Shares tumble as Wall Street omicron race continues to shake

Wall Street put investors on another roller coaster ride on Wednesday, as an early stock rally reversed course and left the indexes with more losses.

The S&P 500 was down 0.5% as of 3:24 p.m. EST. It was 1.9% higher at the start, following better-than-expected readings on the US economy. The afternoon reversal is the latest dizzying move for the Wall Street benchmark, which fell 2.3% on Friday for its worst loss since February, then rose 1.3% on Monday, then fall 1.9% on Tuesday.

The wild moves are in part the result of investors struggling to reduce the damage the new variant of the coronavirus will cause to the economy. Markets were already down Wednesday afternoon when the White House announced that the first case of the omicron variant had been discovered in the United States, in a person recently returned from South Africa.

“Investors are going to have to get used to the idea that this won’t be the last variant,” said Liz Young, chief investment strategist at SoFi. “It’s probably something that has been with us for a while and we have to learn to live with it and manage the growth from an investment perspective.”

Another weight fell on Wall Street on Tuesday when the head of the Federal Reserve said he could end his immense support for financial markets sooner than expected amid still high inflation sweeping the world.

But since coming out of its collapse in early 2020 caused by the first wave of COVID-19, one of the hallmarks of the stock market’s powerful run has been the continued willingness of bargain-hunting investors to buy after. any lower prices. This enduring habit has helped the S&P 500 so far reach 66 all-time highs in 2021, the second record in a year, according to the S&P Dow Jones Indices.

It also helped the Dow Jones Industrial Average initially climb 520 points on Wednesday. The blue chip index lost this gain and more at the end of the afternoon. It was down 236 points, or 0.7%, to 34,255. The Nasdaq composite also turned red, slipping 1.2% after rising 1.8% earlier in the day.

Longer-term Treasury yields also initially recovered some of their steep declines from the previous day, sparked by concerns about slowing economic growth. But the rebound was short-lived. The 10-year Treasury yield was 1.43% from 1.44% on Tuesday night, when it fell 1.52%.

Some better-than-expected economic data did not prevent the wave of sales at the end of the day. A report by the Institute for Supply Management showed that growth in the U.S. manufacturing sector has accelerated somewhat faster than economists expected last month.

A separate report from the ADP payroll processor said non-government employers hired more people in November than economists expected. That could raise expectations for Friday’s more comprehensive jobs report from the US government, although the ADP report doesn’t have a perfect track record to predict it.

A stronger economy would use more fuel, and crude oil prices initially rose, briefly pushing US benchmark crude up 2.1%. But it lost those gains, closing 0.9% lower at $ 65.57 a barrel. It momentarily fell below $ 65 the day before. Brent crude, the international standard, slipped 0.5%.

Falling oil prices pushed most energy stocks down. Occidental Petroleum fell 1.9% and Diamondback Energy slipped 2.3%.

Vertex Pharmaceuticals rose 8.2% for the biggest individual gain in the S&P 500 after posting encouraging data from a study of its experimental treatment for kidney disease. More than 57% of S&P 500 stocks fell.

Shares rose in Europe and Asia amid continued uncertainty over the strength of the omicron punch.

Japan’s Nikkei 225 rose 0.4% even as the country tightened restrictions further by asking international airlines to stop taking new bookings for all flights to that country until the end of the year.

The South Korean Kospi jumped 2.1%, while the German DAX gained 2.5%.

A measure of fear on Wall Street climbed 4.4%. The VIX, which shows how worried investors are about the S&P 500’s coming declines, is still way above what it was before omicron rocked global markets after Thanksgiving.

The possibility of less aid to the markets from the Fed continues to hang over Wall Street. President Jerome Powell said on Tuesday that the central bank would consider halting its monthly bond purchases earlier, which are aimed at stimulating the economy by keeping rates on mortgages and other long-term loans low.

This would open the door for the Fed to raise short-term interest rates, diluting one of the main reasons the S&P 500 has more than doubled since late March 2020. Low rates encourage investors to pay higher prices. high for stocks and helped deflect criticism that the market had become too expensive. So a faster surge in short-term rates threatens stocks, but analysts believe this could also be an encouraging sign of the Fed’s confidence in the strength of the economy.

Analysts are also warning that the market will likely remain nervous until more clarity comes on the ultimate impact of omicron. With no answer yet on the effectiveness of vaccines against the variant, it is only a guess as to whether governments will reinstate tough restrictions, whether people will be afraid of businesses, or whether inflation will get worse.


AP business writer Yuri Kageyama contributed.

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