The Food and Drug Administration’s decision Monday to grant full approval to Pfizer-BioNTech's two-dose Covid-19 vaccine pushed markets higher, boosting the Dow Jones Industrial Average by 300 points and propelling the S&P 500 and the Nasdaq to new highs. Investors appeared to express confidence that the move could be an inflection point for the economic recovery.
The boost could reflect expectations that full approval will increase vaccination rates in two ways: more vaccination requirements by businesses and governments and greater acceptance from the public.
President Joe Biden pressed private companies Monday to mandate vaccinations, saying in a news briefing: “I’m calling on more companies in the private sector to step up the vaccine requirements that will reach millions more people. If you’re a business leader, a nonprofit leader, state or local leader who has been waiting for full FDA approval to require vaccinations, I call on you now to do that, require it.”
Some employers have already taken the approval as a green light for mandates. The New York City public school system — the country’s largest — announced that all staff members must have at least one shot of the two-shot regimen completed by Sept. 27, and the Defense Department announced that all 1.4 million active-duty military members will be required to be vaccinated.
Some private-sector companies, such as United Airlines, Tyson Foods, Walmart and the Walt Disney Co., had already required vaccinations for some or all employees.
“I think some companies and state and local governments will all be feeling more comfortable in issuing vaccine mandates,” said Eric Diton, president and managing director of The Wealth Alliance, an investment advisory firm. “All of that is going to contribute to a higher vaccination percentage, which means a reduced impact of Covid and the delta variant, which should ultimately lead to a strengthening of the economy.”
Vaccine skeptics could be increasingly isolated as more employers embrace mandates. The dismissal of a Texas court case and guidance from the Justice Department had already emboldened more employers to mandate vaccinations, said Michael Schmidt, office managing partner and vice chair of the labor and employment department at the law firm Cozen O’Connor.
The approval Monday will accelerate that momentum, he said.
“For those employers who were still waiting for that issue to resolve itself, I think they’ll be more likely to implement mandatory vaccine policies,” he said.
The approval also paves the way for companies or organizations to require customers to be vaccinated. In particular, the stricken leisure and hospitality sector could benefit if Americans are more willing to travel, dine out, visit theme parks and attend in-person events, said Tuna Amobi, senior consumer analyst at CFRA Research.
“The travel and leisure industry is highly correlated to consumer sentiment and the perception of safety,” he said. “It will all depend on the perception of the consumer, the consumer’s willingness to spend and willingness to travel.”
As case loads have surged recently because of the highly transmissible delta variant of the coronavirus, the economic recovery many had expected at the beginning of the summer seemed to be growing more elusive.
“Up until really recently, the consumer has been a bright spot in the economy,” Diton said. “The consumer wants to spend.”
The FDA’s move could help the country regain its footing on the path back to normalcy.
“With full approval and fears over the delta variant, you’ve got a combo ... that may help accelerate the number of vaccinations,” said Mike Bailey, director of research at FBB Capital Partners.
Bailey said that while the approval won’t win over die-hard vaccination skeptics, the upshot could still be the vaccinations of millions more people in the U.S.
“I don’t want to say this is a black-and-white scenario,” he said. “I do think, on the margins, there probably are some portion of vaccine-hesitant folks that are waiting for this.”
A recent Kaiser Family Foundation survey found that nearly one-third of unvaccinated adults said they would be more likely to get the shots after a vaccine received full FDA approval.
“If, over the next month or two, they start that vaccination process, that would be dramatic,” Diton said. “It reduces strains on hospitals, reduces the death rate. It’s good all around.”
Although none of the available vaccines is authorized for children under age 12, vaccination mandates for teachers and school staff members could help keep classrooms open, which could improve the employment picture among parents sidelined by child care demands during the pandemic.
“All these are building blocks that should help on the margins,” Bailey said, but he added that the virus remains a formidable and unpredictable foe. “It’s one piece of the puzzle, but it doesn’t change the Covid story,” he said.
Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance, said: “We are still a long way from achieving herd immunity. It will be a while before we are able to cross that threshold.”
Zaccarelli said that while the public health implications are crucial, the improvement in consumer sentiment from greater vaccination acceptance and lower rates of Covid-19 is also a key factor in sustaining economic momentum.
“To the extent that the general public becomes more comfortable living with the virus — either because of increased vaccinations or natural immunity from recovered infections — the economy is likely to continue on its upward trajectory,” he said.