Stock futures jump, markets continue to rebound as investors assess Omicron risk. Credit Suisse’s Mandy Xu breaks down Monday’s market action.
Stock futures jumped after a week-long rebound on the roller coaster on Tuesday morning as investors looked beyond the potential impact of the new version of the Omicron coronavirus.
The Dow Jones Industrial Average futures rose 162 points. The S&P 500 futures rose 0.41% and the Nasdaq 100 futures rose 0.4%.
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| Stock futures jump, Omicron risk |
The overnight session was followed by a return to Wall Street in which the Blue-chip Dow gained nearly 650 points. The S&P 500 jumped 1.1% on Monday and gained all 11 sectors. The Nasdaq Composite rose 0.9% and turned higher at the end of the day. Rally was led by travel-related stocks headlines, such as airlines and cruise line operators.
Omicron market volatility
Daily point change in the Dow Jones Industrial Average
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| Daily point change in the Dow Jones Industrial Average |
Source: FactSet. As of market close on Dec. 6.
"Reducing fears of Omicron is helping investors position themselves for a more aggressive Fed," said Fiona Cincotta, senior financial market analyst at Citi Index. "Markets are mitigating the potential economic loss of Omicron because the initial report suggested that the new Covid variant should be less serious."
Stock futures jump, markets continue to rebound as investors assess Omicron risk
Investors are betting that the new strain of Covid-19 could cause a milder illness than a fear. The White House's chief medical adviser, Dr. Anthony Fawcett, said Sunday that the initial information on the variant was "encouraging", although he warned that more information was needed to fully understand it.
Investors, meanwhile, are also measuring the likelihood that the Federal Reserve will begin shifting its large-scale epidemic easing policies and expect rates to rise soon.
Comments by Fed officials suggest the central bank is likely to decide to double the pace of its taper to $30 billion a month at its December meeting next week.
Preliminary discussions may also begin before the December meeting on when the interest rate will be raised and what it will be next year.
Stock futures jump, markets continue to rebound as investors assess Omicron risk
"After last week's market roller coaster ride, traders are probably at a crossroads," said Chris Larkin, chief trading officer at E-Trade Financial. "On the one hand Omicron could pose a minor threat, but on the other hand the Fed could potentially accelerate tightening, so we're seeing some changes in the market."
Market attention will shift to new inflation data later this week. The consumer price index, which is expected to be warmer than the previous month, could be a catalyst for the Fed to tighten its policies more quickly.
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