Dow futures are down more than 400 points as investors try to gauge the economic impact of omicron

Stock futures tumbled in early Tuesday trading, reversing a Monday rebound on Wall Street as investors reassessed risks associated with the new omicron Covid variant.

Futures on the Dow Jones Industrial Average dropped 423 points, or 1.2%. S&P 500 futures tumbled 1% and Nasdaq 100 futures shed 0.5%.

The reversal came after Moderna CEO Stephane Bancel told the Financial Times that he expects existing vaccines to be less effective against the new variant. The CEO told the paper there could be a “material drop” in the current vaccines’ effectiveness against this variant. Bancel told CNBC on Monday that it could take months to develop and ship an omicron-specific vaccine.

Separately, Regeneron said its antibody treatment may have reduced effectiveness against omicron. Regeneron shares lost 3% in premarket trading.

The 10-year Treasury yield fell further below 1.5% as investors worried about the economy slowing because of the new variant. The 10-year rate lost 10 basis points to 1.43% (1 basis point equals 0.01%).

The futures move lower follows a volatile last few sessions as investors evaluate the omicron impact. The Dow lost 905 points on Friday, then rebounded by 237 points on Monday.

Travel shares, which led Friday’s drop and then gained on Monday, were taking hits once again in premarket trading Tuesday. Expedia Group fell 2.3%, Norwegian Cruise Line Holdings tumbled 3.8% and American Airlines shares were off 3.3%.

“We have to expect…that the scenarios, all scenarios, include discoveries of people in this country with omicron and talk that the vaccines don’t work or if they did those who have had Covid have no immunity,” wrote CNBC’s Jim Cramer on Twitter Tuesday. “These all cause selling.”

Some leading pharma stocks also took a hit, with Moderna getting the worst of it as the stock decreased 4.2%. Pfizer, however, was one of the few companies to post gains on the S&P 500, rising 1.2%. Stay-at-home stock Netflix also rose, up 0.7% and videoconference leader Zoom saw shares climb 2.3%.

Major averages rose to session highs on Monday after President Joe Biden said economic lockdowns are currently off the table and there will be no new travel restrictions. The blue-chip Dow ended the day up more than 200 points.

The new Covid variant, first detected in South Africa, has now been found in more than a dozen countries, causing many to restrict travel. The World Health Organization labeled the omicron strain a “variant of concern” on Friday when the Dow slid 900 points to suffer its worst day since October 2020.

Covid symptoms linked to the omicron variant have been described as “extremely mild” by the South African doctor who first raised the alarm over the new strain. Still, the WHO said it will take weeks to understand how the variant may affect diagnostics, therapeutics and vaccines.

Federal Reserve Chairman Jerome Powell will tell the Senate Tuesday as part of his quarterly testimony on the pandemic that he believes that the omicron variant poses “downside risks to employment and economic activity.” It also further complicates the inflation outlook, the Fed chief said in his prepared markets released Monday evening.

“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 will say.

The CBOE volatility index, also known as the VIX or Wall Street’s fear gauge, declined during Monday’s rally but still remained above 22. The gauge spiked 10 points above 28 at one point on Friday. The VIX was higher again on Tuesday.

“This week will be instructive to see if the buy-the-dip approach by investors is still in play, or if markets are vulnerable to a more significant pullback,” said Mark Hackett, chief of investment research at Nationwide.