Dr. Market Is In

By Alex Eule |  Monday, November 29 A Second Opinion. The stock market is a lot of things, but last I checked it doesn't have a medical degree. And yet, for a second consecutive session, the market traded as if it knew the future of the pandemic. After tumbling Friday over a new Covid variant, stocks rebounded today, with the S&P 500 rising 1.3% and the Dow Jones Industrial Average up 237 points, or 0.7%. For now, the market has decided that Omicron -- a "variant of concern" according to the World Health Organization -- doesn't actually pose all that much of a threat to the global economy. Reports that Omicron cases may be milder likely helped ease investors' fears, even if we don't have many real answers, yet.  "U.S. stocks are rebounding as optimism grows that the Omicron variant is a cause for concern, but not a 'cause for panic' and could potentially be the catalyst needed to get more of the country vaccinated," Oanda analyst Edward Moya wrote today. After Friday's risk-off trading, investors were more adventurous across the board, sending oil up 2.2% and Bitcoin up 3.5%. Higher growth tech stocks outperformed, as well, with the tech-heavy Nasdaq Composite up 1.9%, its best day since May 14.  One trend continued from Friday: Vaccine maker Moderna was once again the best performing stock in the S&P 500, rising 11.8% today, following Friday's 21% gain. Moderna's Chief Medical Officer Paul Burton said over the weekend that the company could have an Omicron-specific vaccine ready by early 2022, if it proves necessary.  Even with today's easing of fears, volatility remains elevated. While the Cboe Volatility Index fell 20% today, to 22.96, the volatility benchmark is still 24% above last Wednesday's level before news of Omicron arrived.   Unfortunately, the market still can't wish away Covid or new variants. Federal Reserve Chairman Jerome Powell is planning to talk about the impact of Covid when he addresses the U.S. Senate Banking Committee tomorrow. According to prepared testimony, Powell will tell senators that the latest variant is one more unknown in the economy's delicate reopening process.   The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions. In response to Omicron, the market has begun to pull back on its rate increase estimates. One week ago, as Powell was renominated to his Fed chair role, investors were braced for an accelerated time table of hikes. The Fed futures market was implying a 72% chance of at least one rate increase by June 2022. As of today, those odds have fallen to 57%.

 

DJIA: +0.68% to 35,135.94 S&P 500: +1.32% to 4,655.27 Nasdaq: +1.88% to 15,782.83 The Hot Stock: Moderna +11.8% The Biggest Loser: Merck -5.4% Best Sector: Technology +2.5% Worst Sector: Industrials +0.2%