The Dow Jones was hit by its biggest fall in 13 months as investors were spooked by the emergence of a new Covid variant. The reporting that the new Omicron Covid variant had been found in South Africa and had already spread to Europe saw oil prices and global equities being especially hard hit. With investors fearing the implementation of more restrictions and lockdowns, it marked one of the most turbulent days on Wall Street for over a year.
At one point, the Dow Jones fell by over 1,000 points as the emergence of Omicron caused investors to fear that the recent rebuilding of global economies would be undone. There were other big falls in the S&P500 that fell by nearly 2.5, whereas the NASDAQ slipped just over 2.2% as companies in sectors ranging from travel to banking struggled on the global markets.
The massive losses came just at a time when the US economy was starting to rebound from the economic fallout from the pandemic. The hardest-hit assets tended to be the ones that had recently been performing well, such as the stocks in airline brands like United Airlines and American Airlines all losing between 8-10% in value. This is in addition to stocks in the banking brand JP Morgan dropping by 3%, while the yield on a 10-year Treasury bond fell below 1.50% despite some strong recent gains.
What’s remarkable is the way in which certain assets affiliated with travel were also hit hard with even cryptocurrencies such as Bitcoin taking an 8% tumble in correspondence to market jitters. However, there were still some companies who will have benefitted from the breaking news with the familiar faces of Pfizer, Zoom and Pelaton all defying the market norms to record a boost in stock prices.
How bad could things get?
The fact that Omicron has already spread from southern Africa to places like Belgium and Hong Kong has caused the World Health Organization to call the variant ‘highly transmissible’. It has caused an unwelcome feeling of deja vu all over the world with the US only just getting back to some kind of normal after the devastation wrought by the Delta variant this summer.
Already, there has been large-scale disruption to the airline industries with many nations banning travel to and from South Africa. While there was widespread optimism that economies could overcome the supply chain issues that have dogged much of 2021, the emergence of the new variants has left many investors fearing that 2022 could look depressingly familiar.
It comes at a time when central banks were figuring out how to adjust interest rates in a bid to stop the runaway inflation that has recently been hitting the US and other parts of the world. Much will depend on what scientists learn about the new variant. If Omicron proves to be more transmissible and more resistant to vaccines, it could spell another troubled year ahead.