S&P 500 rebounds 1.5% from Friday’s sell-off as Biden says Covid lockdowns not needed for now
Stocks bounced Monday, following Friday’s big sell-off, after President Joe Biden said economic lockdowns in response to the omicron Covid variant are currently off the table.
The Dow Jones Industrial Average gained about 310 points. The S&P 500 added 1.6%, and the tech-focused Nasdaq Composite rose about 2%. The small-cap benchmark Russell 2000, full of the most economically sensitive stocks, was up just 0.7%.
“If people are vaccinated and wear their masks, there’s no need for lockdowns,” Biden said at a press conference Monday. Biden also said there would be no new travel restrictions.
Stocks are coming off a holiday-shortened session Friday in which the Dow posted its worst day since October 2020. The Dow dropped 905 points, or 2.5%. The S&P 500 tumbled 2.3%, and the Nasdaq Composite slipped 2.2%. The three major indexes were negative for the week.
“There are still more questions than answers regarding the omicron variant, but after what happened on Friday, the bounce today is a welcome sign,” said Ryan Detrick of LPL Financial. “We’ve seen other variants cause some indigestion, but after a little bit of time things were able to calm down and move forward. We’re optimistic that will be the playbook once again.”
Mega-cap technology names emerged the winners Monday with Tesla popping more than 4%, Microsoft up 2.4%, and Amazon and Apple gaining 2% each. Twitter’s shares were volatile on news that CEO Jack Dorsey is stepping down as chief of the social media company.
Travel-related stocks opened higher, turned flat-to-lower then rebounded again in a choppy session. United Airlines rose more than 1%, Royal Caribbean gained 3.9%, and TJX Companies popped more than 2%.
“We would be aggressive buyers of this pullback,” wrote Fundstrat’s Tom Lee in a note to clients Sunday night. “As with the case for Beta and Delta variants, the ‘bark’ has proven worse than the bite in each of those precedent instances. The market carnage, in our view, will be short-lived and transitory.”
Merck was the largest drag on the Dow, dropping more than 5% after Citi downgraded the stock to neutral from buy, saying in a note to clients that development struggles for the company’s HIV drug were taking a bite out of Merck’s long-term potential.
The World Health Organization on Friday labeled the omicron strain a “variant of concern.” While scientists continue to research the variant, omicron’s large number of mutations has raised alarm. Preliminary evidence suggests the strain has an increased risk of reinfection, according to the WHO. The variant was first reported to the WHO by South Africa and has been found in the U.K., Israel, Belgium, the Netherlands, Germany, Italy, Australia and Hong Kong, but not yet in the U.S. Many countries, including the U.S., moved to restrict travel from southern Africa.
The South African doctor who first raised the alarm over the new variant told the BBC that patients had “extremely mild” symptoms though it was too early to determine how omicron behaves before it is studied closely.
“While it is too early to have definitive data, early reported data suggest that the Omicron virus causes ‘mild to moderate’ symptoms (less severity) and is more transmissible,” Bill Ackman of Pershing Square Capital Management tweeted Sunday evening. “If this turns out to be true, this is bullish not bearish for markets.”
The 10-year Treasury yield rebounded back above 1.5% on Monday after a flight to safety Friday sent investors scrambling into bonds and sent rates lower. Prices move inversely to yields. Some bank stocks, such as Wells Fargo and PNC Financial, rose on the bounce in yields.
One stock that continued its Friday trend was Moderna. The vaccine maker’s stock was up 9% higher on Monday after jumping 20% on Friday.
Vaccine makers have announced measures to investigate omicron, with testing already underway. While it remains to be seen how omicron responds to current vaccines or whether new formulations are required, Moderna Chief Medical Officer Paul Burton said Sunday the vaccine maker could roll out a reformulated vaccine against omicron early next year.
Wall Street’s fear gauge — the CBOE volatility index — was retreating again Monday after a 10-point spike on Friday. Truist looked at the last 19 times since 1990 when the VIX surged more than 40% in a single day and found markets were higher 18 out of 19 times a year later, with an average gain of 20%.
On top of Covid developments, investors are also anticipating key economic data released this week.
The November jobs report Friday is expected to show solid jobs growth. Economists surveyed by Dow Jones expect 581,000 jobs added in November.
