Stocks tumbled on Tuesday in yet another volatile session of trading amid fresh concerns about the new omicron Covid variant, with Federal Reserve Chairman Jerome Powell warning that it poses a risk to the economic recovery—not to mention complicates the inflation outlook.
The Dow Jones Industrial Average 1.9%, around 650 points, while the S&P 500 lost 1.9% and the Nasdaq Composite 1.6%.
Tuesday’s declines come after stocks rallied on Monday, rebounding from their worst day of the year on Friday when concerns about the omicron variant sparked a sharp selloff in which the Dow plunged over 900 points.
Omicron poses “downside risks” to employment and economic activity as well complicate the inflation outlook, Federal Reserve Chairman Jerome Powell said in remarks before his quarterly testimony before the Senate Banking Committee on Tuesday.
What’s more, stocks took a further hit after several vaccine makers, including Moderna and Regeneron, warned that existing vaccines may have reduced effectiveness against the new variant.
Moderna CEO Stephane Bancel said in an interview with the Financial Times on Tuesday that there could be a “material drop” in how effective existing vaccines are in fighting omicron.
Similar to last Friday’s selloff, travel stocks like cruise lines and airlines led the market lower on Tuesday, while stay-at-home stocks like Netflix and Zoom both rallied.
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The CBOE volatility index, which is Wall Street’s preferred fear gauge, jumped sharply again on Tuesday. It now sits above 27, nearly reaching the level it was at during last Friday’s selloff.
In his prepared remarks before testifying in front of the Senate on Tuesday, Fed chair Powell dropped the use of the word “transitory” in describing inflation and warned that elevated prices will now linger “well into next year.”
Home prices slowed for the first time since May 2020, according to new data. Prices rose 19.5% in September year over year, down slightly from the annual gain in August, according to the S&P CoreLogic Case-Shiller home price index. Home prices are overall still much higher than they were a year ago due to high demand coming out of the pandemic.