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Wall Street Steadies Itself Monday 11/29 16:15
Wall Street steadied itself Monday after last week's stock market slide
caused by the newest coronavirus variant, with investors now waiting for more
clues about just how much damage it may do to the economy.
NEW YORK (AP) -- Wall Street steadied itself Monday after last week's stock
market slide caused by the newest coronavirus variant, with investors now
waiting for more clues about just how much damage it may do to the economy.
The S&P 500 rose 1.3% to recover more than half of its drop from Friday,
which was its worst since February. Bond yields and crude oil also recovered
chunks of what they lost in traders' knee-jerk reaction to run toward safety
and away from risky investments.
With vaccines in hand --- and with the benefit of a weekend to mull whether
Friday's sharp market moves were overdone --- analysts said the world may be in
better position to weather this newest potential wave. Plus, Friday's tumble
for markets may have been exacerbated by many traders taking the day off
following Thanksgiving.
But while the market steadied itself, uneasiness still hangs over it due to
the discovery of the variant now known as omicron. The variant appears to
spread more easily, and countries around the world have put up barriers to
travel in hopes of stemming it. Still to be seen is how effective vaccines
currently available are for the variant, and how long it may take to develop
new omicron-specific vaccines.
"There are still more questions than answers regarding the new variant,"
said Ryan Detrick, chief market strategist for LPL Financial. "At the same
time, we've been living with COVID-19 for almost 20 months now, and we've seen
multiple variants."
Given the uncertainty, the Dow Jones Industrial Average wavered between a
loss of 3 points and a gain of 388 points through the day. It ended with a gain
of 236.60 points, or 0.7%, at 35,135.94.
The most powerful lift for stocks came from those that have been able to
grow strongly almost regardless of the economy's strength or pandemic's pall.
Gains for five big tech-oriented stocks --- Microsoft, Tesla, Apple, Amazon and
Nvidia --- alone accounted for more than a third of the S&P 500's rise. The
gains for tech-oriented stocks also helped to drive the Nasdaq composite up a
market-leading 1.9%.
Moderna jumped 11.8% for the biggest gain in the S&P 500, adding to an even
bigger gain from Friday, after it said it's testing the effectiveness of its
vaccine against omicron. Its CEO said in a televised interview on ABC that it
could take two to three months for a vaccine developed specifically for the
variant to begin manufacturing.
Travel-related stocks started the day with gains but fell back as more
caution filtered into the market and as travel restrictions around the world
remained in force. They ended mixed after President Joe Biden said he wasn't
considering a widespread U.S. lockdown. He said the variant was a cause for
concern and "not a cause for panic." Delta Air Lines and American Airlines
closed slightly lower, while cruise line operators Carnival and Norwegian
Cruise Line notched gains.
All told, the S&P 500 rose 60.65 points to 4,655.27, while the Nasdaq added
291.18 points to 15,782.83. The Russell 2000 index of small companies was
headed for its own rebound after climbing 1.6% in the early going, but its
gains faded by late afternoon. The index slipped 3.96 points, or 0.2%, to
2,241.98.
"Because so much is still unknown about the omicron variant, it could take
us a week or more to recover what we lost in a single day," said Sam Stovall,
chief investment strategist at CFRA.
The yield on the 10-year Treasury rose to 1.51% from 1.49% late Friday,
recovering some of its steep slide from 1.64% that day. It tends to rise and
fall with expectations for the economy's strength and for inflation.
The VIX, an index that measures how worried investors are about upcoming
drops for the S&P 500, also eased significantly. But it's not all the way back
to where it was before omicron.
Besides waiting on more clues about how much economic damage omicron will
ultimately do, the market has several big mileposts this week that could swing
prices. The headliner is likely Friday's jobs report, where economists expect
to see an acceleration in hiring by employers during November.
Omicron adds more risk to a global economy already contending with
paralyzing uncertainty. Travel bans, including recent decisions by Japan and
Israel to bar foreign visitors, threaten to disrupt global business. Global
supply chains already gummed up by bottlenecks could be further ensnarled if
outbreaks shut down factories, ports and freight yards.
Shipping problems would risk pushing prices higher, adding to inflation
pressures. In response, the world's central banks could raise interest rates
and imperil the recovery from last year's brief but intense coronavirus
recession.
"Omicron reinforces that the economy remains tethered to the pandemic,''
Mark Zandi, chief economist at Moody's Analytics, said on Twitter Monday. "With
each new wave of the pandemic, the economy will suffer slower growth and higher
inflation.''
The U.S. economic recovery lost significant momentum when the highly
contagious delta variant hit over the summer. Economic growth slowed to an
annual rate of 2.1% from July through September from 6.7% from April through
June and 6.3% from January through March. The S&P 500 had its worst onth of the
year in September, falling 4.8%.
Still, more Americans are vaccinated now, and the economy has shown
resiliency, regaining speed after the summer slowdown. Zandi tweeted that "the
most likely scenario is the economy will manage through each wave better than
the one before it.''
Of course, the only way to know which scenario will ultimately occur is to
wait to see it through. And that uncertainty in the meantime could lead to more
up-and-down swings for the stock market, which has surged more than 24% this
year and set a record as recently as Nov. 18.
"We're just going to be in the dark for several weeks here," LPL's Detrick
said.
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