Dow falls over 600 points; stock losses deepen as Powell says appropriate to consider faster taper

How are banal indexes trading?

• The Dow Jones Industrial Average DJIA dropped 534 points, oregon 1.5%, to astir 34,602.
• The S&P 500 SPX fell 69 points, oregon 1.5%, to 4,586.
• The Nasdaq Composite COMP declined 242 points, oregon 1.5%, to astir 15,541.

The Dow and S&P 500 traded beneath their lows from Friday’s archetypal omicron-inspired selloff, which saw the indexes station their biggest one-day drops of the twelvemonth earlier bouncing modestly successful Monday’s session.

What’s driving the markets?

Federal Reserve Chairman Jerome Powell, testifying alongside Treasury Secretary Janet Yellen, told the Senate Banking Committee that it would beryllium due fixed the contiguous economical backdrop to see speeding up the tapering process, with a determination to travel aft reviewing the latest jobs and ostentation information up of the cardinal bank’s mid-December argumentation meeting.

Powell besides backed distant from the Fed’s long-running characterization of inflationary pressures arsenic “transitory,” oregon short-lived. “It’s astir apt a bully clip to discontinue that connection and explicate much intelligibly what we mean,” helium said.

Powell seemed “a small much cautious” connected inflation, said James Ragan, manager of wealthiness absorption probe astatine D.A. Davidson, successful a telephone interrogation Tuesday. His remarks astir tapering and ostentation travel astatine a clip radical are disquieted astir the emergence of the omicron variant of the coronavirus and whether it could pb to a slowdown successful economical growth, said Ragan.

In One Chart: ‘Markets don’t bottommost connected a Friday’: Stock rout puts these S&P 500 levels successful focus

“They’re trying to thread the needle present arsenic acold arsenic the champion timing on” tapering the cardinal bank’s monthly enslaved purchases, Ragan said. Inflation is inactive “a hazard to the market,” helium added, explaining that tapering faster possibly allows the Fed to rise rates sooner to support the emergence successful the outgo of surviving nether power arsenic the system continues its rebound successful the pandemic.

“Reading betwixt the lines, it appears that Chairman Powell has grown dramatically much acrophobic with the hazard of sustained inflation, and is truthful looking to extremity the cardinal bank’s plus purchases sooner than initially outlined,” said Matt Weller, planetary caput of probe astatine FOREX.com and City Index.

Powell’s comments “have already sent a tempest done large markets,” helium said, successful a note. “U.S. indices, fearing the accelerated extremity of the casual wealth train, are investigating their lowest levels of the month.”

Read: S&P 500 whitethorn extremity ‘pretty flat’ successful 2022 amid antecedently ‘unthinkable’ antagonistic existent rates, says BofA strategist

Investors had been eyeing Powell’s grounds to gauge his instrumentality connected the omicron’s economical interaction amid interest that the variant could perchance dilatory enactment arsenic good arsenic lend to ostentation done imaginable supply-chain troubles.

Stocks were already nether unit Tuesday pursuing downbeat comments from vaccine shaper Moderna’s MRNA CEO, Stéphane Bancel, astir the prospects for vaccines against the caller omicron variant.

“There is nary world, I think, wherever [the effectiveness] is the aforesaid level…we had with delta,” Bancel told the Financial Times successful an interrogation published aboriginal Tuesday. He said the scientists he’s spoken to expect a “material drop” successful effectiveness of existent vaccines against omicron. Moderna MRNA shares fell much than 6%.

Bancel cited the overmuch higher fig of mutations connected the spike macromolecule of the omicron variant and the velocity astatine which it’s presently spreading crossed Africa arsenic reasons. He predicted vaccine manufacturers would request respective months to wide nutrient a vaccine that would beryllium effectual against omicron.

“This is erstwhile again a COVID-driven marketplace and immoderate antagonistic headlines astir vaccine effectiveness oregon the severity of omicron infections could origin much risk-off wealth flows arsenic the likelihood of caller lockdowns successful parts of the satellite would emergence arsenic a result,” wrote Tom Essaye, laminitis of Sevens Report Research, successful a note.

Analysts had warned connected Monday that a comparatively sanguine outlook astir the variant among investors could permission markets prone to volatility successful absorption to antagonistic headlines.

See: Only 10% of investors spot omicron arsenic biggest menace to fiscal markets by year-end: flash poll

Bancel’s comments came a time aft President Joe Biden said omicron was concerning, but nary crushed to panic, and the combat against it wouldn’t impact “shutdowns oregon lockdowns.” 

Echoing Friday’s selloff that followed the find of the omicron variant, crude prices tumbled CL00 CLF22 much than 7% Tuesday arsenic investors sought structure successful authorities bonds. The output connected the 10-year Treasury enactment BX:TMUBMUSD10Y, which moves successful the other absorption of price, was down astir 8 ground points astatine astir 1.44% Tuesday afternoon.

The Conference Board said its scale of user assurance dropped to 109.5 from 111.6 successful October, the lowest speechmaking successful 9 months.

Earlier, a speechmaking connected Chicago-area manufacturing activity, the Chicago Business Barometer, besides known arsenic the Chicago PMI, was astatine 61.8 successful November, compared with 68.4 successful the anterior period and median forecasts from economists polled by Dow Jones for 67.5. Readings implicit 50 awesome expansion.

Which companies are successful focus?

• Shares of Regeneron Pharmaceuticals Inc. REGN fell astir 1.4% aft the company’s president and main technological connection told The Wall Street Journal that the company’s antibody attraction loses effectiveness against the omicron variant, but that the afloat interaction won’t beryllium known until further investigating is implicit successful coming weeks.
• Travel-related stocks continued to consciousness pressure, with American Airlines Group Inc. AAL and United Airlines Holdings Inc. UAL each down astir 4% portion Delta Air Lines Inc. DAL fell astir 2%. Popular hose exchange-traded money U.S. Global Jets ETF JETS fell 3.2%, portion travel-booking tract Expedia Group Inc. EXPE shed 3.7%.

What are different markets doing?

• The ICE U.S. Dollar Index DXY, a measurement of the currency against a handbasket of six large rivals, was down 0.3%.
• The Stoxx Europe 600 XX:SXXP fell 0.9% and London’s FTSE 100 UK:UKX mislaid 0.7%.
• In Asia, the Shanghai Composite CN:SHCOMP ended small changed, portion the Hang Seng Index HK:HSI and Japan’s Nikkei 225 JP:NIK each fell 1.6%.

—Barbara Kollmeyer contributed to this report.