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The rapid spread of the omicron variant of COVID-19 is being blamed for a slumping Wall Street as Christmas week kicks off amid a slide in oil prices and moves by the Federal Reserve.
The Dow Jones Industrial Average lost 500 points following the opening bell on Monday, or 1.2 percent, though by mid-morning losses had pared back to a shade over 360 points.
Monday’s actions following a loss on Friday as well, the index’s largest weekly decline since the beginning of the month.
Meanwhile, the tech-centric Nasdaq also lost ground, shedding 1.3 percent on Monday.
The market saw some gains after pharma maker Moderna announced that a third dose of the company’s COVID-19 vaccine boosted immune responses against the variant as compared with two doses in lab testing, which indicated that the jab was capable of offering some protection. Moderna’s shares lept 8 percent premarket, while fellow vaccine-maker Pfizer’s shares gained 1.7 percent.
“Some countries are imposing restrictions to stem the spread of the Omicron variant as the holiday season starts,” Fox Business reported, which helped explain the Wall Street jitters. “The Netherlands on Sunday reimposed a lockdown, with all nonessential shops, bars and restaurants closed until mid-January. Irish Prime Minister Micheál Martin also announced new restrictions. President Biden plans to deliver an update Tuesday on the fight against COVID-19 in the U.S., where cases are rising.”
As infections rise, new concerns have also grown over how disruptive the variant will be to the already troubled global supply chain, which — coupled with massive government spending in the United States — has fueled inflation.
“We’re really seeing Omicron spread like wildfire, and it’s weighing on sentiment,” Esty Dwek, chief investment officer at FlowBank, noted, according to Fox Business.
“You’re seeing lockdowns instigated in Europe. You’re seeing more and more restrictions and the number of cases is going up so much that even if it’s less severe it could lead to more hospitalizations,” Dwek added.
She noted further that as cases rise, restrictions will likely rise with new cases and that will impact economic growth.
U.S. politics appears to be playing a role, as well: Goldman Sachs downgraded its growth forecast for 2022 after Sen. Joe Manchin (D-W.Va.) signaled on Sunday he wouldn’t support President Biden’s multi-trillion dollar “Build Back Better” agenda containing new social and climate spending, MarketWatch reported.
In addition, investors reacted to the Federal Reserve’s announcement it would cut back on its tens of billions of dollars’ worth of monthly bond purchases ahead of signaling higher interest rates in the coming months as well.
“With flight to safety being the overriding concern, lower bond yields are questioning the FOMC’s ability to act as hawkish as they signaled last week. Markets are being challenged by a range of uncertainties at a time where thinner trading volumes ahead of the holiday period can exacerbate price swings,” John Hardy, head of FX strategy at Saxo Bank, said in a note to clients, MarketWatch noted.
Oil took a massive hit last year amid a near-global shutdown, with travel and work restrictions taking a huge toll on daily consumption. However, demand has largely rebounded for the most part, but it is still around 2 million barrels short of the pre-pandemic level of around 101 million per day.
At the same time, production is rising, especially in the U.S., which is also putting a crimp on prices as supplies rise.
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