The first case of the Omicron variant in the United States was confirmed by the Centres for Disease Control and Prevention (CDC), sparking panic on Wall Street. U.S. stocks opened with big gains on Wednesday, supported by strong employment and manufacturing jobs output results, but reversed course in the afternoon and ended the day down sharply after the CDC confirmed the first case of the Omicron variant in the country, sparking panic on Wall Street.
The S&P 500 index fell 1.18 percent to 4,513 at market close, erasing a 1.9 percent gain earlier in the session. Meanwhile, the Nasdaq 100 index fell 1.6 percent to 15,877, led down by large losses in Facebook jobs and Tesla stock.
The Dow Jones Industrial Average also took a hit, falling 1.34 percent and breaking below its 200-day SMA to close at 34,022, as investors sought to de-risk their portfolios in the wake of the coronavirus scare.
Prioritizing economic statistics over pandemic fears, the ADP report showed that the private sector added 534,000 jobs in November, exceeding expectations of 525,000.
Strong hiring shows that the labor market is rebounding quickly following the summer’s downturn, which is a positive indication for the economy. Separately, the manufacturing ISM exceeded forecasts last month, rising to 61.1 from 60.8 in October, indicating strong demand.
While recent economic data has been positive, concerns about the COVID-19 Omicron version continue to weigh on traders’ minds, causing them to be unnecessarily cautious. As a result, travel and leisure stocks have been hammered in recent weeks, with American Airlines and Royal Caribbean both down 27% and 35% from their November highs, respectively.
Investors will require clarity on the omicron variant in order for the market to settle and bullish momentum to revive heading into 2022. There is currently little information on the severity and transmissibility of the severely altered strain, but experts should have more data for full epidemiological investigations in a few weeks.
Until then, volatility is likely to remain high, and equities could be vulnerable to sudden pullbacks if there are unfavorable coronavirus stories, with shares tied to the reopening being the most vulnerable.