Stocks dropped on Tuesday as volatility resumed after a brief rebound earlier this week, with investors contemplating the impacts of a new coronavirus variant and new comments Federal Reserve Chair Jerome Powell.
The S&P 500, Dow and Nasdaq declined. The Dow, a proxy for cyclical stocks, underperformed against the other two major indexes, dropping more than 400 points, or over 1.2%, intraday on Tuesday. U.S. crude oil prices (CL=F) dropped 4%. And shares of airlines, cruise lines and lodging companies considered to be some of the most exposed to virus-related disruptions each sank in early trading to reverse Monday’s gains.
Investors reacted to Fed Chair Powell’s latest remarks before the Senate Banking Committee, wherein Powell said the central bank could speed up its tapering process to end sooner than previously telegraphed in the face of rising inflationary pressures. The comments came even as some other market participants had expected the Fed to strike a more accommodative tone for longer in the face of the recently discovered Omicron variant.
“At this point the economy is very strong and inflation pressures are high, and it is therefore appropriate, in my view, to consider wrapping up the taper of our asset purchases, which we announced at the November meeting, perhaps a few months sooner,” Powell said. “I expect we will discuss that at our upcoming meeting.”
A host of less upbeat new commentary from major coronavirus vaccine-makers also contributed to the selling pressure. Moderna (MRNA) CEO Stephane Bancel told the Financial Times that the company’s current COVID-19 vaccine would likely see a “material drop” in effectiveness against the Omicron variant, while noting more data was needed to see any extent of the decline. Separately, Pfizer’s (PFE) CEO Albert Bourla told CNBC he didn’t “think that the result will be the vaccines don’t protect,” but that “the result could be, which we don’t know yet, the vaccines protect less.”
Both companies have already said they were collecting data on the Omicron variant and that more definitive information would be available in the coming weeks. Researchers have not yet determined whether the new variant is more easily transmitted, or responsible for more severe illness, than previous versions of the virus.
“Information is coming rapidly, it’s evolving in real-time. You can understand why investors [last week] were taking a little bit of a pause, particularly given the liquidity situation we had going into the U.S. holiday season,” Vivek Paul, BlackRock investment institution U.K. chief investment strategist, told Yahoo Finance Live on Monday.
“We think on balance, it would make sense to be invested in the markets at this moment in time,” he added. “It’s all about understanding whether or not this is a delay, or a derailment, of the restart that we’ve seen. And it seems most likely at this moment — not withstanding more information to come— that it looks like a delay.”
The latest commentary on the variant at least momentarily overtook investors’ optimism over remarks Monday from the White House, when President Joe Biden said Omicron was “not a cause for panic.” Biden said he intended to announce the White House’s strategy for addressing coronavirus this winter later this week, and that this plan would not include lockdowns, but would instead emphasize vaccinations, boosters and testing. The Centers for Disease Control and Prevention (CDC) on Monday updated its guidance to say all individuals aged 18 and older “should” get a booster coronavirus vaccine, strengthening this from previous language primarily aimed at getting those considered most at risk an additional dose of the shots.
Prospects that widespread lockdowns would likely not come to the U.S. in the face of the latest variant helped fuel a broad risk-on rally on Monday. This came in sharp contrast with Friday’s moves immediately following the World Health Organization’s announcement of Omicron as a “variant of concern,” which sparked the Dow’s worst plunge since Oct. 2020.
“This is not a repeat of March 2020,” Paul Schatz, Heritage Capital President, told Yahoo Finance Live on Monday. “This looks nothing like March of 2020, yet it’s so recent in our history, people immediately think, ‘Omicron is here, oh my gosh this is going to be a 30% decline, we’re going to go straight down’ … You need to equally weigh history, not weigh it based on how recent it was in your memory.”
11:14 a.m. ET: Stock losses accelerate as Powell says tapering could end ‘a few months sooner’ than telegraphed before
Losses in the S&P 500, Dow and Nasdaq accelerated Tuesday after Federal Reserve Chair Jerome Powell said the Fed’s asset-purchase tapering could be sped up to end “a few months sooner” than previously discussed.
The Dow dropped more than 400 points, or over 1.2%. Both the S&P 500 and Nasdaq were also off more than 1.1% in intraday trading. The small-cap Russell 2000 fell by more than 2%.
