Shares fell on Tuesday as volatility resumed after a brief rebound earlier this week as investors anticipated the fallout from a novel coronavirus strain.
The S&P 500, Dow and Nasdaq fell. The Dow, a proxy for cyclical stocks, underperformed the other two major indices, losing more than 200 points, or close to 0.8%, just after its opening bell Tuesday morning. The price of crude oil in the US (CL=F) fell by more than 2%. And shares of airlines, cruise lines and lodging providers considered the most exposed to virus-related disruptions each slumped in early trading to undo Monday’s gains.
A host of less optimistic new comments from major coronavirus vaccine manufacturers added to the sales pressure. Stephane Bancel, CEO of Moderna (MRNA), told the Financial Times the company’s current COVID-19 vaccine would likely see a “material drop” in effectiveness against its Omicron variant, noting that more data is needed. were to see some degree of decline. Separately, Albert Bourla, CEO of Pfizer (PFE), told CNBC that he didn’t “think the result will be that the vaccines don’t protect,” but that “the result could be, what we don’t know yet, the vaccines protect.” less .”
Both companies have already said they are collecting data on the Omicron variant and more definitive information will be available in the coming weeks. Researchers have not yet determined whether the new variant is more easily transmitted or responsible for more serious illness than earlier versions of the virus.
“Information comes in fast, it evolves in real time. You understand why investors [last week] took a bit of a hiatus, especially given the liquidity situation we had in the US holiday season,” Vivek Paul, chief investment strategist at BlackRock UK investment firm, told Yahoo Finance Live on Monday.
“We think on balance it would make sense to invest in the markets at this point,” he added. “It’s all about understanding whether this is a slowdown or a derailment of the reboot that we’ve seen. And it most likely at this point — despite more information to come — looks like a slowdown.”
The latest commentary on the variant at least briefly caught up with investors’ optimism over Monday’s comments from the White House, when President Joe Biden said Omicron was “no need to panic.” Biden said he planned to announce the White House strategy for dealing with the coronavirus this winter later this week, and that this plan would not include lockdowns, but would instead focus on vaccinations, boosters and testing. The Centers for Disease Control and Prevention (CDC) on Monday updated their guidelines to say that all individuals 18 years of age and older should receive a booster coronavirus vaccine, reinforcing previous language, primarily aimed at getting those most at risk. run an extra dose of shots.
The outlook that widespread lockdowns are unlikely to come to the US in light of the latest variant added to a broad risk rally on Monday. This contrasted sharply with Friday’s moves immediately after the World Health Organization’s announcement of Omicron as a “variant of concern,” leading to the Dow’s worst plunge since October 2020.
“This is not a repeat of March 2020,” Heritage Capital President Paul Schatz told Yahoo Finance Live on Monday. “This is nothing like March 2020, but it’s so recent in our history, people immediately think, ‘Omicron is here, oh my gosh, this is going to be a 30% drop, we’re going straight down’.. You have to get the weigh history equally, don’t weigh it based on how recent it was in your memory.”
Still, the sectors and individual stocks that outperformed Monday were largely technology names, which have served as defensive trades during the pandemic as investors bet on more “stay-in-place” behavior among consumers.
But at the same time, the emergence of the latest variant has also led a number of experts to speculate that the Federal Reserve could take a more moderate approach to monetary policy to continue supporting the economy in addressing lingering virus-related concerns. That, in turn, could keep interest rates low for longer and support longer-dated growth stocks.
“To take a step back, I think you had a global economy that went into the fourth quarter… [of 2020] last week looked incredibly strong… and then there’s a new variant coming,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, told Yahoo Finance Live on Monday. “That seems to work against many of the trades that work in that fast-growing environment, and also seemed to disrupt this ‘should central banks act more aggressively’ narrative, because if there’s a new variant, maybe we should be more careful.”
9:31 a.m. ET: Stocks open lower amid virus fears
This is where the markets traded just after the opening bell:
S&P500 (^ GSPC): -32.56 (-0.7%) to 4,622.71
dow (^DJI): -275.17 (-0.78%) to 34,860.77
Nasdaq (^IXIC): -60.25 (-0.38%) to 15.723.28
rough (CL=F): -$2.67 (-3.82%) to $67.28 per barrel
Gold (GC=F): +$11.20 (+0.63%) to $1,796.40 per ounce
10-year treasury (^TNX): -8.6 fps to yield 1.443%
9:07 AM ET: Home price growth slowed more than expected in the US in September
US home price growth cooled in September but still remained high by pre-pandemic measures, with low interest rates and rising rental costs still fueling buyer demand and pushing prices up.
The S&P CoreLogic Case-Shiller National House Price Index rose 19.5% in September from last year, down from a 19.8% increase in August. The closely monitored 20-City Composite Index, which tracks home price changes in 20 major US metropolitan areas, rose 19.1% year-on-year in September and also came in lower than its rise from 19.6 in August. And the 20-City Composite also fell below analyst expectations for a gain of 19.3%, according to Bloomberg’s consensus data.
8:56am ET: Markets ‘misread Fed’s COVID response function’: Strategist
According to at least one market expert, market participants are currently anticipating too much dovishness from the Federal Reserve in response to the latest concerns about the new Omicron variant.
“I suspect the interest rate market is misinterpreting the Fed’s COVID response function,” Neil Dutta, chief of economics at Renaissance Macro Research, wrote in a note Tuesday. “Each COVID wave has had less impact on the economy since the pandemic. For example, during the COVID wave that peaked in January, there was a significant slowdown in restaurant traffic.”
“In the most recent wave, there was no slowdown. In addition, during the spread of the Delta variant, the Fed gave a strong signal to start winding down in November,” added Dutta. “So I expect to see a slowdown in these recent market moves and am skeptical that recent coronavirus concerns will turn into deeper problems for the US economy.”
7:41 a.m. ET Tuesday: Stock futures fall as Omicron worries about a rebound
This is where the markets traded Tuesday morning:
S&P 500 futures (ES = F): -34.5 points (-0.74%), to 4.616.50
Dow futures (YM=F): -306.00 points (-0.87%), to 34,177.00
Nasdaq futures (NQ = F): -64.50 points (-0.39%) to 16,326.25
rough (CL=F): -$1.57 (-2.24%) to $68.38 per barrel
Gold (GC=F):+$7.70 (+0.43%) to $1,792.90 per ounce
10-year treasury (^TNX): -9.1 bps for 1.438% yield
6:15 PM ET Monday: Stock Futures Hold Profit
These were the key moves in the markets as the overnight session kicked off:
S&P 500 futures (ES = F): +9 points (+0.19%), up to 4,660.00
Dow futures (YM=F): +78 points (+0.22%), up to 35.155.00
Nasdaq futures (NQ = F): +29 points (+0.18%) to 16,419.75
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, Nov. 29, 2021. REUTERS/Brendan McDermid
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter