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Dialing Back Omicron Angst



Chief Market Analyst

It shouldn’t come as any surprise that the world is awash with reports on the omicron COVID variant. That variant, which went public so to speak on Friday, was not received well by the market.

Major equity markets around the globe fell in excess of 2.0% as market participants got caught up thinking the worse. That is, omicron could be more infectious than Delta, lead to more severe disease than Delta, and evade current vaccines. Today, though, the angst has been dialed down a bit and the U.S. market is poised to rebound.

Currently, the S&P 500 futures are up 54 points and are trading 1.2% above fair value, the Nasdaq 100 futures are up 216 points and are trading 1.4% above fair value, and the Dow Jones Industrial Average futures are up 371 points and are trading 1.2% above fair value.

That positive disposition is predicated partly on an embrace of the buy-the-dip trade and partly on the burgeoning hope that omicron can be corralled with current vaccines, current treatments, and/or new vaccine formulations that can be ready relatively soon.

Moderna’s (MRNA) Chief Medical Officer said he thinks a new vaccine targeting omicron could be ready early in 2022 if needed. Shares of MRNA, which soared 21% on Friday, are up another 10% today.

Another tidbit of hope includes reports that health officials in South Africa have said the omicron variant is typically leading to only mild symptoms for those infected with it. Still, the WHO and other medical experts are clarifying that it is still too early to tell just how transmissible and severe the omicron variant is.

Dr. Fauci told the White House it could take approximately two more weeks to get a better read on things, and Moderna’s CEO said it could take approximately 2-6 weeks to get more clarity on whether this variant is more deadly.

Of course, everyone has an opinion whether they are an expert or not. While many countries have barred travel from southern African nations (Japan is banning all foreign travelers starting November 30), the key for the market is that omicron isn’t triggering any global economic shock.

It’s possible that it could, yet the belief in vaccine efficacy is still winning out as an offset to a worst-case scenario of new lockdown measures in the world’s major economies.

Accordingly, we’re seeing some unwinding of Friday’s flight-to-safety trades and Friday’s economic slowdown fears. To that end, the 10-yr note yield is up six basis points to 1.54% and WTI crude futures are up 5.7% to $72.00 per barrel.

On a related note, OPEC+ is delaying the technical meeting it was going to hold today until Wednesday, according to Bloomberg, to give it more time to assess the news of the omicron variant and the coordinated release of oil from strategic petroleum reserves. The OPEC+ ministers meeting is Thursday where it will be decided if OPEC+ is going to boost production quotas, leave them unchanged, or curtail them.

That meeting is one of several important happenings this week. Others include a good bit of Fedspeak, the ISM Manufacturing and Non-Manufacturing reports, and the November Employment Situation Report. In addition, Congress will need to reach an agreement on a new funding resolution to keep the government funded beyond December 3 or risk a shutdown.

It will be a busy week, then, starting today as market participants busy themselves with ruminations about the omicron variant.

Originally Posted on November 29, 2021 – Dialing Back Omicron Angst

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