In the S&P 500, all 11 major sectors were in the red, and the real estate, consumer discretionary and healthcare sectors underperformed. The materials company Dow Inc., Salesforce.com and American Express were the biggest laggards in the Dow Jones Industrial Average.
10:04 a.m. ET: Consumer confidence misses estimates in November: Conference Board
Consumer confidence dropped by a greater-than-expected margin in November compared to October, according to the Conference Board’s closely watched monthly index Tuesday.
The headline confidence index dropped to 109.5 in November, the Conference Board said. This missed consensus expectations for a drop to just 110.9, according to Bloomberg data. October’s confidence index was also downwardly revised to 111.6, from the 113.8 previously reported.
The drop came as subindices tracking consumers’ assessments of both present situations and expectations deteriorated compared to October.
“Expectations about short-term growth prospects ticked up, but job and income prospects ticked down. Concerns about rising prices—and, to a lesser degree, the Delta variant—were the primary drivers of the slight decline in confidence,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement. “Meanwhile, the proportion of consumers planning to purchase homes, automobiles, and major appliances over the next six months decreased.”
“The Conference Board expects this to be a good holiday season for retailers and confidence levels suggest the economic expansion will continue into early 2022. However, both confidence and spending will likely face headwinds from rising prices and a potential resurgence of COVID-19 in the coming months,” Franco added.
9:31 a.m. ET: Stocks open lower amid virus fears
Here’s where markets were trading just after the opening bell:
S&P 500 (^GSPC): -32.56 (-0.7%) to 4,622.71
Dow (^DJI): -275.17 (-0.78%) to 34,860.77
Nasdaq (^IXIC): -60.25 (-0.38%) to 15,723.28
Crude (CL=F): -$2.67 (-3.82%) to $67.28 a barrel
Gold (GC=F): +$11.20 (+0.63%) to $1,796.40 per ounce
10-year Treasury (^TNX): -8.6 bps to yield 1.443%
9:07 a.m. ET: Home price growth slowed more than expected in the U.S. in September
U.S. home price growth cooled in September but still remained elevated by pre-pandemic standards, with low interest rates and rising rent costs still stoking home-purchase demand among buyers and pushing up prices.
The S&P CoreLogic Case-Shiller national home price index rose by 19.5% in September over last year, ticking down from a 19.8% rise in August. The closely watched 20-City Composite index, which tracks home price changes across 20 major metropolitan areas in the U.S., rose by 19.1% year-on-year for September, also coming in below the 19.6 rise in August. And the 20-City Composite was also below analyst expectations for a 19.3% gain, according to Bloomberg consensus data.
8:56 a.m. ET: Markets are ‘misreading Fed’s COVID reaction function’: Strategist
According to at least one market pundit, market participants are currently anticipating too much dovishness from the Federal Reserve in response to the latest concerns over the new Omicron variant.
“I suspect that the rates market is misreading the Fed’s COVID reaction function,” Neil Dutta, head of economics at Renaissance Macro Research, wrote in a note Tuesday. “Since the pandemic, each COVID wave has had less of an impact of the economy. For example, during the COVID wave that peaked in January, there was a meaningful slowdown in restaurant traffic.”
“In the most recent wave, there wasn’t a slowdown. Moreover, during the spread of the Delta variant, the Fed ended up making a strong signal to commence tapering in November,” Dutta added. “Thus, I expect to see an unwind of these recent market moves and am skeptical that recent concerns over coronavirus will spill into deeper issues for the U.S. economy.”
7:41 a.m. ET Tuesday: Stock futures sink as Omicron concerns resurge
Here’s where markets were trading Tuesday morning:
S&P 500 futures (ES=F): -34.5 points (-0.74%), to 4,616.50
Dow futures (YM=F): -306.00 points (-0.87%), to 34,177.00
Nasdaq futures (NQ=F): -64.50 points (-0.39%) to 16,326.25
Crude (CL=F): -$1.57 (-2.24%) to $68.38 a barrel
Gold (GC=F):+$7.70 (+0.43%) to $1,792.90 per ounce
10-year Treasury (^TNX): -9.1 bps to yield 1.438%
6:15 p.m. ET Monday: Stock futures hold onto gains
Here were the main moves in markets as the overnight session kicked off:
S&P 500 futures (ES=F): +9 points (+0.19%), to 4,660.00
Dow futures (YM=F): +78 points (+0.22%), to 35,155.00
Nasdaq futures (NQ=F): +29 points (+0.18%) to 16,419.75
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter