New, rapidly spreading strain of coronavirus B.188.8.131.529 Declared a type of concern by the World Health Organization Global markets bustle on Black Friday, following a selloff that wiped out November gains for the S&P 500 index SPX, raising concerns about the economy and Wall Street’s performance in the coming week.
and Nasdaq Composite Comp,
and the Dow Jones Industrial Average sent the DJIA,
The lowest in a day since October 28, 2020.
The WHO said the omicron variant, which has been found in Belgium, Israel and Hong Kong and was first identified in southern parts of Africa, is more transmissible than the delta strain that is currently dominant worldwide, and there are other variants .
The emergence of new tensions gave rise to the White House Restrictions announced starting Monday, non-US citizens and residents of South Africa as well as those from Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi on a visit to join the European Union, the UK, Singapore and Japan, which also announced similar travel restrictions,
A sell-off in the market during the brief Black Friday session and a consistent flight to assets, which investors expect will outperform amid fresh mobility restrictions, helped revive a general focus on retail on a day tied to heavy consumer spending ahead of the Christmas holiday. Got it. Friday’s downturn also offered a crystal clear reminder that the path of markets and the economy hinges on the course of COVID.
It is not clear whether the latest coronavirus developments will cause permanent damage to the market complexion. O’Micron comes at a critical time for optimistic investors, with bears pointing to stock market valuations, inflation concerns and global economic growth as reasons for expected declines in equities from a peak of more than 5%. managed to avoid the fall.
In theory, the Friday after Thanksgiving is traditionally lightly traded and therefore susceptible to price volatility.
The Nasdaq saw its lowest volume of the year on Black Friday, with 3.479 billion shares traded, well below the year-over-year average of 5.099 billion. Overall overall volume, including trading on the Intercontinental Exchange ICE
According to Dow Jones Markets data, NYSE platform ownership stood at 8.760 billion, compared to a yearly average of 11.196 billion.
Still, only time will tell whether O’Micron’s response is a textbook, knee-jerk selloff or something more sinister.
Businesshala’s Bill Watts cited Friday research by Mark Arbator Investments of Arbator Investments, writing that the next level of support to watch for the S&P 500 after Friday’s close at 4,594,62 is 4,570, the 50-day exponential average. Is; 4,566, 38.2% retracement of the rally; and 4,550, the previous high since the beginning of September.
“It is too early to know to what extent the new version will affect economies and markets, and Friday’s market move is probably accelerated by low liquidity due to the US Thanksgiving holiday, and the risk that more bad news emerges over the weekend. ” Jonas Golterman, senior market economist at Capital Economics, wrote in a Friday research note.
Jesse Paretts of the All Star Charts blog writes that if the S&P 500 moves below 4,500, things could turn bad with little support below that point.
“You know how parents always tell you nothing good happens after midnight? Well in the S&P 500, nothing good happens below 4500,” he writes in Friday’s blog.
“If we’re below that there’s probably a huge problem there, and 18 months will warrant the heaviest cash position,” Parets writes.
On the public health front, some analysts say there are legitimate reasons for unease.
“The fact is that this version is spreading much faster than the previous versions (including the delta version),” Credit Suisse global chief investment officer Michael Strobek wrote in a research note. There are some questions from Pfizer PFE about the effectiveness of existing COVID vaccines,
and modern mRNA,
Because of the number of omicron type mutations on the spike protein. The spike protein is part of the virus targeted by COVID-19 vaccines.
Analysts, led by Jefferies analyst Sean Darby, noted that risk-appetite was already waning ahead of Black Friday and that the sell-off could be a “tipping point” in favor of caution and risk moderation.
“News of a new or so new COVID variant spreading in Southern Africa”
The last 24 hours appears to have been the turning point in risk appetite,” the Jefferies analyst wrote.
“However, there has been a major change in the risk variables in the past month – an
Increasing number of ‘tailed treasury auctions’, decline in equity market breadth and
The imperceptible change in American retail appetite went unnoticed.
According to Darby and his colleagues, the position in global equities is one of the most aggressive in US history.
Jefferies’ research suggests investors are now hoping that the Federal Reserve, under designated chairman Jerome Powell, will accelerate the pace of cuts to central bank asset purchases, creating tighter financial conditions that are unfavorable to riskier assets. can be proved. Goldman Sachs forecasts the Fed to grow from a deficit of $15 billion to $30 billion a month, and forecasts three policy interest rate increases above two in 2022.
“After all, the Sharpe ratio – a measure of the return per unit of risk – is
Turning to global stocks. We expect the gap between the performance of risky and safe haven assets to narrow,” Jefferies wrote.
However, the situation may still prove to be a buying opportunity for bold investors.
Strobek wrote that “riskier assets such as equities may give back some strength, but we will see this as an opportunity in select and specific sectors.”
Credit Suisse CIO writes, “At this point, we reiterate our assessment from the latest Investment Committee report, that is, the underweighting of equities in portfolios and government bonds.”
Analysts at Citigroup also said that “we will buy into any downside,” noting that its bearish checklist does not indicate significant red flags. “Valuations appear to be up, but other factors (credit spreads, fund flows) have not yet been notably expanded,” writes Citi, triggering 7.5 out of 18 red flags in global markets measures, while the US 18 Seeing 9.5 out of .
Greg Basuk, CEO of AXS Investments in Port Chester, NY, says the sale at the end of the week could result in a Black Friday sale for stock-market investors.
“Black Friday is usually the unofficial kick-off to the annual holiday shopping season. But we believe the real buy is for stocks that have been battered by COVID infection spikes, inflation fears and supply chain woes. but still have strong fundamentals that will drive their gains as the economy eventually reopens,” he wrote
That said, some analysts note that the ongoing lockdown in Europe and the spread of COVID, even before the Omicron announcement, were reasons to be cautious as they would impact the global growth outlook.
Either way, it looks like some degree of caveat emptor may apply next week and trade colors for the rest of 2021.
Trading on Monday will help determine if the bullish trend continues or if a bearish phase is crystallizing.
It will be a week focused on employment conditions with the end of November’s US jobs report and Powell and others offering their final thoughts ahead of a media blackout period ahead of the Federal Open Market Committee’s final 2021 meeting. On December 14-15.
Fed inflation concerns at last meeting left room for rapid dilution of bond purchases
Santa Claus Rally, Anyone?
What’s on the economic calendar?
A report on pending home sales at 10 AM Eastern Time
Weekly jobless claims report for the period ended November 27 at 8:30 am
Outgoing Fed Govt. Randall Quarles Will present farewell thoughts at an American Enterprise Institute at 11 a.m.