Investors reconsider unknowns of omicron
Pandemic-related market drops getting milder and shorter
Global markets steadied Monday, with stocks on Wall Street and oil prices gaining, as investors contemplated more carefully the knowns and unknowns of a new COVID-19 variant.
The S&P 500 rose 1.3%, rebounding from a 2.3% drop Friday. That was its worst day since February and came after initial news of the discovery in southern Africa of the new variant, called omicron. The World Health Organization labeled it a “variant of concern,” its most serious category.
Shares of companies in industries that had been bouncing back in recent months, like airlines and other travel firms, took big hits as governments reintroduced limits on movement across borders. Oil prices plunged on concerns about the economic toll of potential restrictions, while government bond yields fell amid an investor flight to the relative safety of sovereign debt.
On Monday, with quick answers about the threat from omicron hard to come by, investors seemed less focused on potential disaster and some of Friday’s moves were undone. While the new variant might turn out to be more contagious and vaccine resistant, it could also prove to be less dangerous to the health of the vaccinated or previously infected.
Scientists haven’t come to firm conclusions, and it could take up to two weeks before the tests of current vaccines on the new variant have results. And, COVID-related stock market drops are getting milder and shorter.
When the virus first emerged in early 2020 the S&P 500 fell for a month and a half before recovering. In October 2020, a resurgence of cases led to a drop of 5.6% over a few days, but markets had rebounded within a week. In July of this year, the emergence of the delta variant triggered a one-day slide of 1.6% that was recouped within a few days.
“We don’t know how dangerous it is to health, though early reports that it isn’t very dangerous, while downplayed by the cautious experts, are very seductive,”
Kit Juckes, a strategist at Société Générale, wrote in a note to clients. “Against that backdrop, some of Friday’s madness has been reversed, but only part of it.”
Stocks in Europe also rose Monday, with the Stoxx Europe 600 closing
0.7% higher. The FTSE 100 in Britain rose 0.9%, while stock indexes in France and Spain were also higher.
Futures of the two major oil bench marks, Brent crude and West Texas Intermediate, gained 1% and 2.6%. With crude oil rebounding, shares of energy companies also climbed. Enphase Energy was up 3.8%, while Diamondback
Energy gained about 2.3%.
Government bond yields also climbed. The yield on 10-year Treasury notes rose 4 basis points, or 0.04 percentage points, to 1.52%. On Friday, the yield had dropped 16 basis points, the steepest oneday fall since late March 2020.
Concerns over newly imposed travel restrictions mostly eased Monday,
with travel and leisure stocks trading higher as President Joe Biden said Monday that the administration’s plan to combat COVID in the winter did not include “shutdowns or lockdowns,” and would instead rely on more testing, vaccinations and boosters.
Royal Caribbean Group rose 2.8% on Monday, while Norwegian Cruise Line was up 0.8%. Shares
of United Airlines also rose. Moderna, the vaccine maker, rallied more than 10%.
Not every market rebounded, however. With Japan sealing its borders, just days after reopening to short-term business travelers and international students, shares in Asia tumbled. The Nikkei 225 fell 1.6%, while stocks in Hong Kong fell 1%.*