US Stocks Slump Following Omicron Concerns and Biden’s Stalled Spending Plan

It’s been a bruising start to the week for the US stock market that suffered a 1% fall in value on Monday. This followed the worrying news regarding the rapid spread of the Omicron Covid variant, as well as a setback to President Biden’s domestic spending bill.

The 1.1% fall marked the biggest three-day drop suffered by the S&P 500 in three months. The Nasdaq 100 fell by 1.1% while the Dow Jones Industrial Average was down by 1.2%.

Oil was one of the hardest hit commodities with a devastating fall of 2% where West Texas Intermediate crude fell as much as 3.7%. This comes amid fears that a slowing down in economic growth would see everything from airlines to factories requiring less fuel. Gold was also hit hard with a 0.9% drop in value, and while there was little change in the value of the dollar, there was a noteworthy fall in bonds.

There were further drops in many other sectors from tech stocks like Microsoft losing 1.2%, to steel manufacturers like Nucor’s stock price dropping by 5.8%. Interestingly, one of the few areas that enjoyed any kind of growth was cruise ships where a positive economic forecast by Carnival triggered rises for similar brands such as Royal Caribbean and Norwegian Cruise Line.

A difficult winter ahead

The run-up to the festive period is notorious for producing a lower trading volume, but even so, this was a difficult day on Wall Street. Much of this was blamed upon the concerning developments of the Omicron variant across Europe. However, the widespread fears of a reduction in liquidity could be the main cause of the poor market performance.

This followed the rejection of President Biden’s $2 trillion spending package that was unexpectedly rejected by the Democrat Senator Joe Manchin. The rejection of the bill has meant that Biden will probably have to go back to square one in helping get the US economy back on track following the ravages of the pandemic.

It comes at a critical time when the Federal Reserve has been making moves to try and stave off the dangerously high inflation rates across the US. With a tapering of federal spending support in March 2022 along with three expected interest rate rises, it had already triggered a more sober approach across the markets.

However, the rejection of Biden’s spending plan has added another unwelcome dose of uncertainty that has seen investors turning their backs on reasonably safe assets like gold. Much will depend on how the US prepares for the advances of the Omicron variant that has already triggered lockdowns across many nations in Europe.

With employment figures finally starting to look much more positive in the US, the arrival of a new variant couldn’t have come at a worse time for a country that was getting back on its feet after the Delta variant. All of which suggests that it could be yet another bleak winter in the US.

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