Concerns about a new COVID variant dominating the market
The day after the Thanksgiving holiday is usually slow but with a positive bias, but that’s not the case here on Friday. Suddenly news of a new type of COVID is emerging in South Africa, and there is a rush to impose new travel restrictions. So far, the variant has only appeared in four countries, but the importance of travel restrictions is now up exponentially after what happened after the initial COVID strain.
The main concern about this new alternative is that there are several mutations that could cause it to spread faster and render current vaccines ineffective. It will take a long time to develop new vaccines.
The facts about the situation are still developing, but the fear of the unknown is happening and the markets are in sharp decline. Indexes around 6:50 AM ET showed that the S&P 500 was trading 1.87% lower.
This latest news comes at a time when concerns are growing about the failure of indexes to reverse weakness in the broad market. There has been much debate about how to solve the two-tiered nature of the work on its own. Panic selling due to the new COVID variant was not a scenario many market strategists considered.
At the moment the sale is all inclusive, but technical conditions vary greatly across sectors and groups, so we’ll need to watch to see how the rotational action plays out as this develops. Already we’ve been rotating back into somewhat “close the economy” names like vaccine makers and stocks like Zoom Video (ZM) and Netflix (NFLX) and Roblox (RBLX) are traded at a higher price. Oil and airlines are sharply lower.
This is a very emotional reaction at first and market players are making moves that reflect another economic shutdown. There have been some concerns recently about variants other than delta never taking hold, but a quick response to this South African alternative may help prevent this from becoming a full-blown crisis.
Many market participants have been wondering when the indicators will finally correct and reflect what has been going on in the market as a whole for a while. This is not the preferred way for it to happen, but it will happen somehow sooner or later. Our task now is to navigate the work.
I don’t plan to do any big selling in this open field, but I will be patient before allocating more money to the business. Don’t forget this session is half day long and we close at 1pm ET here on Friday.
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