chief economist of Rosenberg Research, said investors were being rewarded with a "triple whammy of good news" after two weeks of flux.

"For one, there is palpable relief that the majority of the states are reopening their economies, including 75% of California," Rosenberg in an email to The Washington Post. "Second, there is growing hope that a vaccine is coming our way sooner, rather than later. Lastly, Fed Chairman Jay Powell told investors over the weekend that the central bank's checkbook remains wide open, strongly hinting that more monetary policy stimulus is on its way." 

Last week, fresh economic data revealed the pandemic's mounting economic toll: The U.S. Labor Department on Thursday reported weekly jobless claims of 3 million, bringing the two-month total to more than 36 million unemployed. April retail sales plummeted 16.4%, a drop that was worse than analysts had predicted as consumers stayed home amid the pandemic lockdown. The darkening retail picture prompted some economists to issue even graver predictions for second quarter gross domestic product, with some calling for a contraction of more than 40%.

"The economic collapse has taken a dangerous turn where now it is consumer prices that are being pulled down into the abyss as consumers sitting at home have postponed their purchases," Chris Rupkey, chief financial economist and MUFG Union Bank wrote in commentary. "The danger is that consumers will see that prices are falling and actually stop buying goods and services to wait for even cheaper prices and a better deal which will only serve to prolong the recession and reinforce the economy's downward spiral into the unknown." 

But Monday's good news saw investors leave safe havens for riskier ground. The yield on the 10-year U.S. Treasury note to ticked upward to .665% in early trading. Bond yields rise as prices drop.

Continued recovery in oil markets added to the positive sentiment, as the gradual removal of lockdown restrictions around the world also eased fears of a global oil glut. Brent crude, the global oil benchmark, was up 9.6% to trade at $32.36 per barrel.

"The supply cuts of the last month combined with gradual reopening of various countries around the world has put a significant dent in the supply/demand imbalance and alleviated capacity concerns that led to last months panic," Craig Erlam, an analyst with OANDA, wrote in commentary Monday.