Stocks, Oil Falter on Omicron, Biden Spending Plan Setbacks

By Reuters
December 21, 2021 Updated: December 21, 2021

NEW YORK—U.S. stocks fell by more than 1 percent on Monday, pressured downward by surging Omicron coronavirus cases and a possible fatal blow to a $1.75 trillion U.S. domestic spending bill, with oil prices sliding more than 3 percent.

U.S. stock indexes retreated more than 1 percent as positive COVID-19 case counts rose, Britain warned of tightening coronavirus curbs to limit the spread and President Joe Biden’s investment bill hit a significant setback. U.S. COVID cases have risen 50 percent this month.

Investors feared that new restrictions would weigh on fuel demand, sending oil prices lower.

“It was kind of a triple whammy on the economy over the weekend-Omicron, the Fed, and taking the fiscal initiative off the table,” said Jack Ablin, chief investment officer at Cresset Capital Management. “The market is taking a hit. I think it’s an economic reset that investors are kind of gauging.”

The Federal Reserve decided last week to end its pandemic-era stimulus faster, with the central bank signaling at least three quarter-percentage-point interest rate hikes by the end of 2022.

In light of rising COVID-19 cases, the World Economic Forum postponed until mid-2022 its annual meeting which had been due to take place in the Swiss mountain resort of Davos in January.

Some economists expect the U.S. economy to grow slower next year after U.S. Senator Joe Manchin, a moderate Democrat who is key to President Biden’s hopes of passing the investment bill, said on Sunday he would not support the package.

The Dow Jones Industrial Average fell 1.53 percent to 34,823.49 mid-afternoon Monday while the S&P 500 dropped 1.46 percent to 4,553.38. The Nasdaq Composite dropped 1.54 percent to 14,936.49.

MSCI’s gauge of stocks across the globe shed 1.55 percent.

Oil prices dropped amid concerns the spread of the Omicron variant would crimp demand for fuel. [O/R]

U.S. crude recently fell 3.1 percent to $68.23 per barrel and Brent was at $71.70, down 2.48 percent on the day.

While coronavirus restrictions cloud the outlook for economic growth, they also risk keeping inflation elevated, prompting central banks to consider raising rates.

The dollar came under came under pressure on Monday as U.S. Treasury yields slipped. The dollar index fell 0.152 percent.

The index, up about 7 percent for the year, has rallied in recent weeks.

The yield on the three-year Treasury note was at 0.8936 percent, down 3.2 basis points in afternoon trading.

By Jessica DiNapoli