Stocks, Oil Drop on Omicron Variant Concerns
Moderna CEO expresses skepticism about whether vaccines will be as effective against new variant
Index performance
Source: FactSet
As of Nov. 30, 10:30 a.m. ET
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Nov. 30
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NasdaqComposite
S&P 500
Dowindustrials
By Will Horner
Updated Nov. 30, 2021 10:19 am ET
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U.S. stock indexes fell and investors sheltered in government bonds after drugmakers raised concerns that Covid-19 vaccines might not work as well against the new Omicron strain.
The S&P 500 declined 0.4%, and the Dow Jones Industrial Average fell 0.7%, or about 250 points. The tech-heavy Nasdaq Composite, meanwhile, added 0.1%. Major indexes closed higher Monday, rebounding from a sharp selloff last week.
Investors are trying to parse the risk posed by the new strain. Drugmakers have said existing vaccines might be less potent against Omicron. The lack of concrete information so far is driving uncertainty, and with it, volatility in stock markets. Moderna’s chief executive told the Financial Times in an interview published Tuesday that he was skeptical existing vaccines would be as effective against the new variant.
“Markets are kind of in a holding pattern where no one knows if this is going to be a problem or not,” said Mike Bell, a strategist at J.P. Morgan Asset Management. “Until we have evidence either way on whether the existing vaccines still work against Omicron, it doesn’t make sense to make a big bet in either direction.”
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President Biden said his administration was working with Pfizer, Moderna and J&J on Omicron contingency plans.
Trading in individual stocks reflected the focus on pandemic news. Moderna shares fell 7.5%. Travel and airlines also declined, with Expedia shares falling 3%, American Airlines shares dropping 2.9% and Carnival shares sliding 3.6%.
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The yield on the benchmark 10-year Treasury note, viewed as a safe asset, fell to 1.432% Tuesday from 1.529% Monday. Bond yields and prices move in opposite directions.
In commodity markets, Brent crude, the international oil benchmark, fell 3.5% to $70.88 a barrel Tuesday, having risen by 1% Monday.
The lack of concrete information on Omicron is driving volatility in stock markets.
PHOTO: RICHARD DREW/ASSOCIATED PRESS
Investors awaited testimony from Federal Reserve Chairman Jerome Powell on Tuesday for clues on how the new variant might impact the outlook for inflation and interest-rate rises. Mr. Powell is expected to say that the new strain could intensify the supply-chain issues that have fueled a spike in inflation.
The emergence of the Omicron variant has scrambled how investors view inflation. Oil prices and other commodities dropped sharply on the prospect for slower growth, which should feed through to softer inflation figures. Lower bond yields also reflect waning bets on runaway price rises.
Yet inflation may only come down slowly, with supply-chain problems made worse by travel restrictions. This could complicate how the Fed and other central banks, which were preparing to raise interest rates, react in the months ahead.
“We had been starting to see this glimmer of hope that some of the supply-side constraints were starting to ease,” said Seema Shah, chief strategist at Principal Global Investors. “If we go back into fear mode, you would be looking at those supply-side bottlenecks being exacerbated.”
Overseas, the Stoxx Europe 600 dropped 0.4%. In Asia, stock markets were mostly lower. Japan’s Nikkei 225 fell 1.6%, while Hong Kong’s Hang Seng Index fell 1.6% to its lowest level in more than a year. In mainland China, the Shanghai Composite Index edged up less than 0.1%.
—Karen Langley contributed to this article.
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