Remdesivir – Gilead Science’s (NASDAQ: GILD) antiviral created to fight Ebola – is back in the headlines.
Last week, a clinical trial out of China suggested that it didn’t work in treating COVID-19. The week before that, a University of Chicago Medicine study suggested that it did.
Investors felt slightly “crisscrossed” as a result. Chinese labs haven’t been the most forthcoming in recent months, but the findings of the trial were enough to give bulls pause.
Today, that all changed after the National Institute of Allergy and Infectious Diseases (NIAID) completed its remdesivir study. The NIAID now believes remdesivir has real potential as a coronavirus treatment.
Gilead also conducted a study on the drug of its own. Early results of the company’s trial found that COVID-19 patients improved significantly after taking remdesivir for only 5 days. 64.5% of the patients treated were discharged from the hospital within 14 days of taking the drug.
“It’s not going to be a cure, but it is going to be a drug potentially that if you use it particularly early in the course of the disease […] it could reduce their chances of having a really bad outcome,” said Dr. Scott Gottlieb, who served as the former FDA commissioner from 2017-2019.
The market is soaring in response to the news.
“The idea of something that is just given to you in the hospital IV that makes it so that it eliminates the, let’s say, the odds of you dying is something that makes us feel like that maybe this is the Tamiflu for this dreaded disease,” CNBC’s Jim Cramer said this morning.
“I think a lot of people are going to say open [the economy] up and that’s why the market’s flying.”
Helping matters is Google parent company Alphabet (NASDAQ: GOOG), which reported surprisingly strong earnings following the market’s close on Tuesday. GOOG shares are up almost 9% as of midday.
And now that Alphabet set the tech baseline, investors anticipate equally good (if not better) earnings from the other FAANG stocks. Amazon (NASDAQ: AMZN), in particular, has achieved a downright dominating retail presence amid the COVID-19 pandemic. The company will report earnings on Thursday (tomorrow) after the close. The numbers should reveal an impressive quarter that prods the tech-heavy Nasdaq Composite even higher.
More imminently important, however, is the Fed’s monetary policy announcement scheduled for 2 p.m. EST this afternoon. Chairman Jerome Powell is expected to tell investors that rates are staying near-zero for the foreseeable future. If he can defuse inflation worries, too, today’s rally could hit a fever-pitch.
“The Fed will likely focus on its crisis policy implementation and signal readiness for future shocks,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said.
“It’s also possible that the Fed clarifies its forward guidance and affirms that interest rates will remain low until inflation expectations are firmly anchored in the 2.0% range.
With stocks soaring and gold prices dropping, it seems the market isn’t overly concerned about inflation quite yet.
Yes, a massive round of fiscal stimulus was just dumped into the economy. For now, though, investors are feeling good.
And until inflation actually starts creeping higher, they’ll continue to feel that way.
So, while it might be tempting to cut-and-run from stocks after such a massive gain today, it’s probably the wrong move.
That’s not to say inflation won’t be a problem. It absolutely will be if left unchecked.
But with a COVID-19 treatment and economic re-opening on the docket, the market doesn’t care. It would be prudent to stay long on equities until it does.
Especially once the Fed confirms its dovish monetary policy later today.
