On Monday, stock futures opened higher to hold onto gains after a recovering rally, with investors at least temporarily shaking off concerns over a new coronavirus variant and looking ahead to new market catalysts.
The S&P 500, Dow and Nasdaq contract went up. Each of the three major indexes had ended the day solidly in the green with technology stocks leading the way higher and helping pull the Nasdaq up by nearly 2%.
President Joe Biden said that the newly discovered Omicron coronaviruses variant was not a cause for panic. Investors were heartened by remarks from the White House. Biden said he intended to announce the White House's strategy for addressing coronaviruses this winter, and that this plan would not include lockdowns, but instead would focus on vaccines, boosters and testing. The Centers for Disease Control and Prevention CDC updated its guidance on Monday to say all individuals aged 18 and older should get a booster coronavirus vaccine, strengthening this from previous language mainly aimed at getting those considered most at risk an additional dose of the shots.
The prospect of widespread lockdowns in the U.S. wouldn't come to an end in the face of the latest variant, which has fuelled a broad risk-on rally on Monday. The Dow's worst plunge since October 2020 was caused by Friday's moves immediately after the World Health Organization announced Omicron as a variant of concern.
Heritage Capital President Paul Schatz, Heritage Capital President, told Yahoo Finance Live on Monday that this is not a repeat of March 2020. This looks nothing like March of 2020, yet it's so recent in our history, people immediately think that 'Omicron is here, we're going to go straight down' You need to weigh history, not weigh it based on how recent it is in your memory. The sectors and individual stocks that outperformed on Monday were largely technology names, which have served as defensive trades throughout the epidemic, as investors bet on more stay-in-place behavior among consumers.
The emergence of the latest variant has led to a number of pundits believing that the Federal Reserve might take a more dovish approach to monetary policy to support the economy as it deals with ongoing virus related concerns. That could keep interest rates low for longer and support longer-duration growth stocks.
To take a step back, I think you had a global economy that was looking incredibly strong in the fourth quarter of 2020 through last week and then a new variant comes along, Andrew Sheets, Morgan Stanley chief cross-assets strategist, told Yahoo Finance Live. That would seem to work against a lot of the trades that work in that high-growth environment and disrupted this do central banks need to act more aggressively' narrative because if there's a new variant, then maybe we should be more cautious. Major vaccine manufacturers including Moderna, BioNTech and Pfizer already said they were collecting data on the Omicron variant and deciding whether or not they need to rework their existing vaccines to address it. Researchers haven't yet determined whether the new variant is more easily transmitted or responsible for more severe illness than previous versions of the virus.
Information is coming quickly, it's changing in real-time. There was a reason why investors last week were taking a little pause due to the liquidity situation we had going into the U.S. holiday season, according to Vivek Paul, BlackRock investment institution U.K. chief investment strategist, told Yahoo Finance Live on Monday. The reaction you see today puts it in a little bit of context. We have seen more information come out, we have to wait for more information regarding the longevity of Omicron, as we have to see more information come out. He added that it would make sense to invest in the markets at this moment because of the market reaction today and we think it would be in line with the market reaction. It's all about understanding whether or not this is a delay or a derailment of the restart we've seen. It seems that it looks like a delay, because it appears to be the most likely to be there at this moment, not withstanding more information to come. Here were the main moves in markets as the overnight session kicked off:
Emily McCormick is a reporter for Yahoo Finance.