Dow and S&P 500 hit record highs as optimism surged for a breakthrough in the quest for a coronavirus vaccine.
Shares of firearms sellers tumbled on Monday as promising data from a COVID-19 vaccine trial knocked stay-at-home stocks and as civil unrest failed to materialise after Democratic candidate Joe Biden emerged as the winner of last week’s United States presidential election.
Smith & Wesson Brands and rival Sturm Ruger & Co fell more than 9 percent, while Vista Outdoor, which sells ammunition and a range of sporting goods, fell more than 12 percent.
They were among several so-called stay-at-home stocks dropping after Pfizer said its experimental vaccine was more than 90-percent effective in preventing COVID-19.
Sales of sporting goods, including hunting gear, have increased this year as consumers spend more time outdoors due to the coronavirus pandemic.
“If a vaccine that is 90 percent effective can truly bring COVID to an end, the return to work and school could subsequently bring sales in these categories back down to normalized levels,” Aegis Capital analyst Rommel Dionisio said in an email.
Two other big winners this year from consumers spending more time at home – Peloton Interactive and Zoom Video Communications – both fell more than 14 percent, while airlines and other companies that would benefit from an end to the health crisis rallied.
An absence of civil unrest following the election may also be hurting sentiment for gun stocks.
Worries that Biden and his Democratic party would win the presidency and take control of the Senate from Republicans sent firearms sales surging in recent months, as did violent protests in several cities, and fears of new civil unrest related to Tuesday’s presidential election.
But with control of the Senate still undecided, Biden could struggle to fulfil campaign promises, including banning the sale of military-style rifles.
However, Dionisio predicted that fears about gun safety legislation could still fuel another surge in firearms purchases by consumers worried they will not be able to buy them in the future.
Smith & Wesson’s shares have jumped or dropped at least 6 percent in every session since the election, and they are now down 11 percent overall since Tuesday.