Dow futures fall 400 points on omicron fears

Dow futures fall 400 points on omicron fears

Stock futures were lower in early morning trading Monday as investors continued to grapple with the resurgence of Covid cases and an upcoming shift in the Federal Reserve’s easy monetary policy.

Futures on the Dow Jones Industrial Average dropped 400 points or 1.15%. S&P 500 futures dipped 1.2% and Nasdaq-100 futures declined 1.4%.

Investor sentiment sagged Monday amid turmoil for President Joe Biden’s economic agenda and rising global omicron infections, spurring selloffs in stocks, equity futures, and oil while bolstering sovereign bonds.

U.S. futures and European shares all trimmed losses to about 1% after Moderna Inc. said its vaccine increased antibody levels against the variant. Treasuries pared an increase, while the dollar ticked lower and crude oil slid on worries that mobility curbs to tackle the strain will hurt demand. 

The omicron variant is raging across the world as the winter holiday season approaches. The strain has been found through testing in 43 out of 50 U.S. states and around 90 countries, and the number of cases is doubling in 1.5 to 3 days in areas with community transmission, the World Health Organization (WHO) said on Saturday.

U.S. cases are jumping into year-end with more than 156,000 reported on Friday, according to CDC data.

The move-in futures is “reflecting growing uncertainty surrounding whether the Omicron surge will bring new widespread economic shutdowns, an unexpected shelving of additional fiscal stimulus from President Biden’s Build Back Better plan, and a breach by the S&P 500 index of its 50-day moving average,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

The 10-year Treasury yield backed off to below 1.40% on fears omicron would slow the economic recovery down, while keeping inflation high.

At 7 AM ET (1200 GMT), the Dow Futures contract was down 305 points, or 0.9%, S&P 500 Futures traded 45 points, or 1%, lower and Nasdaq 100 Futures dropped 200 points or 1.3%.

The major averages come into the holiday-shortened week on a negative run, with the tech-heavy Nasdaq Composite suffering the most, dropping nearly 3% last week as the prospect of higher interest rates persuaded investors to rotate out of growth stocks. The broad-based S&P 500 declined 1.9% and the blue-chip Dow Jones Industrial Average slipped 1.7%.

The rapid growth of cases of the Omicron Covid variant has prompted worries that the country’s economic recovery could stall just as the Federal Reserve is starting to tighten monetary policy.

The World Health Organization stated on Saturday that the number of cases of the Omicron variant is doubling in 1.5 to 3 days in areas with community transmission and that this Covid variety has now been found in 43 of the 50 U.S. states. 

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