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Market Snapshot: Dow futures turn lower after U.S. agencies call for pause of Johnson & Johnson COVID vaccine

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U.S. stocks turned south on Tuesday morning after U.S. public-health agencies requested a temporary halt in the use of Johnson & Johnson’s one-shot COVID vaccine out of “an abundance of caution” due to extremely rare blood-clotting issues.

The news comes as cases of the virus are ramping up in the U.S., heading into the summer and as the country had been hoping to increase production of the Johnson & Johnson COVID remedy that has far fewer logistical challenges than other vaccines that must be stored at super-cold temperatures.

How are stock benchmarks trading?

On Monday, the Dow
DJIA,
-0.16%

slipped 55.20 points to close at 33,745.40, a decline of 0.2%; the S&P 500
SPX,
-0.02%

gave up less than a point to finish at 4,127.99; while the Nasdaq Composite Index
COMP,
-0.36%

declined 50.19 points, ending at 13,850.00, a loss of 0.4%.

What’s driving the market?

Stocks stumbled 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,
+0.24%

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 to 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,
+1.01%

and Moderna
MRNA,
-1.08%

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, investors were also watching for a report on inflation. The U.S. consumer price report for March is due out at 8:30 a.m. Eastern and economists polled by Dow Jones are 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.

“Even if inflation concerns have been played down by the Federal Reserve, investors will keep a close eye on the US CPI data release,” wrote Pierre Veyret, technical analyst at ActivTrades in a daily note.

Ipek Ozkardeskaya, senior analyst at Swissquote said that the market reaction to the inflation report will depend on the degree by which it is outside expected ranges.

“The market reaction to the inflation data will of course depend on the strength of the data, but also on how much investors are ready to buy into Jerome Powell’s prediction that higher inflation won’t last long enough to compromise the Federal Reserve’s (Fed) inflation target of an average of 2%,” Ozkardeskaya wrote.

“Jerome Powell will continue repeating that inflation is not an issue in the longer run,” the Swissquote analyst said.

The session will see a parade of 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 pre-market.

: This is no time to “prematurely declare victory” in the battle against Covid-19, says Fauci

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