On Monday, the major averages dropped as traders struggled to comprehend the resurgence of Covid infections inspired by the new omicron variant.
On Tuesday, the Dow Jones Industrial Average shed 433.28 points to 34,932.16, weighed down by declines in Boeing, Goldman Sachs, and American Express. The S&P 500 slumped 1.1% to 4,568.02, while the technology-focused Nasdaq Composite dropped 1.2 percent to 14,980.
As of Monday, the S& amp; P 500 had dropped 3.01% over the previous three days, making it the worst three-day drop in over a month. The Nasdaq Composite has also declined 3.76% during this period, making it the worst three-day stretch since May.
The omicron variety is sweeping the globe as we approach the winter holiday. According to statistics from the Centres for Disease Control and Prevention, more than 156,000 reported cases in the United States by Friday.
According to the World Health Organisation, the strain has been discovered by testing in 43 out of 50 US states and 90 different countries, with the number of infections doubling every 1.5 to 3 days in regions where community transmission is present.
On Monday, Boeing, Caterpillar, and General Electric took a hit. The aircraft company’s loss was approximately 2.2 percent. Cat downgraded by 1%. Boeing and GE each declined by more than 2% on Monday.
On Monday, reopening plays were once again among the biggest losers. Las Vegas Sands’ decline was 3.6 percent. Alaska Air Group and Southwest both dropped nearly 1 percent on Monday. Darden Restaurants lost almost 1.3%.
The price of oil, which is a significant input for both natural gas and oil-based extraction methods, fell on Friday. While the energy sector as a whole lost ground due to declining prices for US crude, many stocks in the space plummeted even more. Devon Energy dropped 2.4%, while Exxon Mobil shed about 1.5%.
Goldman Sachs was down 2.6%, while Wells Fargo fell close to 2.3%. JPMorgan and Bank of America slumped 1.8% and 1.6 percent, respectively.
“Markets are reacting to mounting uncertainty over whether the omicron surge will result in new widespread economic shutdowns, an unexpected halting 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 of Leuthold Group
On Monday, several technology stocks fell by about 2 percent, but Netflix outperformed the broader market’s trend by gaining nearly 1.2 percent.
On the political front, Sen. Joe Manchin (D-WV), a conservative Democrat, said he would reject the Biden administration’s “Build Back Better” plan on Sunday. Manchin’s refusal will most certainly doom the $1.75 trillion social spendings and climate change legislation as it is now.
Following the Manchin announcement, Goldman Sachs reduced its GDP forecast by two-tenths of a percent, lowering its first-quarter 2022 estimate to 2% from 3%. The firm also lowered its second-quarter and third-quarter growth predictions.
“The odds have decreased following Manchin’s remarks, and we will remove the assumption from our prediction,” Goldman’s economist Jan Hatzius wrote. “Headline CPI is expected to reach as high as 7% in the next few months in our forecast before beginning to decline, exacerbating inflation worries previously expressed by Sen.
The major averages terminated a down week, with the S& P 500 declining 1.9%. On Friday, the Nasdaq Composite fell nearly 3% as investors sold high-performing growth stocks on the prospect of higher interest rates, while the Dow slipped approximately 1.7 percent.
Last week’s losses came as the Federal Reserve announced a more aggressive strategy to wind down its asset purchases and suggested it would raise interest rates three times in 2022.
According to the Stock Trader’s Almanack, some investors are betting on a Santa Claus rally into the year-end, suggesting good market performance in the last five trading days of 2018 and the first two trading days of 2022.
“On the one hand, certain market areas are overbought,” Vital Knowledge’s Adam Crisafulli added in a note. The “buy the dip” aggressive buying mentality that was lucrative for the past 1.5+ years, especially in high-multiple corners of the market, was nevertheless underpinned.