Omicron fears, falling oil prices are hammering stocks

Wall Street stocks added to their recent streak of losses on Monday, joining a global meltdown in financial markets amid concerns about the severity of the omicron variant, inflation and other forces that will hit the economy.

The S&P 500 fell 1.1% for its third consecutive decline. This drop follows similar declines in Europe and Asia. Inventories by oil producers helped lead the way down after the price of U.S. crude fell 3.7% over concerns that the new variant of the coronavirus could lead factories, planes and drivers to consume less fuel.

Omicron may be the heaviest force hitting the markets, but it is not the only one. A $ 2 trillion spending program proposed by the US government suffered a fatal blow over the weekend when an influential senator said he could not back it. Markets also continue to absorb the Federal Reserve’s decision to cut back on aid to the economy more quickly, due to rising inflation.

They all combined to bring the benchmark S&P 500 down 52.62 points to 4,568.02. The Dow Jones Industrial Average lost 433.28 points, or 1.2%, to 34,932.16. The Nasdaq composite lost 188.74 points, or 1.2%, to 14,980.94.

Small business stocks performed less well than the rest of the market. The Russell 2000 Index lost 34.06 points, or 1.6%, to 2,139.87. In global markets, the German DAX lost 1.9% and the Japanese Nikkei 225 fell 2.1%.

“Omicron threatens to be the Grinch to steal Christmas,” Mizuho Bank’s Vishnu Varathan said in a report. The market “prefers security to unpleasant surprises”.

With the upsurge in covid-19 cases, government leaders around the world are evaluating the return of restrictions on business and social interactions when many seem to be fed up.

The Dutch government began a strict national lockdown on Sunday, while a British official said on Monday it could not guarantee that new restrictions would not be announced this week. The Natural History Museum, one of London’s top attractions, said on Monday it was closing for a week due to “a lack of indoor staff.”

In the United States, President Joe Biden will today announce the new steps he is taking, “while issuing a stern warning about what winter will be like for Americans who choose to remain unvaccinated,” said the White House press secretary this weekend.

Occidental Petroleum slipped 3.8%, topping a long list of losses in oil stocks. Commodity producers, tech companies and financial stocks also fell amid omicron concerns. Steelmaker Nucor fell 5.8%, Microsoft slipped 1.2% and Synchrony Financial, which offers branded credit cards and other financial products, fell 5.2%.

Cruise passengers have received a boost after Carnival gave an optimistic forecast for 2022, despite growing concerns over the recent increase in covid cases around the world. Carnival gained 3.4% for the biggest gain in the S&P 500, while Royal Caribbean rose 0.3% and Norwegian Cruise Line added 2%.

Omicron’s final impact on the economy is unclear. In addition to weakening it by imposing restrictions on businesses, another feared outcome is that it could push inflation even higher. If this results in closures of ports, factories and other key points in long global supply chains leading to customers, already tangled operations could escalate.

These problems helped push consumer prices up 6.8% in November from the previous year, the fastest inflation in nearly four decades.

The two-year Treasury yield fell to 0.63% from 0.66% on Friday night. This is a sharp turnaround from its sharp rise in recent months, based on expectations that the Fed may start raising short-term interest rates in 2022 to keep inflation under control.

The 10-year Treasury yield climbed to 1.42% from 1.40% on Friday night.

Information for this article was provided by Joe McDonald and Paul Wiseman of The Associated Press.

Steve R. Hansen