Independent Advisor Alliance CEO Chris Zaccarelli argues that traders will be tempted to sell as the market reacts to a new discovery of COVID-19 variant.
Stocks dropped sharply on Friday as a new, fast-spreading COVID-19 variant detected in South Africa triggered recent fears that a resurgent coronavirus could shake the global economy’s recovery from the pandemic.
The Dow Jones Industrial Average fell more than 1,000 points while the S&P 500 dropped 1.9%, on track for its worst day since September. The Nasdaq Composite fell 1.7% at the start of the shortened trading session on Friday (US).
The drop comes after health officials warned of a new variant found in South Africa that has a high number of mutations and has spread rapidly among young people. The World Health Organization is due to meet Friday to discuss whether the strain is a concern and to decide whether to give it a name from the Greek alphabet.
Ryan Detrick, chief market strategist for LPL Financial, “The new variant news has brought with it a selling first and ask questions later psychology.
| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| I: DJI | Dow Jones average | 34827.66 | -976.72 | -2.73% |
| SP500 | S&P 500 | 4599.91 | -101.55 | -2.16% |
| I: Comp | NASDAQ Composite Index | 15524.555207 | -320.67 | -2.02% |
The economic impacts of the new effort – which was found in Hong Kong, Belgium and Israel, as well as South Africa – were already felt on Friday, with at least 10 European countries suspending air travel from South Africa. The European Union of 27 countries has also recommended an “emergency brake” on travel from South Africa, citing the “very ways” new variant.
Airline stocks quickly sold off, with Delta Air Lines, United Airlines and American Airlines falling almost 9% each.
| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| Of | DELTA AIR LINES, INC. | 34.72 | -4.97 | -12.53% |
| UAL | UNITED AIRLINES HOLDINGS, INC. | 40.41 | -6.32 | -13.53% |
| AAL | AMERICAN AIRLINES GROUP, INC. | 16.97 | -2.49 | -12.78% |
“The economic recovery was quite impressive, and the one thing that could beat it completely would be a more dangerous variant,” Detrick said. “Time will tell how worried we should be, but investors are selling in front of potentially bad news.”
Several European countries have already tightened anti-virus controls this week after their own case numbers spiked. Austria imposed a 10-day lockdown, while Italy restricted activity by unvaccinated people. Americans are advised by their government to avoid Germany and Denmark.
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| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| Use | United States Oil Fund LP | 49.31 | -6.57 | -11.76% |
Oil price also fell sharply, plunging nearly 11% to about $ 69.93 per barrel, its worst day since April 2020. International Benchmark Burns dirty futures Slid 9.9%, or $ 8.37, to $ 73.85 per barrel after reports that OPEC is considering poising a production increase after President Biden and other energy-consuming countries topped their national petroleum reserves.
The CBOE volatility index – known as Wall Street’s “fear measure” – rose to more than 45% to 27, its highest level in months.
Vaccine-makers were the early winners in Friday’s sale, with shares of Pfizer, Moderna and BioNTech all up. Johnson & Johnson is down. Although it is not immediately clear how effective these vaccines are against the new variant, mRNA vaccines – such as those developed by Pfizer and Moderna – can be easily updated.
Pfizer was set to close at an all-time high, based on data dating back to January 1972, while Moderna was poised for the largest percentage increase since March 2020.
| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| PFE | PFIZER INC. | 53.82 | +2.92 | + 5.73% |
| BNTX | BIONTECH SE | 359.39 | +54.63 | + 17.93% |
| Mrna | MODERNA, INC. | 337.09 | +63.70 | + 23.30% |
| JNJ | JOHNSON & JOHNSON | 159.78 | -0.54 | -0.33% |
Travel stocks, hotels, travel lines and airlines will likely see pressure on rising lockdown fears.
| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| Of | DELTA AIR LINES, INC. | 34.72 | -4.97 | -12.53% |
| AAL | AMERICAN AIRLINES GROUP, INC. | 16.96 | -2.50 | -12.83% |
| LUV | SOUTHWEST AIRLINES CO. | 44.70 | -2.29 | -4.87% |
| RCL | Royal Caribbean Group | 68.66 | -9.66 | -12.33% |
| MAR | MARRIOTT INTERNATIONAL, Inc. | 143.62 | -13.99 | -8.88% |
| LEDs | HILTON WORLDWIDE HOLDINGS, INC. | 133.67 | -11.58 | -7.97% |
Additionally, stocks at home, including Zoom, Peloton and Netflix, may also see some positive action.
| Ticker | Security | Last | Change | Change% |
|---|---|---|---|---|
| Zm | Zoom Video Communications, Inc. | 225.59 | +17.29 | + 8.30% |
| PTON | Peloton Interactive, Inc. | 45.73 | +1.80 | + 4.11% |
| Naflex | Netflix, Inc. | 668.24 | +9.95 | + 1.51% |
And with Black Friday underway, investors will also keep a close eye on retail stocks as early sales data rolls in. As of Thursday online spending was on pace to hit $ 5.4m as tracked by Abode.
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By Wednesday, consumers rocked up over $ 72 billion from November 1-23, a nearly 20% jump from the same period a year ago.
In Asia, the Shanghai Composite Index lost 0.6% to 3,564.09 and the Nike 225 in Tokyo declined to 28,751.62. The Hang Seng in Hong Kong tumbled 2.7% to 24,080.52.
The COSPY in Seoul lost 1.5% to 2,936.44 and Sydney’s S&P-ASX 200 fell 1.7% to 7,279.30.
The Associated Press contributed to this report.
