Tech shares rise but Dow under pressure as U.S. pauses Johnson & Johnson COVID vaccine rollout

How are stock benchmarks trading?

• The Dow Jones Industrial Average
  DJIA,
  -0.34%
  were trading 160 points lower at around 33,588, a decline of 0.5%.
• The S&P 500 index
  SPX,
  +0.12%
  was up less than a point to reach 4,128, or less than 0.1%.
• The Nasdaq Composite Index
  COMP,
  +0.68%
  rose 64 points, or 0.5%, to 13,921.

On Monday, the Dow slipped 55.20 points to close at 33,745.40, a decline of 0.2%; the S&P 500 gave up less than a point to finish at 4,127.99; while the Nasdaq Composite declined 50.19 points, ending at 13,850.00, a loss of 0.4%.

What’s driving the market?

Technology stocks were rising but the broader market was wobbling early Tuesday after the two leading U.S. federal public health agencies, the Food and Drug Administration and Centers for Disease Control and Prevention called for an immediate pause in the use of the Johnson & Johnson’s
JNJ,
-1.89%
COVID-19 vaccine, after six recipients in the U.S. developed a rare disorder involving blood clots within six to 13 days after being vaccinated.

The news is having a relatively modest impact on the investment mood on Wall Street, but may be a reminder of some of the challenges of reopening the economy from the worst pandemic in more than a century.

“Fortunately, the US vaccination rollout is well underway, so the downside effect on both oil and US stocks should be fairly limited,” wrote Stephen Innes, chief global strategist at Axi. He added that with the stock market near records it has been sensitive to negative headlines.

So far, nearly 7 million Americans have received J & J shots, and about 9 million more have been delivered to states, CDC data show. Scientists from the FDA and CDC will jointly investigate possible links between the vaccine and the clotting disorder and determine whether it should continue to be used or be limited. 

The J & J shot, which showed 66.1% efficacy in preventing moderate to severe disease had been seen as a game-changer for getting Americans rapidly vaccinated.

J&J’s shot was the third cleared for use in the U.S., behind the two-shot Pfizer
PFE,
+1.19%
and Moderna
MRNA,
+8.28%
vaccines.

The vaccine report comes as the U.S. is facing a new rise in COVID cases, with reports of 70,000 new coronavirus infections per day, according to data from Johns Hopkins University. That is even after hitting a single-day vaccine record of 4.6 million on Sunday.

The economic rebound has been closely tied to getting Americans vaccinated and back to work and children back in schools.

Federal Reserve Bank of St. Louis President James Bullard on Monday said that that although it was too early to talk about dialing back the central bank’s accommodation, he said that getting 75% or 80% of people vaccinated might signal that it is time to taper the Fed’s bond purchases.

“When you start to get to 75% vaccinated, 80% vaccinated and CDC starts to give more hopeful messages that we are bringing this under better control and starts relaxing some of their guidelines, then I think the whole economy will gain confidence from that,” Bullard said during an interview with Bloomberg TV.

Meanwhile, a report on consumer prices came in higher than estimated, rising in March for the fourth month in a row, with the pace of inflation hitting the highest level in 2½ years.

The rate of inflation over the past year shot up to 2.6% from 1.7% in the prior month, marking the highest level since the fall of 2018.

The report underscored new pressures emerging on the economy as the U.S. recovers from the coronavirus pandemic. Economists polled by Dow Jones were projecting a month-over-month rise of 0.5% and 2.5% year-over-year.

Fed officials have emphasized that they are willing to keep rates near 0% even if inflation starts to rise because policy makers think it will be transitory. However, market participants have expressed some skepticism of the central bank’s inflation outlook.

The session also will see a parade of Fed speakers including Philadelphia Fed President Patrick Harker, who will deliver speech on economic outlook to the Delaware State Chamber of Commerce at noon, Richmond Fed President Thomas Barkin will speak to the Economic Roundtable of the Ohio Valley at the same time.

Market participants were also parsing data out of China after the country’s exports jumped in March, suggesting that COVID’s grip on the nation may be seeing further loosening. The data showed that imports surged 38.1% from March a year ago in dollar terms, beating analysts’ consensus estimates, while exports climbed 30.6% over the period, below expectations but still strong.

Which companies are in focus?

• Shares of J & J were down by about 3% in premarket trade after the FDA and the CDC called for an immediate pause in the use of its COVID-19 vaccine on Tuesday, “out of an abundance of caution.”
• Investors may also be watching a report on inflation and news that Singapore-based Grab Holdings Inc. is going public through a merger with special-purpose acquisition company Altimeter Growth Corp. AGC. Shares of Altimeter were up over 7% in premarket.

How are other assets faring?

• The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was down 0.1% at 92.01.
• U.S. crude
  CL.1,
  +0.90%
   for May delivery
  CLK21,
  +0.90%
   gained 62 cents, or 1%, to trade at $60.30 a barrel on the New York Mercantile Exchange.
• The 10-year Treasury note yield TMUBMUSD10Y shed 0.3 basis point to 1.67% after the CPI report. Bond prices move inversely to yields.
• Gold futures traded higher, with the June contract
  GCM21,
  +0.91%
  $10.20, or 0.6%, higher at $1,742.90 an ounce on Comex.
• In Europe, the Stoxx 600 index SXXP traded little changed, while London’s FTSE 100 UKX was down 0.1%.
• In Asia, the Shanghai Composite SHCOMP finished 0.1% lower, Hong Kong’s Hang Seng HSI closed down 0.2%, and Japan’s Nikkei 225 NIK rose 0.7%.