The market’s erratic response to lukewarm medical research for COVID-19 treatment and vaccine candidates isn’t expected to slow down as investors pin their hopes for a recovery on the high-risk biotechnology sector.
“In the coming few months, the stock market, especially related to COVID-19, will continue to be volatile,” said Difei Yang, a biotech analyst at Mizuho Securities. “It’s driven by retail investors, rather than institutional investors…they react to headline news, and the market reacts.”
Case in point: on May 18, Moderna Inc.
became the first company to disclose data from a clinical trial testing a COVID-19 vaccine in humans. The preliminary data implied efficacy; however, the biotechnology company only shared data from eight out of 45 participants in the Phase 1 clinical trial. The stock jumped 20%, closing at a record high of $80.00, and the Dow Jones Industrial Average soared 3.9%, to finish at 24,597.37, erasing much of the month’s losses.
The next day Moderna’s stock took a dive, closing at $71.67, with analysts attributing the drop to a Stat News story outlining skepticism among vaccine experts. The Dow tumbled 1.6%, to end at 24,206.86, near a session low.
The thing is, the story wasn’t particularly damning. It did raise important questions, including why the data was released for a percentage of the trial’s participants and why the National Institute of Allergy and Infectious Diseases hadn’t put out a news release or comments from NIAID director Dr. Anthony Fauci, as the federal agency had done with clinical-trial data for Gilead Sciences Inc.’s
remdesivir. (Fauci later told NPR that the Moderna vaccine data “is really quite promising.”)
“Out of realm of its expertise, [the market’s] got a bias upward,” said Kristina Hooper, chief global market strategist at Invesco. “That creates an environment where you tend to see a very positive reaction by stocks to a development that might seem minor to health experts.”
There are two reasons behind the volatility: individual investors who don’t understand how drug development works may be simply reading a headline before investing in virus stocks. At the same time, there has been a shift in how medical research is disseminated as sites are now publishing COVID-19 studies before they have been vetted by other clinical experts.
“It’s a big pocket of froth. ”
Go to the news source: Why virus stocks are driving market volatility