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The spread of Omicron variant combined with the Fed’s tapering measures have put pressure on stocks leading to major sell-offs over the last week.
The markets have entered kind of a panic mode now with heavy selling seen in early trading hours on Monday. The Dow Jones futures, along with the S&P 500 futures and the Nasdaq futures have tanked owing to the Omicron spread fears.
The recent Covid variant has shown signs of rapid spread leading to panic selling on Wall Street. Besides, investors are still setting up terms with the Fed’s policy reversal measures. Futures for the Dow Jones dropped 420 points or 1.19%. The S&P 500 futures dipped 1.29%. Similarly, the Nasdaq Futures 100 also tanked 1.24%.
At the same time, investors have been heavily selling the high-flying stocks as major averages came off for a negative week. Although the broader market remains in a confirmed uptrend, the recent market correction has got investors defensive.
Investors are now awaiting a clear market strength before regaining exposure, especially in the growth stocks. Interestingly, some investors are also awaiting a Santa Clause rally by the year-end. It calls for positive market performance in the last five trading days of the year. In a note to investors, Adma Crisafulli, founder of Vital Knowledge said:
“On the one hand, corners of the market are oversold. However, “the aggressive ‘buy the dip’ mentality, which proved so profitable for the last 1.5+ years, especially in the high-multiple corners of the market, was underwritten by a tidal wave of stimulus that is now receding.”
The Factors Affecting Market Volatility
Last week itself, the Fed announced its stimulus tapering plan. The US Central bank is planning to increase the interest rate three times in the coming year. Despite the negative weekly performance last week, the S&P 500 is still up 1.2% this month. Furthermore, its year-to-date gains stand at a staggering 23%.
On the other hand, the blue-chip Dow Jones has gained 2.6% this month. However, there was a massive sell-off across technology stocks this month of December. As a result, the tech-heavy Nasdaq has corrected 2.4% so far this month.
Fears of Omicron have been raging worldwide as the holiday season approaches. Besides, the Omicron variant is also becoming dominant in different countries and much of the US. Although Omicron is reportedly less fatal than the Delta variant, a surge in cases can once again overwhelm the hospital systems.
The Netherlands has started a strict lockdown already from Sunday evening as the dutch cases spiked. This comes just a week after Austria announced the lockdowns. Other countries in Europe are also mulling similar moves.