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S&P 500 Surges on Coronavirus Vaccine News: Travel and Entertainment Stocks Have Huge Day

By Jason Hall - Updated Jul 15, 2020 at 6:55PM

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News that an early trial for a COVID-19 vaccine is yielding positive results had investors betting big on hotels, airlines, cruise lines, and travel-booking stocks today.

More good news on a potential COVID-19 vaccine that's looking promising. The S&P 500 (^GSPC 2.13%) picked up 29 points, or just under 1%, on July 15, following the publication of results from a phase 1 study of Moderna's (MRNA 1.83%) COVID-19 vaccine candidate. The results were promising, showing that all 45 participants produced neutralizing antibodies. 

Investors took the news and ran with it -- straight into some of the most beaten-down stocks in the S&P, including cruise lines, airlines, hotel and casino operators, and travel and entertainment-booking companies. An amazing 20 companies in the S&P 500 gained more than 9% on the day, with a dozen of those in the travel, entertainment, and hospitality business. 

Man with surprised expression holding toy rocket that begins to launch.

Image source: Getty Images.

Cruise lines riding the tide, airlines gaining altitude

The three biggest-gaining stocks in the index today were cruise lines Royal Caribbean (NYSE: RCL)Norwegian Cruise Line Holdings (NYSE: NCLH), and Carnival Corp (CCL 9.19%), all up 16% or more at market close and rising higher in after-hour trading. It's been an incredibly volatile period for cruise line investors, with the beaten-down industry still working on plans to go back to the high seas. 

Today, like every other day that's seen cruise line stocks move big over the past few months, is based on speculation. The big three cruise operators won't be returning to the water before September and even then will be cruising with much fewer passengers. 

All five airlines in the S&P 500 gained at least 7.5% today:

Airline stock Price change on 7/15/20
American Airlines Group (NASDAQ: AAL) 16.2%
United Airlines (NASDAQ: UAL) 14.6%
Delta Airlines (DAL 2.17%) 9.5%
Alaska Air (NYSE: ALK) 9.2%
Southwest Airlines (LUV 2.45%) 7.5%

Source: Fidelity

Today's gains for these airlines is due to the same thing that's moving cruise line stocks. Hope for an effective vaccine to help humanity move beyond the deadly pandemic is giving investors visions of skies full of jets filled with passengers once again. 

While still in bad shape, airlines are in a relatively better situation than their waterborne brethren, since air travel has recovered somewhat over the past few months. Yet even with air travel resuming -- at least domestic travel -- these operators are still seeing volume down well more than half from last year's levels. 

Delta's earnings yesterday are a good reminder of how bad things are: The company still has more than 70% of its flights grounded and burned an average of $27 million in cash per day in June. Southwest is also saying it is likely going to be forced to layoff employees for the first time in the company's history, since it looks like air travel will take longer than expected to fully recover. 

Nonetheless, investors are betting on an early-stage vaccine as a hopeful sign things will get better sooner rather than later. 

Hotels, casinos, booking websites show big gains too

MGM Resorts International (MGM 1.65%)Live Nation Entertainment (NYSE: LYV), Hilton Worldwide Holdings (NYSE: HLT)Host Hotels & Resorts (NYSE: HST)Expedia Group (NASDAQ: EXPE), and Wynn Resorts (NASDAQ: WYNN) all gained between 9.4% and 13% today, riding the same positive news about Moderna's vaccine candidate. Like their travel-focused brethren, hotels, casinos, and entertainment event and booking companies have struggled mightily as the coronavirus pandemic has brought entertainment and business travel to a halt. 

Earnings update: Goldman banks a huge quarter, UnitedHealth Group doubles profit

Goldman Sachs (GS 3.35%) and UnitedHealth Group (NYSE: UNH) were two of the more notable S&P 500 companies to report earnings today, with both delivering expectations-beating results. 

Goldman reported a huge 41% increase in revenue and earnings of $6.26 per share, which beat expectations by more than 60% on very strong trading and investment banking activity. In short, Goldman's investment banking focus is paying off in the market's turbulence. 

For UnitedHealth, it may seem counterintuitive that a health insurer's profits would go up during a global health pandemic. And while COVID-19 did negatively impact its business, the medical care that was deferred in the quarter reduced its expenses, putting more of the premiums it earned on the bottom line.

Investors should note that those gains probably won't last forever; deferred medical treatments will take a bite out of future earnings, and a deep recession could weigh on premiums as more people lose employer-based insurance as unemployment increases. Moreover, the sharp increase in COVID-19 cases is likely to result in more expenses for the massive health insurer. 

Of note: Ford's Bronco well-received, Hanesbrands and Gap up big on analyst upgrades

Ford Motor Company (F 3.06%) has been desperate for some good news in what has proven a brutal year. Today it seems to have gotten that, with investors feeling a lot better about the company following the Monday night reveal of its long-awaited Bronco SUV. The new Bronco will come in three styles and looks to be a serious new entry to the valuable sporty SUV space. Investors like the Bronco's prospect enough to vote up the Blue Oval's stock price more than 6% today. 

Two of the S&P 500's biggest gainers today were Hanesbrands (HBI 2.57%) and Gap (NYSE: GPS), up 14% and 13%, respectively. The two apparel manufacturer and retail companies got bullish backing from separate Wall Street analysts today, with Raymond James upgrading Hanesbrands to a "strong buy" and an RBC analyst boosting Gap shares on strong prospects from its partnership with Kanye West. 

Looking ahead: buckle up

So far, this week has turned out well for investors, with the S&P delivering two positive days even with earnings so far coming in mixed, and COVID-19 cases and the death toll mounting. Needless to say, it's going to be impossible to accurately predict what happens with stocks over the next week, month, or even year. The fact is, today's big day for many stocks was tied to the prospects for a vaccine that could still take over a year to fully complete clinical trials

Of course, investors are betting on an emergency-use authorization coming sooner, but the stakes are very high for a vaccine or more effective treatments to finally help us put the COVID-19 pandemic, and the brutal human toll, behind us. 

Jason Hall owns shares of Ford and Southwest Airlines. The Motley Fool owns shares of and recommends Live Nation Entertainment. The Motley Fool recommends Alaska Air Group, Carnival, Delta Air Lines, Southwest Airlines, and UnitedHealth Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
$10.34 (9.19%) $0.87
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,210.24 (2.13%) $87.77
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
$347.91 (3.35%) $11.29
Ford Motor Company Stock Quote
Ford Motor Company
$15.50 (3.06%) $0.46
Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
$39.28 (2.45%) $0.94
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
$33.93 (2.17%) $0.72
MGM Resorts International Stock Quote
MGM Resorts International
$34.48 (1.65%) $0.56
Hanesbrands Inc. Stock Quote
Hanesbrands Inc.
$11.56 (2.57%) $0.29
Moderna, Inc. Stock Quote
Moderna, Inc.
$174.27 (1.83%) $3.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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