On Tuesday, investors reassessed the risks associated with the new Covid version, omicron, erasing Monday’s Wall Street rally.
Major averages fell to session lows after Federal Reserve Chairman Jerome Powell suggested that the central bank consider speeding up the bond-buying taper at its December meeting.
Losses in American Express and Salesforce drove down the Dow Jones Industrial Average, which dropped 652.22 points to 34,483.72. The S& P 500 index dropped 1.9 percent to 4,567.00 points. The Nasdaq Composite Index, which is heavily weighted in technology, fell 1.6 percent to 15,537.69 points.
The Russell 2000 small-cap index fell 1.9 percent to 2,198.91, with the most economically sensitive stocks taking the brunt of the losses.
In testimony before a Senate committee, the Fed chairman said he believes the pace of monthly bond purchases may get reduced faster than the $15 billion-per-month plan outlined earlier this month.
“At this moment, the economy is extremely robust, and inflationary pressures are higher, so it is appropriate in my opinion to contemplate finishing up our asset purchases… perhaps a few months sooner,” Powell said. “I suppose we’ll talk about that at our next meeting.” His remarks simply indicates that the Fed’s attention has shifted to combating inflation and its negative consequences rather than any further possible economic disruptions from new Covid variations.
Moderna CEO Stephane Bancel told the Financial Times that he believes existing vaccines to be less effective against the new variety, prompting the reversal on Tuesday. The CEO told the newspaper that the current vaccinations’ effectiveness against this variation could “materially decrease.” Bancel told CNBC on Monday that developing and shipping an omicron-specific vaccination may take months. Moderna has lost around 4.4 percent of its value.
Travel stocks, which were among the first to fall on Friday before recovering on Monday, were down again on Tuesday. Expedia Group was down over 3%, Norwegian Cruise Line Holdings was down 3.5 percent, and Booking Holdings was down about 3.7 percent.
CNBC’s Jim Cramer posted on Twitter Tuesday that “We have to expect… that the scenarios, all scenarios, include discoveries of people with omicron in this nation and talk that the vaccines don’t work or that if they do, those who have had Covid have no protection,”
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