Stocks took a turn lower Wednesday afternoon after Dr. Anthony Fauci, President Joe Biden’s top medical adviser, said the U.S. has its first confirmed case of the omicron variant of the coronavirus that causes COVID-19.
The comments come a day after the market swooned on a combination of hawkish comments from Powell and worries surrounding the omicron variant of coronavirus.
How are stock-index futures trading?
- The S&P 500 index SPX, +0.35% rose 24 points, or 0.5%, to 4,591, after hitting an intraday peak at 4,652.94.
- The Dow Jones Industrial Average DJIA, +0.04% traded 94 points, or 0.3%, higher to 34,578, but had established a Wednesday high at 35,004.
- The Nasdaq Composite Index COMP, -0.13% advanced 11 points, or less than 0.1%, to reach 15,546, but had registered an intraday peak at 15,816.82.
On Tuesday, the Dow industrials dropped 652.22 points, or 1.9%, to 34,483.72. The S&P 500 fell 88.27 points, or 1.9%, to 4,567, while the Nasdaq Composite declined 245.14 points, or 1.6%, to 15,537.69. The Russell 2000 index RUT, -0.29% slid 1.9% to 2,198.91, just shy of a close of 2,198.47 that would have put it in correction territory, defined as a fall of at least 10% from a recent peak.
What’s driving the markets?
Fauci said that “the California and San Francisco departments of public health and the CDC have confirmed that a recent case of COVID-19 among an individual in California was caused by the omicron variant.”
Although the eventual emergence of a U.S. case was widely expected, comments from the public health specialist took the wind out of the market’s sails, which had enjoyed a decidedly more optimistic tone Wednesday.
Investors had even shrugged off comments from Federal Reserve Chairman Jerome Powell, who reiterated his view that the central bank should tighten financial conditions to combat surging inflation from new variants of COVID such as omicron, testifying for a second day in front of lawmakers about the state of the economy in the face of the COVID-19 pandemic. Powell tempered his remarks by saying that “the taper need not be a disruptive event in markets, I don’t expect that it will be. It hasn’t been so far — we telegraphed it.”
Markets appeared to be in a more sanguine mood even before Powell’s Wednesday testimony, as investors parsed private payrolls in the U.S., which rose by 534,000 in November, according to the ADP National Employment Report released Wednesday. Economists polled by The Wall Street Journal had forecast a gain of 506,000 private-sector jobs in November.
The ADP results come ahead of the closely watched November payrolls data that will be released on Friday.
Tuesday’s downturn also was precipitated by comments from Moderna MRNA, -8.27% CEO Stéphane Bancel, who expressed doubts about extant vaccines against the omicron variant, which the World Health Organization on Friday designated as a variant of concern because they fear it may be more transmissible and harder to immunize against due to the mutations in its so-called spike protein.
Read: ‘Don’t freak out’: Omicron is bound to disrupt supply chains. The question is, how bad will it be?
Analysts said investors will remain laser focused on updates over the omicron variant, with data expected over the next two weeks or so.
“While Powell decided to retire the phrase transitory when discussing inflation, the fact is that this latest variant runs the risk of ensuring this current hawkish tone is in itself somewhat temporary in nature,” said Joshua Mahony, senior market analyst at IG, in a note to clients.
“With the risk of future lockdowns and economic closures, comments from the Fed and BOE should be taken with a pinch of salt given how much they could change once we find out the full extent of this variant,” said Mahony.
The U.S. is reportedly set to announce further travel restrictions this week, among them a requirement that all incoming air travelers be tested for COVID within a day of their flight. Details are being completed ahead of a planned speech from President Joe Biden on Thursday, where he is expected to detail the country’s plan to control the pandemic this winter.
In other economic data, a closely followed index of U.S.-based manufacturers rose to 61.1 in November from 60.8 in the prior month, the Institute for Supply Management said Wednesday. That matched the forecast of economists polled by The Wall Street Journal. Any number above 50 signifies growth. A separate reading from IHS Markit showed that November U.S. manufacturing PMI dropped to 58.4 vs initial 59.1.
Crude oil was also rebounding strongly from a sharp selloff on Tuesday. January West Texas Intermediate crude climbed 4.5% to $69.12 a barrel, while global benchmark Brent BRN00, +0.41% jumped 4.9% to $72.64 a barrel. Goldman Sachs strategists said the oil market reaction has been “excessive” in relation to the omicron variant.
Which companies are in focus?
- Groupon Inc. GRPN announced Wednesday that it has named Zappos veteran Kedar Deshpande to be the company’s next chief executive. Deshpande spent the past decade at Zappos in a variety of roles, including as CEO.
- Shares of GlobalFoundries GFS, -2.37% were rising Wednesday after the semiconductor fabricator, benefiting from the continuing global chip shortage, reported a 56% jump in third-quarter revenue.
How are other assets trading?
- Gold futures GC00, +0.32% rose 0.8% to $1,790.30 an ounce.
- The ICE U.S. Dollar Index DXY, +0.04%, a measure of the currency against a half-dozen other monetary units, was down 0.2% at 95.853.
- The 10-year Treasury note yields TMUBMUSD10Y, 1.440% around 1.48%, up from 1.440% on Tuesday at 3 p.m. ET. Prices for Treasurys fall as yields rise.
- The Stoxx Europe 600 SXXP, +1.71% closed 1.7% higher and London’s FTSE 100 UKX, +1.55% rose 1.6%.
- In Asia, the Shanghai Composite SHCOMP, +0.36% rose 0.3%, while the Hang Seng Index HSI, +0.78% gained 0.7% and Japan’s Nikkei 225 NIK, +0.41% rose 0.4%.
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