U.S. Stocks Partly Offsetting Yesterday’s Rebound
Following the notable rebound seen in the previous session, stocks have moved back to the downside in morning trading on Tuesday. The major averages have all moved lower on the day, although they have only partly offset yesterday’s strong gains.
The Nasdaq briefly bounced into positive territory in recent trading but has since rejoined its counterparts in the red. Currently, the Dow is down 191.51 points or 0.6 percent at 34,944.43, the Nasdaq is down 32.36 points or 0.2 percent at 15,750.48 and the S&P 500 is down 19.74 points or 0.4 percent at 4,635.53.
The pullback on Wall Street partly reflects renewed concerns about the new coronavirus variant after Moderna’s (MRNA) CEO said in an interview that Covid-19 vaccines are likely to be less effective against Omicron.
Moderna CEO Stephane Bancel said in an interview with the Financial Times that it would take a couple of weeks to determine how much the mutations have affected the efficacy of the vaccines currently available in the market.
“Depending on how much it dropped, we might decide on the one hand to give a higher dose of the current vaccine around the world to protect people,” Bancel said. “Maybe people at very high risk, the immunocompromised, and the elderly should need a fourth dose.”
Regeneron Pharmaceuticals (REGN) has also warned its Covid-19 antibody cocktail and similar drugs could be less effective against the Omicron variant.
Meanwhile, Federal Reserve Chair Jerome Powell is currently testifying before the Senate Banking Committee regarding the pandemic and the CARES Act.
Powell told the committee the recent surge in new Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation.
“Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions,” Powell said.
The potential for the intensification in supply-chain disruptions comes as Powell noted pandemic-related supply and demand imbalances have already contributed to notable price increases in some areas.
Tobacco stocks are extending the sell-off seen over the two previous sessions, with the NYSE Arca Tobacco Index plunging by 3 percent to its lowest intraday level in almost ten months.
A steep by treasury yields is also contributing to considerable weakness among financial stocks, dragging the NYSE Arca Broker/Dealer Index and the KBW Bank Index down by 2.5 percent and 1.6 percent, respectively.
Oil service stocks are also seeing significant weakness on the day, resulting in a 2.2 percent slump by the Philadelphia Oil Service Index.
The weakness among oil service stocks comes amid a steep drop by the price of crude oil, as crude for January delivery is tumbling $2.43 to $67.52 a barrel.
Airline, natural gas and telecom stocks have also shown notable moves to the downside, while gold stocks are jumping along with the price of the precious metal.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. Japan’s Nikkei 225 Index slumped by 1.6 percent, while China’s Shanghai Composite Index closed slightly higher and Australia’s S&P/ASX 200 Index edged up by 0.2 percent.
Meanwhile, European stocks have climbed well off their worst levels but continue to see modest weakness. While the German DAX Index is down by 0.4 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both down by 0.3 percent.
In the bond market, treasuries have shown a substantial rebound after coming under pressure in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.6 basis points at 1.444 percent.
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