Stocks Extend Fall On COVID-19 worry
5:03 pm Monday, December 20th, 2021
Wall Street’s main indexes dropped more than 1% on Monday in a broad selloff as investors worried about a deluge in COVID-19 cases potentially undercutting the economic rebound and a critical blow to President Joe Biden’s domestic investment bill.
The reported catalysts are Europe imposing new COVID restrictions and Senator Manchin (D-WV) voicing opposition to the $1.75 trillion Build Back Better Act. These events have fueled interlacing concerns about the Fed making a policy mistake next year if it hikes three times into potentially slower growth.
The S&P 500 has sliced below its 50-day moving average (4607) amid losses in all 11 sectors, and there’s been little interest to buy the dip. Five sectors are down more than 2.0%, including financials (-2.7%) as the laggard, while the consumer staples sector outperforms on a relative basis with a 0.5% decline.
Oil prices have dropped 5.0% to $67.19/bbl, as the market expects the economic restrictions to hinder demand, but strikingly, Treasury yield curve has steepened amid a decline in shorter-dated yields.
The 2-yr yield is down two basis points to 0.62%, as the bond market respects the possibility for the Fed to pivot to a more cautious stance next year. That’s somewhat at odds with the fears the stock market is telegraphing. The 10-yr yield is unchanged at 1.40%. The U.S. Dollar Index is down 0.1% to 96.49.
Looking at individual stocks, Moderna (MRNA) was up 9% in early trading after providing encouraging preliminary data for its COVID-19 booster shots, but MRNA shares closed lower by 3.50% in a disappointing trade.
In other corporate news, Cerner (CERN) confirmed an agreement to be acquired by Oracle (ORCL) for $95.00/share in cash, or approximately $28.3 billion in equity value. Carnival (CCL) expects a profit in the second half of 2022.
Today’s economic data was limited to the Conference Board’s Leading Economic Index (LEI), which increased 1.1% in November (consensus 1.0%) following a 0.9% increase in October.
