U.S. Stocks Pull Back Sharply On News Of First U.S. Omicron Case

Stocks showed a strong move to the upside in early trading on Wednesday but pulled back sharply over the course of the session. With the downturn on the day, the Dow fell to a nearly two-month closing low, while the Nasdaq and S&P 500 hit their lowest closing levels in over a month.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 461.68 points or 1.3 percent at 34,022.04, the Nasdaq plunged 283.64 points or 1.8 percent to 15,254.05 and the S&P 500 slumped 53.96 points or 1.2 percent to 4,513.04.

The substantial downturn on Wall Street came after the Center for Disease Control and Prevention revealed the first confirmed case of Covid-19 caused by the new Omicron variant has been detected in the U.S.

The CDC said the first confirmed omicron case was detected in an individual in California, who returned from South Africa on November 22, 2021.

“The individual, who was fully vaccinated and had mild symptoms that are improving, is self-quarantining and has been since testing positive,” the CDC said. “All close contacts have been contacted and have tested negative.”

The sharp pullback reflects recent volatility as traders show significant sensitivity to the latest news about the Omicron variant of the coronavirus.

While news of the detection of the variant contributed to the steep drop last Friday, indications the symptoms of the variant were “extremely mild” contributed to a rebound on Monday.

However, comments from Covid-related drugmakers suggesting vaccines and treatments are less effective against Omicron contributed to Tuesday’s pullback.

Traders largely shrugged off the latest U.S. economic news, including a report released by payroll processor ADP showed private sector employment increased by slightly more than expected in the month of November.

ADP said private sector employment shot up by 534,000 jobs in November after surging by a revised 570,000 jobs in October.

Economists had expected private sector employment to jump by about 525,000 jobs compared to the addition of 571,000 jobs originally reported for the previous month.

ADP chief economist Nela Richardson noted, “It’s too early to tell if the Omicron variant could potentially slow the jobs recovery in coming months.”

The Institute for Supply Management released a separate report showing manufacturing activity grew at a slightly faster rate in the month of November.

The ISM said its manufacturing PMI crept up to 61.1 in November from 60.8 in October, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 61.0.

Sector News

Airline stocks showed a substantial downturn over the course of the trading session, with the NYSE Arca Airline Index plummeting by 4.9 percent after soaring as much as 3.4 percent in early trading.

Significant weakness also emerged among gold stocks, as reflected by the 3.2 percent nosedive by the NYSE Arca Gold Bugs Index. The index tumbled to its lowest closing level in well over a month despite an increase by the price of gold.

Oil service stocks also came under pressure as the day progressed, resulting in a 2.6 percent slump by the Philadelphia Oil Service Index. With the steep drop, the index ended the session at a three-month closing low.

The sell-off by oil service stocks came as the price of crude for January delivery fell $0.61 to $65.57 a barrel after reaching a high of $69.49 a barrel.

Software, natural gas, and retail stocks also showed notable moves to the downside, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 255 Index and China’s Shanghai Composite Index both rose by 0.4 percent, while South Korea’s Kospi spiked by 2.1 percent.

The major European markets also showed strong moves to the upside on the day. While the U.K.’s FTSE 100 Index jumped by 1.6 percent, the French CAC 40 Index and the German DAX Index surged up by 2.4 percent and 2.5 percent, respectively.

In the bond market, treasuries moved slightly higher over the course of the session after seeing initial weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by nearly a basis point to 1.434 percent after reaching a high of 1.497 percent.

Looking Ahead

Further news on the Omicron front may attract attention on Thursday along with the Labor Department’s report on weekly jobless claims.

Trading activity may be somewhat subdued, however, as traders look ahead to the more closely watched monthly jobs report on Friday.

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