Investors have started looking past the scare of Omicron, the new Covid-19 variant, and the economy is recovering. As a result, Dow Joe Industrial’s average futures surged, and that of Nasdaq-100 futures lagged; investors are rotating out of high-priced technology shares and turning to the ones linked to the recovering economy.
What is influencing the markets to start the week?
Shares like energy, industrials, and airlines that are linked to the economic reopening were acquired in Monday premarket.
Investors went on to sell tech stocks with higher valuations. These shares pulled the market down to a losing week on Wall Street the previous week.
There is a major shift in the pipeline at the Fed Reserve to bring a faster end to its policies aimed at easing policies.
The 10-year Treasury yield bounced back after falling last week due to the omicron threat.
Bitcoin lost $10,000 since Friday and saw a sharp drop overnight from Friday to Saturday. The drop decreases risk appetite and is affecting related tech stocks.
Dow futures went up 223 points, or 0.8%
Nasdaq fell 0.2%
S&P futures gained 0.4%
The de-risking theme continued in markets as high-priced tech shares were lower in premarket trading, with Tesla also trading in the red. Friday saw the Nasdaq Composite fall 1.92% and Tesla’s biggest drag. Ark Innovation Fund, Cathie Wood’s flagship, dropped 5 % on Friday, and the fund’s holdings except two stocks are now in the bear market. Zoom Video, Roku, Palantir are some names that saw sharp drops.
Monday saw a fall of a further 2% of Ark Innovation in premarket trading. The markets were left unnerved with Fed Chair Jerome Powell’s remarks indicating higher inflation even with the emergence of the new variant.
According to Fed officials, the Fed is looking at doubling the pace of its taper to $30 billion a month. Discussions to raise interest rates and how much could also begin in the December meeting.
On Monday, the stocks that are linked to the reopening of the economy surged, boosting Dow futures. Boeing and Chevron shares traded in the green. American Airlines shares surged about 2% in premarket trading. Carnival and Wynn Resorts shares were around 1%.
Bitcoin traded nearly $57,000 on Friday morning but came Saturday, and it has plummeted to around $43,000. By Monday, the cryptocurrency giant bounced back and traded at $47,377.
Coinbase shares last 6% in premarket trading as Square dropped around 3%.
Job growth that was expected much earlier contributed to Friday’s market. Nonfarm payrolls increased by 210,000 last month. TD Securities noted that softer payrolls print abashed risk sentiment. With investors jumping to safety, the 10-year Treasury yield dropped to 1.335%, the lowest since Sept 21.
Friday experienced a volatile week for major averages as investors were exposed to the new information on the omicron variant.
Major averages closed the week in red,
Dow was negative for four consecutive weeks
S&P and Nasdaq Composite were down for two consecutive weeks
Russell, small-cap, fell 3.86% for the week
“Despite the estimated flat year for the S&P 5000, we remain bullish on pockets of the market along with the small caps,” Bank of America informed the clients. The firm further added that small caps are comparatively more domestic, more exposed to the recovery spending services, bigger beneficiaries of CAPEX/reshoring and more expensive vs. large caps.”
The bank also said that the potential brighter side for small caps depends on the Covid cases. The variant has been discovered in over 15 US states till now, CDC Director Dr. Rochelle Walensky said. She said that they are following the several dozen cases closely. And they are hearing about the probability of the numbers rising.