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Omicron Be Gone



Chief Market Analyst

Looking at the stock market this morning, it is fair to say that its concerns about the Omicron variant have been put to rest for the most part.

Going into Black Friday, the S&P 500 was trading at 4701.46. Coming out of Black Friday, when news of the Omicron variant was first reported, the S&P 500 was trading at 4594.62. Yesterday, the S&P 500 closed at 4686.75. In the last two days alone, the S&P 500 has gained 3.3%, helped by reports that suggested the Omicron variant might not be as bad as feared from a health or economic standpoint.

This morning another positive-sounding report was added to the mix. Pfizer (PFE) and BioNTech (BNTX) said preliminary lab studies have shown that three doses of their current vaccine neutralizes the Omicron variant and that two doses still provided strong protection against severe disease.

That news provided a nice boost for the futures market when it hit, yet the initial enthusiasm has faded some.

Currently, the S&P 500 futures are up six points and are trading 0.2% above fair value, the Nasdaq 100 futures are up eight points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 55 points and are trading 0.2% above fair value.

The Pfizer news is a little like the cherry on top of an ice cream sundae the stock market was already enjoying, meaning the sweet treat of positive Omicron thoughts had already been largely consumed over the last two sessions. Accordingly, there isn’t the same sugar rush on this latest piece of news.

If anything, this positive line on protecting against the Omicron variant is apt to turn the market’s focus back to the monetary policy shift. After all, if Omicron isn’t going to be the pernicious force some first thought it could be, then economic activity should continue to run at a pretty healthy recovery pace that makes it clear the Fed’s policy rate should not be hanging out much longer at the zero bound.

It now seems all but certain that the Fed will announce a quickening of the taper at its FOMC meeting next week, such that its asset purchases will be ending in March or April next year.

The 2-yr note yield, which stood at 0.52% a month ago, is up to 0.70% this morning. The 10-yr note yield has hit 1.50%.

In another noteworthy piece of news, it sounds like Congress is on a path to raise the debt ceiling without any eleventh-hour drama. This will be done in a politically-minded way that enables Republicans in the Senate to avoid voting for the debt limit increase and Democrats in the Senate to vote in favor of a debt ceiling increase without using the reconciliation process.

The framework of this agreement was reported on yesterday. It didn’t really provide the stock market much of a boost, or really any boost at all, which suggested there was an expectation a deal of some kind would ultimately be reached to avoid a worst-case default scenario.

Even so, it’s reassuring for the market to know that this matter is looking more like a Grinch with a heart than a Grinch who stole Christmas.

Unfortunately, the latest report from Stitch Fix (SFIX) hasn’t been reassuring for its investors. SFIX is down 25% after the company reported weaker than expected active client growth for its fiscal first quarter and guided fiscal second quarter revenues well below consensus expectations. SentinelOne (S) is another post-earnings loser, trading down 13% despite posting better than expected third quarter results and fourth quarter guidance.

Toll Brothers (TOL) and PagerDuty (PD), on the other hand, are up 1.1% and 9.8%, respectively, following their earnings results.

Originally posted on December 8, 2021 – Omicron Be Gone

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