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USA | Nov 29, 2021

US stocks tumble on new Omicron variant fear

/ Our Today

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A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 8, 2021. (Photo: REUTERS/Brendan McDermid)

NEW YORK (Reuters)

US stocks closed lower on Friday (November 26), with the Dow Jones and S&P 500 suffering their biggest one-day percentage drops in months, and pandemic-hit sectors that had gained from a reopening falling sharply after a new coronavirus (COVID-19) mutation was found.

Authorities worldwide reacted with alarm on Friday to the Omicron variant found in South Africa, with the European Union and Britain among those tightening border controls as researchers sought to establish if it was vaccine-resistant.

Cruise operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise Line each plunged more than 10 per cent, while shares in United Airlines, Delta Air Lines and American Airlines also tumbled. The NYSE Arca Airline index fell 6.45 per cent in its biggest one-day percentage decline since September 2020.

Retailers dropped 2.04 per cent as Black Friday kicked off the holiday shopping season with worries that the new variant would depress store traffic and curb supply.

Selling was broad, with big declines of more than one per cent in all 11 major S&P sectors except healthcare, which fell just 0.45 per cent thanks to COVID-19 vaccine makers Pfizer Inc rising 6.11 per cent to close at a record high of $54, and Moderna Inc jumping 20.57 per cent.

“It is déjà vu all over again for like the eighth time,” said Keith Buchanan, senior portfolio manager at Globalt Investments in Atlanta.

“What we understand about this variant could accelerate over the weekend, if there is more concerning news than good news, a lot of people don’t want to be holding risk assets on Monday morning, or are afraid of what that could look like Monday morning.”

Despite the sell-off, market participants noted the drop was likely exaggerated by the thin volume during the shortened post-Thanksgiving holiday session.

The Dow Jones Industrial Average fell 905.04 points, or 2.53 per cent, to 34,899.34; the S&P 500 lost 106.84 points, or 2.27 per cent, to 4,594.62; and the Nasdaq Composite dropped 353.57 points, or 2.23 per cent, to 15,491.66.

The domestically focused Russell 2000 small-cap index fell 3.67 per cent. Both the S&P 500 and small-cap Russell index posted their biggest one-day percentage drops since February 25.

The S&P 500 banks index dropped 3.87 per cent as investors dialled back expectations of faster US interest rate hikes. Energy, this year’s best performing sector, dropped four per cent on the day, its biggest decline in more than eight months, as crude prices plunged $10 a barrel.

FILE PHOTO: A trader works inside a booth on the floor of the New York Stock Exchange (NYSE) in New York City. Photo taken on November 8, 2021. (Photo: REUTERS/Brendan McDermid)

Elevated US inflation, coupled with strong economic data and the renomination of Jerome Powell as Federal Reserve chair by US President Joe Biden, had fueled expectations the central bank might hike interest rates sooner than expected.

The CBOE volatility index, popularly known as Wall Street’s fear gauge, hit its highest level since early March.

Stocks such as Netflix Inc, Peloton Interactive and Zoom Video Communications, known as “stay-at-home” names, all scored solid advances.

Declining issues outnumbered advancers on the NYSE by a 5.84-to-1 ratio; on Nasdaq, a 3.96-to-1 ratio favoured decliners.

The S&P 500 posted seven new 52-week highs and 23 new lows; the Nasdaq Composite recorded 18 new highs and 334 new lows.

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